2007 Half Year Results

RNS Number:9815C
Roc Oil Company Limited
30 August 2007


30 August 2007

                         ROC OIL COMPANY LIMITED ("ROC")
                             STOCK EXCHANGE RELEASE

                     2007 HALF YEAR FINANCIAL RESULTS SUMARY

Today, ROC releases its half year financial report and appendix 4D for the
period ended 30 June 2007. In the accompanying Financial Statements, ROC is
required to compare its 1H2007 results with the equivalent figures for the
corresponding period last year. However, the rapid organic and acquisitive
growth of the Company in the last twelve months generated several near record
results during 1H2007 that render comparisons between the two periods largely
meaningless. The key points pertaining to the 1H2007 results include:

*   Production of 1.6 MMBOE from five fields, compared to 0.3 MMBOE from two
    fields in 1H2006.

*   Net Sales Revenue of $100.8 million, up $83.2 million on $17.6 million
    in 1H2006.

*   Trading Profit of $45.0 million, up $40.9 million on $4.1 million profit
    in 1H2006.

*   Cash Flow from operating activities $58.9 million, up $61.8 million, a
    significant improvement on a negative $2.9 million cash flow in 1H2006.

*   Net Loss after income tax of $8.8 million, a $13.4 million improvement
    on the loss of $22.2 million in 1H2006.

*   EBITDAX of $67.3 million, up $63.7 million on $3.6 million in 1H2006.

*   Per barrel production costs of $10.19/BOE ($16.0 million), a $1.29/BOE
    (11%) improvement on $11.48/BOE in 1H2006.

*   Amortisation of $27.76/BOE ($43.6 million) in 1H2007 compared to $22.89/
    BOE in 1H2006.

*   Exploration and appraisal expenditure of $52.3 million was incurred
    mainly in relation to drilling four exploration wells, the pre-drill
    preparatory work, including rig mobilisation, for the Angolan drilling and
    seismic programmes and the acquisition of potentially high impact
    exploration acreage in offshore Madagascar. Exploration drilling resulted in
    four discoveries from four wells, three of which, are considered to have
    commercial potential: Frankland and Dunsborough, offshore Australia and
    Massambala, onshore Angola.

*   All of the $52.3 million in exploration costs has been expensed in
    accordance with ROC's "successful efforts" accounting policy because the
    three discoveries require appraisal work and therefore cannot presently be
    demonstrated to be commercial on a stand alone basis.

*   Development expenditure of $37.0 million incurred, reflecting the
    completion and commissioning of the Enoch Oil and Gas Field and progress
    towards completion of the Blane Oil Field, both in the North Sea, as well as
    the commencement of work on the Incremental Development Plan for the Zhao
    Dong C & D Oil Fields, Bohai Bay, Offshore China.

*   A cash flow gain of $5.0 million was realised as a result of hedge
    contracts being settled. However, during 1H2007 ROC ceased hedge accounting
    on the majority of its hedge book in order to maintain compliance with the
    technical requirements of the Australian accounting standards. This resulted
    in a reported hedge-related loss of $18 million being expensed due to the
    movement in the mark to market value of the hedges that do not qualify for
    hedge accounting, partly offset by a gain of $1.5 million for the remaining
    swap contracts that do qualify for hedge accounting.

*   During the period the Chinese Government announced that it would reduce
    the income tax rate from 33% to 25% effective from 1 January 2008, which
    resulted in a non-cash deferred tax benefit of $26.5 million in the Income
    Statement.

*   Net debt position at 30 June 2007 of $126.8 million compared to $113.1
    million at 31 December 2006, which was in the form of a 12 month Bridge
    Facility which was refinanced with a four year US$200 million facility on 20
    August 2007.

Commenting on the 2007 Half Year financial results, ROC's Chief Executive
Officer, John Doran stated that:

"Compared to the corresponding period last year, ROC's 1H2007 results represent
a big step up. This achievement, however, should not be over emphasised because
it says more about where the Company was last year than where it is today.
During the interim period, ROC has become a significant Australian oil producing
company and further enhanced its exploration track record. As always, ROC is
looking to the future where challenges lie, not to the past where achievements
reside.

The half yearly accounts highlight some interesting aspects as to how ROC's
reporting and regulatory framework can provide a perspective which differs from
the underlying economic and commercial reality of running the business. There
are three keys areas which give rise to these circumstances:

*   Firstly, exploration expenditure is accounted for under a "successful 
    efforts" accounting policy. This means that ROC is required to expense the 
    four exploration wells it drilled during 1H2007, all of which discovered 
    hydrocarbons, including the three which are regarded as being potentially 
    commercial. Quite frankly, there are relatively few recent regional examples
    of Australian oil companies drilling discovery wells that would meet the 
    "successful efforts" definition as applied by ROC. On this basis, 
    shareholders should expect that ROC's exploration drilling costs will 
    continue to be expensed rather than capitalised, unless a field is found 
    that is considered to be probably commercial, more or less immediately after
    the discovery well has been drilled.

    This conservative accounting practice has not been universally adopted by 
    ROC's peer group, but it is the policy that governs the Company's financial 
    reporting and, therefore, it is important that shareholders understand its 
    conservative nature and the impact it has on the Company's published 
    accounts.

*   Secondly, because of accounting standards beyond its control, ROC's oil 
    price hedge accounting treatment changed during the period, driven by the 
    volatility in the differential between the Brent oil price and the 
    underlying realised price of ROC's sales. Consequently, it became 
    inappropriate for ROC to hedge account under the technical requirements of 
    the Australian accounting standards. This situation has impacted on the 
    Company's Income Statement with a reported $16.5 million net hedging loss, 
    despite the Company's hedges providing a real cash flow benefit of 
    $5 million during the period and remaining economically effective. In this
    context, it is important to emphasise that in terms of volume hedged the 
    Company's hedging policy continues to be conservative with only about 16% of
    the Company's proved and probable reserves being hedged.

*   Thirdly, ROC has also experienced a one-off, non-cash, tax benefit of 
    $26.5 million due to the Chinese Government announcing that the corporate 
    tax rates would change from 33% to 25%, effective 1 January 2008 - despite
    the fact that the cash benefit of these adjustments are yet to be realised.

In relative ROC terms, the numbers referred to above are big. Therefore, it is
particularly important for shareholders and potential investors to be aware of
the underlying accounting rationale that generated them and the fact that the
Company's exploration and hedging accounting treatments will continue to deliver
volatility to future Income Statements. An example of this volatility is that if
the accounts were presented as of late August 2007 instead of 30 June 2007, the
marked to market position of ROC's hedge book would have improved by
approximately $7.0 million.

Perhaps, the most important point to highlight from the sum of the above, is
that shareholders and potential investors might be well advised to look through
the 1H2007 profit and loss details and focus on the real value of the Company as
expressed in terms of its cash flow, asset value and exploration success: a
1H2007 $59 million Cash Flow from operating activities; a $45 million Trading
Profit and three new exploration discoveries which merit further appraisal. On
this basis, ROC has clearly had a reasonable six months."

A complete copy of ROC's Half Year Report and Financial Statements can be 
accessed on ROC's website.
(http://www.rocoil.com.au/Public/Announcement/2007/2007_Half_Year_Report_and_
Results_300807.aspx)


Damian Fisher
General Manager
External Affairs & Investor Relations

                                         For further information please contact:
                                                                Dr John Doran on
                                                            Tel: +61-2-8356-2000
                                                            Fax: +61-2-9380-2635
                                                     Email: jdoran@rocoil.com.au
                                       Or visit ROC's website: www.rocoil.com.au

                                                                   Dr Kevin Hird
                                          General Manager - Business Development
                                           Tel: +44 20 7495 5707/+61 2 8356 2000
                                            Mob: +44 775136 7149/+61 417 261 727
                                                     Email:  khird@rocoil.com.au

                                                                    Michael Shaw
                                    Oriel Securities Limited (Nominated Adviser)
                                                       Tel:  +44 (0)20 7710 7600



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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