RNS Number:9276M
Roc Oil Company Limited
31 January 2008
ROC OIL COMPANY LIMITED
(ABN 32 075 965 856)
REPORT TO SHAREHOLDERS
Activities for the Quarter Ended 31 December 2007
CEO COMMENTS
ROC posted a very strong operating performance for 4Q 2007. Another record
quarter on three key fronts: record oil production (1.08 MMBO); record realised
oil prices (A$100/BBL); and record sales revenue ($88 million).
Two other important, albeit quite different, field development milestones were
also reached during the Quarter.
* Firstly, the Cliff Head Oil Field paid out its gross capital investment
of $327 million after producing approximately 5 MMBO, about one third of its
total original 2P recoverable oil reserves, during the first 18 months of
production. This development presented many challenges across many
disciplines and required a high degree of lateral thinking together with a
commitment to early investment, well ahead of the recent high oil price
environment; therefore, it is good to see payout achieved with the majority
of reserves yet to be produced.
* Secondly, at the other end of the development project time scale, CNOOC,
the relevant Chinese state oil company, approved a minimum reserve base for
the potential development of the Wei 6-12-S and Wei 6-12 oilfields in the
Beibu Gulf, offshore China as a result of which this project is expected to
move forward towards a Final Investment Decision during 1H 2008.
The commencement of the Milho-1 exploration well in November marked the start of
the next phase of ROC's Angolan drilling programme which will see four wells
target the hydrocarbon potential of the pre-salt section in the Cabinda South
Block. This continuous drilling programme will run through into mid-2008 and at
various stages will overlap with the Company's other drilling activities in
China, Australia and Mauritania to provide a record level of drilling activity
which will see at least 9 exploration/appraisal wells and more than a dozen
development wells drilled during the next 6 months.
These CEO comments would be delinquent if they didn't also refer to events
during the month immediately subsequent to Quarter-end, when a combination of
global equity market adjustments, a 2.1 MMBO revision to ROC's net 2P reserves
at Zhao Dong, equivalent to 7.5% of Company-wide 2P reserves, and the first well
of the 2008 Beibu Gulf exploration drilling programme coming in dry, caused
ROC's share price to drop to a two and a half year low. Given that when the
share price was last at this level the Company produced approximately 34 BOPD
and generated quarterly sales of $229,000, it is not unreasonable to suggest
that there is considerable potential for the share price to rebound strongly,
notwithstanding the current state of the equity markets.
KEY ACTIVITIES
1. CONSOLIDATED REVENUE & PRODUCTION
1.1 Production hit a quarterly record of 1.08 MMBOE (11,771 BOEPD) 98% oil;
up 23% compared to 0.88 MMBOE (9,578 BOEPD) in the previous quarter. The
increase was largely due to the first full Quarter of production from the
Blane Oil Field and increased production from the C and D oil fields in
Zhao Dong.
1.2 Total sales revenue also set a new quarterly record: $88 million; up 45%
compared to $60.8 million in the previous quarter.
1.3 Sales volumes of 0.89 MMBOE; up 17% compared to 0.76 MMBOE in the previous
quarter, due to increased production, partly offset by the timing of cargo
liftings which resulted in increased inventory at the end of the Quarter.
1.4 The average realised oil price in the Quarter across all of ROC's
production assets was $100.13/BBL (US$86.39/BBL), up 23% from 3Q 2007,
another record.
2. PRODUCTION ASSETS
2.1 Cliff Head Oil Field, WA-31-L, Offshore Western Australia (ROC: 37.5% &
Operator)
Following successful workovers in 3Q 2007, gross oil production averaged 9,460
BOPD (ROC: 3,548 BOPD); up 8% on the previous quarter. During December 2007,
field production moved into its mature phase with the onset of a slow, natural
decline which is scheduled to last many years, during which time the focus will
be on optimizing well production performance and recovery. During November 2008,
18 months after production commenced, the Cliff Head Oil Field produced its 5
millionth barrel of oil and paid out its $327 million capital cost.
2.2 Zhao Dong C & D Oil Fields, Bohai Bay, Offshore China (ROC: 24.5% &
Operator)
Improved production performance was achieved at Zhao Dong during the Quarter.
Gross oil production averaged 19,447 BOPD (ROC: 4,765 BOPD), 12% higher than the
previous quarter. This increase reflects the positive contribution from the four
development wells drilled during the Quarter together with a number of
successful initiatives implemented to improve well and field performance
including geotechnical and engineering support to augment drilling operations.
2.3 Enoch Oil and Gas Field, North Sea (ROC: 12.0%)
Gross production averaged 7,760 BOPD and 6.6 MMSCFD (ROC: 931 BOPD and 0.8
MMSCFD); down 8% compared to the previous quarter. Because the production data
quoted is based on the Forties Pipeline reporting system Enoch production
volumes have not yet been finalised and, as reported in 3Q 2007, may be subject
to revision.
2.4 Blane Oil Field, North Sea (ROC: 12.5%)
The Quarter marked the first full quarter of production for the Blane Oil Field.
Gross oil production averaged 15,320 BOPD (ROC: 1,915 BOPD). The gas compression
upgrade project which will provide a dedicated gas supply for gas lift for
Blane's producing wells commenced. Drilling of the planned water injection well
is scheduled to commence in February 2008.
2.5 Chinguetti Oil and Gas Field, PSC Area B, Offshore Mauritania (ROC: 3.25%)
Gross oil production averaged 12,312 BOPD (ROC: 400 BOPD); down 8% on the
previous quarter due to continuing natural field decline. A programme of two
infill wells and three well interventions is planned to commence in 2Q 2008 and
this is expected to increase production levels, enhance the current gas-lift
capability and shut-off water producing zones.
3. DEVELOPMENT ASSETS
3.1 Zhao Dong C & D Oil Fields, Bohai Bay, Offshore China (ROC: 24.5% &
Operator)
The 2007 development drilling programme was successfully completed in early
December 2007. Drilling activities have been temporarily suspended for the
winter and will recommence in March 2008. Upgrade work on the offshore drilling
and production platforms as part of the Incremental Development Plan continued.
During the Quarter, work commenced on the rig upgrade, including the
installation of a new mud tank, together with new pipe work. A workover was also
successfully completed on one of the development wells and a new electrical
submersible pump installed.
3.2 Zhao Dong C4 Oil Field, Bohai Bay, Offshore China (ROC: 11.575% unitised &
Operator)
Development of the C4 Oil Field progressed with first oil scheduled for 4Q 2008.
A major milestone for the development was achieved on 30 November 2007, when
installation of the piling for the conductor template was completed.
4. EXPLORATION AND APPRAISAL ASSETS
4.1 WA-286-P, Perth Basin, Offshore Western Australia (ROC: 37.5% & Operator)
Planning progressed for the 515 km2 Diana 3D seismic survey to be acquired in 1Q
2008. The survey will further define the recent Frankland and Dunsborough
discoveries and nearby prospects and leads. The Premium "Wilcraft" jack-up rig
was contracted for an exploration and appraisal drilling programme comprising
two wells, Lilac-1 and Frankland-2, to be drilled in February-March 2008 (see
section 7 - Post Quarter Events).
4.2 WA-351-P, Carnarvon Basin, Offshore Western Australia (ROC: 20%)
The Operator, BHP Billiton Petroleum Pty Ltd, continued to review options for
acquiring a 3D seismic programme in 2008, which will focus on Triassic gas
potential.
4.3 Block 22/12, Beibu Gulf, Offshore China (ROC: 40% & Operator - Subject to
Government participation in developments for up to 51%)
During the Quarter, a reserves report defining a minimum commercial reserves
base for the Wei 6-12 South and Wei 6-12 oil fields was submitted to and
approved by CNOOC, the relevant Chinese state oil company. Work on the
feasibility study and the Development Plan continues with a Final Investment
Decision targeted for mid-2008. Pre-drill preparations were also underway for a
three well exploration/appraisal programme starting in early 2008. At the end of
the Quarter, the Premium "Murmanskaya" jack-up rig was on location preparing to
drill the first exploration well (see section 7 - Post Quarter Events).
4.4 Cabinda South Block, Onshore Angola (ROC: 60% Working Interest & 75%
Contributing Interest & Operator)
Evaluation of the Massambala-1 heavy oil discovery continued during the Quarter.
During the Quarter, ROC's second and third exploration wells in the Block,
Cevada-1 and Soja-1 were drilled. Although both wells had good hydrocarbon shows
neither was judged to be commercial.
The Simmons 80 Rig commenced drilling ROC's fourth exploration well, Milho-1, on
24 November 2007. This is the first well in the programme that will specifically
target the hydrocarbon potential of the pre-salt section. As of end January
2008, the well was yet to drill the prognosed reservoir section and it is now
expected to reach Total Depth by late February 2008.
ROC and its co-venturers agreed to drill three further exploration wells back-to
-back after Milho-1, all of which will target pre-salt prospects.
4.5 Offshore Mauritania (ROC: 2 - 5.49%)
Interpretation of the Tiof high resolution 3D seismic survey in PSC Area B
continued during the Quarter. Planning continued for the Atwood "Hunter" to
drill the large, high risk, Khop-1 exploration well which is scheduled to
commence in February 2008. The well will test a dominant structural feature in
PSC Area C Block 6. Following the drilling of this prospect, a Banda NW
appraisal well is planned to be drilled in PSC Area B.
4.6 Block Belo Profond, Offshore Madagascar (ROC: 75% & Operator)
Planning continued for an aeromagnetic survey and a geological review is also
progressing. In parallel with this work an Environmental Impact Study is
underway.
4.7 Blocks H15 & H16 Equatorial Guinea (ROC: 18.75% & Technical Manager)
The arbitration between Pioneer Natural Resources (Equatorial Guinea) Limited
and the other joint venturers, including ROC, continued.
5. CORPORATE
Mr Ross Dobinson resigned as a Director of ROC's Board, effective 31 December
2007.
On 17 December 2007, ROC received Government approval of its farmin to
exploration permits WA-381-P and WA-382-P in the Vlaming Sub-Basin, offshore
Perth.
Block 30/22b in the UK North Sea, operated by Maersk Oil (UK) Limited, was
relinquished effective 21 December 2007.
Redistribution of equity effective 23 December 2007, resulted in ROC's
participating interest in PSC Area C, Block 2 offshore Mauritania, increasing
from 3.2% to 5.49%.
On 24 December 2007, the Company was advised by Sonangol E.P., the national
concessionaire that it had successfully pre-qualified as an operator in the
current 2007/08 Angolan Licensing Round.
6. FINANCIAL
At Quarter-end ROC had approximately $47 million (US$41.4) in cash and debt of
$151.2 million (US$133.3 million).
6.1 Change in Reporting Currency
The Company has undertaken a review of the appropriate currency for preparation
of its accounts and the provision of financial reports to the market. This
review considered, amongst other things, the international nature of ROC's
assets, that the majority of its revenue, expenditures, assets and liabilities
are incurred in US dollars and the Company's listing on AIM in the United
Kingdom where entities commonly report in US dollars. As a result of the review,
going forward the Company's financial information, including the 2007 Financial
Statements scheduled to be released on 28 February 2008, will be presented in US
dollars. For ease of reference, in this Quarterly Report, the Company has
provided year-to-date revenue and expenditure in Australian dollars and US
dollars
6.2 Production
+----------------------+-----------+-----------+-----------+-----------+
| | 4Q 2007 | 3Q 2007 | YTD | % Change |
| | | | | (4Q07 to |
| | | | | 3Q07) |
+----------------------+-----------+-----------+-----------+-----------+
|Oil Production (BBLS) | | | | |
|Cliff Head | 326,383| 303,130| 1,184,104| 8|
|Zhao Dong C&D Fields | 438,340| 390,455| 1,710,206| 12|
|Chinguetti | 36,814| 39,803| 175,839| (8)|
|Blane | 176,183| 35,717| 211,900| 393|
|Enoch | 85,679| 93,002| 201,070| (8)|
|Other | 340| 347| 1,836| (2)|
+----------------------+-----------+-----------+-----------+-----------+
|Total Oil Production | 1,063,739| 862,454| 3,484,955| 23|
+----------------------+-----------+-----------+-----------+-----------+
|Gas Production (MSCF) | | | | |
|Enoch | 73,655| 102,149| 212,429| (28)|
+----------------------+-----------+-----------+-----------+-----------+
|NGL Production (BOE) | 6,890| 1,730| 8,620| 298|
|Blane | | | | |
+----------------------+-----------+-----------+-----------+-----------+
|Total BOE | 1,082,905| 881,209| 3,528,980| 23|
+----------------------+-----------+-----------+-----------+-----------+
|BOEPD | 11,771| 9,578| 9,668| 23|
+----------------------+-----------+-----------+-----------+-----------+
Note: Production quoted is ROC's working interest share of total production.
ROC's net entitlement production for the period was 1,015,719 (3Q 2007: 821,753;
YTD: 3,334,594) after taking out governments' share of profit oil.
6.3 Sales
+----------+------------------+------------------+-----------------------------+
| | 4Q 2007 | 3Q 2007 | YTD |
+----------+---------+--------+---------+--------+----------+---------+--------+
|Oil Sales | BOE | A$'000 | BBLS | A$'000 | BOE | A$'000 |US$'000 |
|(BBLS) | | | | | | | |
+----------+---------+--------+---------+--------+----------+---------|--------+
|Cliff Head| 327,776 | 33,413 | 302,181 | 26,356 |1,185,666 | 103,215 | 86,556 |
|Zhao Dong | 306,054 | 28,078 | 299,951 | 21,543 |1,326,471 | 100,565 | 84,334 |
|C&D Fields| | | | | | | |
|Chinguetti| 27,356 | 2,791 | 32,394 | 2,835 | 120,519 | 10,357 | 8,685 |
|Enoch | 89,182 | 9,403 | 104,932 | 9,459 | 194,114 | 18,862 | 15,818 |
|Blane | 125,122 | 13,971 | - | - | 125,122 | 13,971 | 11,716 |
|Other | 340 | 42 | 347 | 21 | 1,836 | 153 | 128 |
+----------|---------+--------+---------+--------+----------+---------|--------+
|Total Oil | 875,830 | 87,698 | 739,805 | 60,214 |2,953,728 | 247,123 |207,237 |
|Sales | | | | | | | |
+----------|---------+--------+---------+--------+----------+---------|--------+
|Gas Sales | | | | | | | |
|(MSCF) | | | | | | | |
|Enoch | 73,655 | 282 | 102,149 | 566 | 212,429 | 974 | 817 |
+----------|---------+--------+---------+--------+----------+---------|--------+
|Total | 888,106 | 87,980 | 756,830 | 60,780 |2,989,133 | 248,097 |208,054 |
|Sales | | | | | | | |
|(BOE) | | | | | | | |
+----------+---------+--------+---------+--------+----------+---------+--------+
Note: ROC's net entitlement crude stock position increased by 127,612 BBLS
during the period so that at the end of 4Q 2007 ROC was in an underlift position
of 243,571 BBLS compared to a 115,959 BBLS underlift position at the end of the
previous quarter.
6.4 Expenditure Incurred
+---------------------+-----------+-----------+-----------+-----------+
| | 4Q 2007 | 3Q 2007 | YTD | YTD |
| | A$'000 | A$'000 | A$'000 | US$'000 |
+---------------------+-----------+-----------+-----------+-----------+
|Exploration | | | | |
|Angola | 23,045| 31,795| 80,892| 67,836|
|China | 4,318| 1,283| 6,535| 5,480|
|Mauritania | 301| 86| 992| 832|
|Australia | (1,725)| 389| 19,943| 16,724|
|UK | (93)| 56| 136| 114|
|Equatorial Guinea | 59| 5| 358| 300|
|Madagascar | 204| 441| 2,806| 2,353|
|Other | 296| 198| 1,307| 1,096|
+---------------------+-----------+-----------+-----------+-----------+
|Total Exploration | 26,405| 34,253| 112,969| 94,735|
+---------------------+-----------+-----------+-----------+-----------+
+---------------------+-----------+-----------+-----------+-----------+
|Development | | | | |
|Zhao Dong C&D Fields | 9,550| 8,746| 25,727| 21,575|
|Zhao Dong C4 | 2,120| 1,900| 4,169| 3,496|
|Blane | 2,029| 5,051| 23,736| 19,905|
|Enoch | 364| 1,103| 11,076| 9,288|
|Chinguetti | 191| 412| 3,766| 3,158|
+---------------------+-----------+-----------+-----------+-----------+
|Total Development | 14,254| 17,212| 68,474| 57,422|
+---------------------+-----------+-----------+-----------+-----------+
+---------------------+-----------+-----------+-----------+-----------+
|Total Exploration & | 40,659| 51,465| 181,443| 152,157|
|Development | | | | |
+---------------------+-----------+-----------+-----------+-----------+
6.5 Hedging
The Company's hedge position for the period from 31 December 2007 to December
2011 is summarised below. This hedge is equivalent to 15% of ROC's Company-wide
2P reserves.
+-------+------------------------------+
| | Brent Oil Price Swaps |
+-------+--------------+---------------+
| | Volume | Weighted |
| | | Average Brent |
| | | Price |
| | | USD/BBL |
+-------+--------------+---------------+
| 2008 | 1,177,987 | 71.40 |
+-------+--------------+---------------+
| 2009 | 851,998 | 70.01 |
+-------+--------------+---------------+
| 2010 | 686,994 | 68.46 |
+-------+--------------+---------------+
| 2011 | 455,997 | 66.31 |
+-------+--------------+---------------+
| | 3,172,976 | 69.66 |
+-------+--------------+---------------+
During 2007 1.6 MMBO of oil price derivative contracts were settled resulting in
a cash flow loss of $4.7 million (US$ 3.9 million).
As advised during the year, because of the volatility in the differential
between the Brent oil price and the underlying realised price of ROC's crude oil
sales during 2007, it became inappropriate for ROC to hedge account the majority
of the Company's oil price derivative contracts under the technical requirements
of the Australian accounting standards.
Therefore, ROC has decided to value all its oil price swap hedge book using the
mark-to-market value and to report the movement in this value in its income
statement rather than using hedge accounting to report the movement in value for
parts of the hedge book as changes to equity. As a result, ROC will report a net
derivative loss of $82 million (US$68.8 million) in its 2007 income statement,
including a non cash component of $77.3 million (US$64.9 million) primarily
because of the movement in the mark-to-market value of these contracts caused by
the high oil price environment prevailing at year end.
7. POST QUARTER EVENTS
On 1 January 2008, ROC commenced a three-well exploration and appraisal
programme in Block 22/12, Beibu Gulf, Offshore China. The first exploration
well, Wei 6-12W-1 reached a Total Depth of 2,333 mBRT without finding
hydrocarbons and was plugged and abandoned on 28 January 2008. The Premium
"Murmanskaya" jack-up rig is currently preparing to jack down and move off the
Wei 6-12W -1 location.
The result for the Wei 6-12W-1 well does not have any adverse impact on the
potential development of the Wei 6-12S and Wei 6-12 oil fields.
On 15 January 2008, ROC commenced the 515km2 Diana 3D seismic survey in the
offshore north Perth Basin. As at the end of January, 345 km2 of seismic had
been acquired.
On 25 January 2008, RISC Pty Ltd completed its independent audit of ROC's
reserves excluding the Chinguetti Oil Field offshore Mauritania. When combined
with ROC's internal reserves review and as set out in ROC's Stock Exchange
release dated 25 January 2008, the status of ROC's reserves can be summarised as
follows:
* ROC's remaining company wide proved and probable (2P) reserves at 31
December 2007 are 21.4 MMBOE, all of which are being produced or developed;
* There has been a reduction of 2.1 MMBOE relating to ROC's 2P net
reserves in the C and D Oil Fields, in the Zhao Dong Block, offshore China,
before any adjustment for 2007 production. Compared to ROC's 2P reserves at
31 December 2006, this change in Zhao Dong reserves represents a reduction
of approximately 7.5% of ROC's company-wide 2P Reserves;
* The change in Zhao Dong 2P reserves will have an impact on ROC's 2007
financial results through an increase in the non-cash amortisation expense.
ROC's preliminary assessment, subject to audit, indicates that the reserves
change, together with estimated future costs to develop the 2P reserves at
Zhao Dong, will result in an increase in the amortisation expense for Zhao
Dong of approximately A$12/BBL, totalling approximately A$21 million for the
year ending 31 December 2007;
* There are no other material revisions to ROC's 2P reserves; and
* This review does not take account of discovered resources of the Company
not yet in production or subject to development.
8. FURTHER INFORMATION
For further information please contact ROC's Chief Executive Officer, John
Doran, Chief Operating Officer, Bruce Clement, or General Manager, External
Affairs & Investor Relations, Damian Fisher, on:
Phone: (02) 8356 2000 Email: jdoran@rocoil.com.au
Facsimile: (02) 9380 2066 Web Site: www.rocoil.com.au
Address: Level 14, 1 Market Street, Sydney, NSW 2000, Australia
+------------------------------------------------------------------------+
|definitions |
+---------+--------------------------------------------------------------+
|BBL(S) |means barrel(s) |
+---------+--------------------------------------------------------------+
|BCF |means billion cubic feet |
+---------+--------------------------------------------------------------+
|BOE |means barrels of oil equivalent (6 MSCF = 1 BOE) |
+---------+--------------------------------------------------------------+
|BOPD |means barrels of oil per day |
+---------+--------------------------------------------------------------+
|BOEPD |means barrels of oil equivalent per day |
+---------+--------------------------------------------------------------+
|BCPD |means barrels of condensate per day |
+---------+--------------------------------------------------------------+
|MCF |means thousand cubic feet |
+---------+--------------------------------------------------------------+
|mBRT |means metres below rotary table |
+---------+--------------------------------------------------------------+
|mTVDSS |means metres true vertical depth below sea level |
+---------+--------------------------------------------------------------+
|MSCF |means thousand standard cubic feet |
+---------+--------------------------------------------------------------+
|MMSCF |means million standard cubic feet |
+---------+--------------------------------------------------------------+
|MMSCFD |means million standard cubic feet per day |
+---------+--------------------------------------------------------------+
|MMBO |means million barrels of oil |
+---------+--------------------------------------------------------------+
|MMBOE |means million barrels of oil equivalent |
+---------+--------------------------------------------------------------+
|OWC |means oil-water contact |
+---------+--------------------------------------------------------------+
|PSC |means Production Sharing Contract |
+---------+--------------------------------------------------------------+
|Quarter |means the period 1 October 2007 to 31 December 2007 |
+---------+--------------------------------------------------------------+
|ROC |means Roc Oil Company Limited and includes, where the context |
| |requires, its subsidiaries |
+---------+--------------------------------------------------------------+
|SCF |means standard cubic feet |
+---------+--------------------------------------------------------------+
|TCF |means trillion cubic feet |
+---------+--------------------------------------------------------------+
|US$ |means US dollars |
+---------+--------------------------------------------------------------+
|$ |means Australian dollars |
+---------+--------------------------------------------------------------+
In accordance with ASX and AIM Rules, the information in this Release has been
reviewed and approved by Dr John Doran, Chief Executive Officer, Roc Oil Company
Limited, BSc (Hons) Geology, MSc and PhD. Dr Doran, who is a member of the
Society of Petroleum Engineers, has more than 30 years of relevant experience
within the industry and consents to the information in the form and context in
which it appears.
Dr Kevin Hird
General Manager - Business Development
Tel: +44 (0)20 7495 5707/+61 (0)2 8356 2000
Mob: +44 (0)7751 3671 49/+61 (0)417 261 727
Email: khird@rocoil.com.au
Michael Shaw
Oriel Securities Limited (Nominated Adviser)
Tel: +44 (0)20 7710 7600
Bobby Morse
Buchanan Communications
Tel: + 44 (0)20 7466 5000
Fax: + 44 (0)20 7466 5001
E-Mail: bobbym@buchanan.uk.com
Mob: +44 (0)7802 875 227
This information is provided by RNS
The company news service from the London Stock Exchange
END
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