Rockpool Acqui Regulatory News (ROC)

27 Apr 2007 07:02

Roc Oil Company Limited27 April 2007 ROC OIL COMPANY LIMITED (ABN 32 075 965 856) REPORT TO SHAREHOLDERS Activities for the Quarter Ended 31 March 2007 CEO COMMENTS The Quarter was characterised by major progress in terms of key Governmentapprovals for substantial ROC-operated development projects in China; thearrival of the ROC-owned Explorer rig onshore Angola ahead of a 2Q 2007 drillingcampaign; subdued production due to a variety of quite separate factorsaffecting different field operations and a reduction in total sales revenue andvolume that was accentuated by overlift at the end of the previous Quarter andunderlift during the current Quarter. In other words: situation normal for acompany that is actively operating a variety of projects. Perhaps, the most appropriate perspective to bring to bear on the Quarter isthat it followed a Quarter that showcased the magnitude of the corporatetransformation which ROC underwent during the latter part of 2006, and precedesa Quarter that is expected to see a new North Sea field come on stream andmulti-well exploration drilling programmes undertaken offshore Western Australiaand onshore Angola. In this sense, 1Q 2007 was a relatively quiet Quartersandwiched between a landmark 4Q 2006 and a potentially very significant 2Q2007. KEY ACTIVITIES 1. REVENUE & PRODUCTION • Total working interest oil production of 782,544 BBLS (8,695 BOPD): down 8% compared to 847,087 BBLS (9,207 BOPD) in the previous Quarter. • Total sales volume of 574,408 BBLS; down 45% compared to 1,048,282 BBLS in the previous Quarter, partly due to significant overlift during 4Q 2006 and underlift in 1Q 2007. Specifically, ROC sold 258,000 BBLS more than it produced in 4Q 2006, as advised in the last Quarterly Report and produced 174,000 BBLS more than it sold in 1Q 2007. • Total sales revenue of $38.9 million; down 41% compared to $66.1 million in the previous Quarter for reasons referred to above. The average received price for the Quarter was $67.71/BBL (US$53.49/BBL) up 7% from the previous Quarter. 1.1 Cliff Head Oil Field, WA-31-L, Offshore Western Australia (ROC: 37.5% & Operator) Gross oil production average of approximately 7,900 BOPD (ROC WI: 2,948 BOPD),down 9% on previous Quarter due to a planned shut-in during the period andintermittent mechanical and downstream constraints. At the end of the Quarter,the field was producing at a relatively steady rate, generally between 8,000 and9,000 BOPD from five of the six designated oil producers. On 5 February 2007, an important Health, Safety, Environment & Community ("HSE&C") milestone was reached with 12 months of production operations completedwithout a Lost Time Injury. 1.2 Zhao Dong C & D Oil Fields, Bohai Bay, Offshore China (ROC: 24.5% & Operator) Gross oil production averaged about 21,000 BOPD (ROC WI: 5,143 BOPD) down 1% onthe previous Quarter due to intermittent port congestion and inclement weather,partially offset by the lifting of the Government production constraint.On 27 March 2007, a significant HSE&C milestone was reached when operations atZhao Dong achieved one million man-hours without a Lost Time Injury. 1.3 Chinguetti Oil Field, PSC Area B, Offshore Mauritania (ROC: 3.25%) Gross oil production averaged approximately 18,300 BOPD (ROC WI: 596 BOPD) down22% on the previous Quarter. The Chinguetti-18 development well was brought onstream during the Quarter. 2. DEVELOPMENT 2.1 Zhao Dong C and D Oil Fields and C4 Oil Field, Bohai Bay, OffshoreChina (ROC: 24.5% in C and D Fields & Operator, ROC: 11.575% in unitised C4Field & Operator) The US$373 million (ROC: US$91 million) Incremental Development Plan ("IDP") forthe C and D Oil Fields was approved during the Quarter. The 5-year IDP includesthe drilling of approximately 100 wells for a cost of US$331 million with 65 ofthe wells being drilled from the enhanced C and D facilities. The balance of thecost relates to new facilities including construction and installation of asecond drilling platform and a second fluid processing and storage facility,both of which will be located adjacent to the existing Zhao Dong platforms. As part of the approved IDP, the undeveloped Extended Reach Area ("ERA"), in thenorth-eastern part of the C Field, which contains a significant part of thepossible reserves in the Block, will be targeted over the next 5 years by atleast 35 wells, all to be drilled from the future C4 facilities. In February 2007, the US$150 million (ROC: US$17.4 million) developmentprogramme for the C4 Oil Field was approved including the construction of newfacilities and the drilling of 24 wells. The development contemplates drillingthe wells from two conductor pods while a third, separate pod will also beinstalled to serve as a pipeline terminal which will be tied back to theexisting Zhao Dong platforms via a 4.5 km pipeline. C4 development drilling is planned to commence in mid-2008 and to continue to2011. The current target for first oil from the C4 - ERA is late 2008. 2.2 Enoch Oil and Gas Field, North Sea (ROC: 12.0%) The project remains on schedule for first production in 2Q 2007. Developmentexpenditure of $5.9 million (net ROC) in the Quarter related to host platformfacilities construction work on the Brae A platform, umbilical installationwork, rock dumping on pipeline crossings, subsea pipe spool work and pipelineand umbilical pressure testing. The total capital cost of the Enoch developmentis now expected to be approximately £100 million (ROC: £12 million). 2.3 Blane Oil Field, North Sea (ROC: 12.5%) On 27 March 2007, it was announced that first oil from Blane will be delayed to3Q 2007 due to inclement weather periods and delays with topside construction onthe third party host platform. These, and other factors, have contributed to acost increase for the Blane development which is now likely to totalapproximately £250 million, (ROC: £31.5 million). Development expenditure of $11million (net ROC) in the Quarter was related to the host platform facilitiesconstruction work on the Ula platform, umbilical installation work and pipelinetrenching work. 2.4 Chinguetti Oil Field, PSC Area B, Offshore Mauritania (ROC: 3.25%) From 10 March to 2 April 2007, a high resolution 4-D seismic survey over theChinguetti Oil Field was acquired, with the aim of assisting in planning thesecond phase in-fill drilling programme and optimising the reservoir developmentplan over its expected field life. 3. EXPLORATION AND APPRAISAL 3.1 Perth Basin, Offshore Western Australia (ROC: 7.5% - 50% & Generally Operator) The Premium Wilcraft jack-up drilling rig was contracted for a three wellexploration drilling programme which commenced in early April 2007. Theprogramme includes Frankland-1 and Dunsborough-1 in WA-286-P and Perseverance-1in WA-325-P. See Section 6.1 Post-Quarter Events. 3.2 Block 22/12, Beibu Gulf, Offshore China (ROC: 40% & Operator) An Appraisal Report and Final Reserves Assessment relating to the Wei 6-12 Southand Wei 6-12 oil fields was completed during the Quarter. The most likelyoil-in-place for the two fields is 56 MMBO. When combined with the two adjacentundrilled prospects, the most likely oil-in-place for the four features withinthe Wei 6-12S/6-12 Complex is 83 MMBO. The most likely recoverable oil estimatefor the four features is 29 MMBO, of which 19 MMBO relates to the two knownfields. On this basis, the Joint Venture is moving towards a formal Front EndEngineering and Design ("FEED") phase which is scheduled to begin in 2Q 2007 anda Final Investment Decision ("FID") which is targeted for 2H 2007. In response to an invitation to tender, issued during Q1 2007, ROC received anumber of bids relating to jack-up rigs that could be made available for amulti-well exploration drilling programme scheduled to commence in late 2007/very early 2008. 3.3 Angola (ROC: 60% & Operator) Following completion of upgrade work on the ROC-owned Explorer rig in the UK,the rig arrived in Cabinda in mid-March 2007 where it awaits the completion ofthe construction of the first well site scheduled for May 2007. The Simmons 80 rig, which is being upgraded in Dubai, is expected to depart forAngola in late May 2007. Ongoing interpretation of the 2005 and 2006 seismic surveys has confirmed morethan 30 prospects and leads. In addition to the two prospects previouslyidentified, Massambala and Soja (formerly Caju), three other prospects have beenhigh graded as potential drilling candidates for 2007. Two of these latestadditions to the prospect inventory represent pre-salt pays. The exploration drilling programme is planned to commence in May 2007 with up tosix exploration wells due to be drilled. Based on the encouraging results achieved to date, ROC and its co-venturers haveagreed to acquire a further 200 sq km of 3-D seismic during 2007 in the easternpart of the block. 3.4 Equatorial Guinea (ROC: 18.75% & Technical Manager) Activity continued to focus on a number of rig contract options includingcontract negotiations for the Aban Abraham deep water drilling vessel, currentlybeing upgraded in Singapore. 4. CORPORATE In March 2007, the Chinese government changed the corporate tax rate from 33% to25%, effective 1 January 2008. This will result in ROC's deferred tax liabilitybeing reduced by 24% and accordingly it is anticipated that a non-cash deferredtax benefit of approximately $27 million will be recognised in the IncomeStatement for the current period. The £250,000 sale of ROC's 100% interest in the onshore UK PEDL 005 (Remainder)licence, including the Keddington Oil Field, to Egdon Resources plc, wascompleted on 12 March, 2007. Consistent with a Farm-in Agreement signed in 2003, Dana Petroleum (E&P)Limited's assignment of 3% interest in Block 8, offshore Mauritania, to ROC wasconcluded on 15 January 2007. This takes ROC's total equity in Block 8 from 2%to 5%. Formal consent was received relating to the relinquishment of the WA-349-Ppermit in the Perth Basin, Australia, effective 5 January 2007. ROC withdrewfrom the WA-226-P permit in the Perth Basin, Australia, effective 5 March 2007. On 26 March 2007, ROC advised that Mr Richard Burgess has given notice of hisintention to retire as a Director of the Company effective from the AnnualGeneral Meeting to be held on 10 May 2007. Mr Burgess has agreed to become anAdvisor to ROC and he will therefore retain a close association with theCompany. On 26 March, the Company also announced the appointment of Mr DennisPaterson, President, Roc Oil (China) Company, based in Beijing, as an ExecutiveDirector effective 23 March 2007. 5. FINANCIAL At Quarter-end ROC had approximately $64.1 million in cash and debt of $170.8million. 5.1 Production+------------------------------+-------------+-------------+-------------+| | 1Q 2007 | 4Q 2006 | Change || | BBLS | BBLS | % |+------------------------------+-------------+-------------+-------------+|Australia - Cliff Head | 265,358| 300,030| (12) |+------------------------------+-------------+-------------+-------------+|China - Zhao Dong C & D Fields| 462,914| 476,514| (3) |+------------------------------+-------------+-------------+-------------+|Mauritania - Chinguetti | 53,623| 69,895| (23) |+------------------------------+-------------+-------------+-------------+|Other | 649| 648| - |+------------------------------+-------------+-------------+-------------+|Total Production | 782,544| 847,087| (8) |+------------------------------+-------------+-------------+-------------+ Production quoted is ROC's working interest share of total production. ROC's netentitlement production for the period was 747,938 (4Q 06: 790,344) 5.2 Sales+--------------------------+---------------------+---------------------+| | 1Q 2007 | 4Q 2006 |+--------------------------+----------+----------+-----------+---------+| | BBLS | $'000 | BBLS | $'000 |+--------------------------+----------+----------+-----------+---------+|Australia - Cliff Head | 259,517| 19,124| 300,982| 21,401|+--------------------------+----------+----------+-----------+---------+|China - Zhao Dong C & D | 314,242| 19,722| 620,191| 36,334||Fields | | | | |+--------------------------+----------+----------+-----------+---------+|Mauritania - Chinguetti | -| -| 126,483| 8,366|+--------------------------+----------+----------+-----------+---------+|Other | 649| 47| 626| 45|+--------------------------+----------+----------+-----------+---------+|Total Sales | 574,408| 38,893| 1,048,282| 66,146|+--------------------------+----------+----------+-----------+---------+ ROC's net entitlement crude stock position increased by 173,530 BBLS during theperiod and at the end of the 1Q 2007 ROC was in a net underlift position of73,930 BBLS compare to a 99,600 BBLS overlift in the previous Quarter. 5.3 Expenditure+-------------------------------------+--------------+--------------+| | 1Q 2007 | 4Q 2006 || | $'000 | $'000 |+-------------------------------------+--------------+--------------+|Exploration | | |+-------------------------------------+--------------+--------------+|Angola | 7,578| 10,511|+-------------------------------------+--------------+--------------+|China | 614| 11|+-------------------------------------+--------------+--------------+|Mauritania | 145| 3,885|+-------------------------------------+--------------+--------------+|Australia | 130| 182|+-------------------------------------+--------------+--------------+|UK | 105| 58|+-------------------------------------+--------------+--------------+|Equatorial Guinea | 102| 55|+-------------------------------------+--------------+--------------+|Other | 251| 949|+-------------------------------------+--------------+--------------+|Total Exploration | 8,925| 15,651|+-------------------------------------+--------------+--------------+ +-------------------------------------+--------------+--------------+|Development | | |+-------------------------------------+--------------+--------------+|Cliff Head | -| 736|+-------------------------------------+--------------+--------------+|Zhao Dong C & D Fields | 1,201| (531)|+-------------------------------------+--------------+--------------+|Blane | 11,048| 16,772|+-------------------------------------+--------------+--------------+|Enoch | 5,883| 5,841|+-------------------------------------+--------------+--------------+|Chinguetti | 2,462| 1,664|+-------------------------------------+--------------+--------------+|Total Development | 20,594| 24,482|+-------------------------------------+--------------+--------------+| | | |+-------------------------------------+--------------+--------------+|Total Exploration & Development | 29,519| 40,133|+-------------------------------------+--------------+--------------+ 5.4 Hedging During the Quarter ROC executed an additional 1,400,000 BBLS of crude oil priceswap contracts at a weighted average Brent oil price of US$66.22/BBL for theperiod 1 January 2008 to 31 December 2011. At Quarter end, ROC's oil price hedging for the period through to December 2011was: +---------+---------------------------+----------------------------+| | Brent Oil Price Swaps | Brent Oil Price Puts |+---------+-------------+-------------+-------------+--------------+| | Volume | Weighted | Volume | Weighted || | |Average Brent| |Average Brent || | | Price | | Price || | | USD/BBL | | USD/BBL |+---------+-------------+-------------+-------------+--------------+| 2007 |1,156,980 |67.17 |285,000 |51.79 |+---------+-------------+-------------+-------------+--------------+| 2008 |1,177,987 |71.40 |- |- |+---------+-------------+-------------+-------------+--------------+| 2009 |851,998 |70.01 |- |- |+---------+-------------+-------------+-------------+--------------+| 2010 |686,994 |68.46 |- |- |+---------+-------------+-------------+-------------+--------------+| 2011 |455,997 |66.31 |- |- |+---------+-------------+-------------+-------------+--------------+| |4,329,956 |68.99 |285,000 |51.79 |+---------+-------------+-------------+-------------+--------------+ 6. POST QUARTER EVENTS 6.1 On 23 April, ROC announced that, Frankland-1, the first well in a three wellexploration drilling programme in the offshore Perth Basin, was a gas discovery.The well, drilled by the Premium Wilcraft jack-up rig, was plugged and abandonedaccording to the well plan on 25 April, 2007. 6.2 During April 2007, a workover programme commenced at Cliff Head Oil Field which will not significantly disrupt production. 6.3 Drilling activities at Zhao Dong commenced in April 2007. 6.4 During April a high-resolution 3-D seismic survey was acquired overthe undeveloped Tiof Oil Field, in PSC Area B, offshore Mauritania. 6.5 On 26 April, ROC together with the Government of Madagascar and US-basedprivate company Marex, Inc signed a Production Sharing Contract ("PSC") coveringan exploration area of 13,770 sq km in the Mozambique Channel area offshoreMadagascar. The PSC is subject to Presidential Decree. ROC will operate the PSCwith an initial Working Interest of 75% which under certain circumstances mayrise to 100% over time. The initial mandatory work programme commitment relatesto 2-D and 3-D seismic acquisition. 7. FURTHER INFORMATION For further information please contact ROC's Chief Executive Officer, Dr JohnDoran on:Phone: (02) 8356 2000 Email: jdoran@rocoil.com.auFacsimile: (02) 9380 2066 Web Site: www.rocoil.com.auAddress: Level 14, 1 Market Street, Sydney, NSW 2000, Australia definitionsBBL(S) means barrel(s)BCF means billion cubic feetBOE means barrels of oil equivalentBOPD means barrels of oil per dayBOEPD means barrels of oil equivalent per dayBCPD means barrels of condensate per dayGWC means gas-water contactMCF means thousand cubic feetm BRT means metres below rotary tablemTVDSS means metres true vertical depth below sea levelMMSCF means million standard cubic feetMMSCF/D means million standard cubic feet per dayMMBO means million barrels of oilMMBOE means million barrels of oil equivalentOWC means oil-water contactPSC means Production Sharing ContractQuarter means the period 1 January 2007 to 31 March 2007ROC means Roc Oil Company Limited and includes, where the context requires, its subsidiariesSCF means standard cubic feetTCF means trillion cubic feetUS$ means US dollarsWI Working Interest$ means Australian dollars£ Means Pounds Sterling This information is provided by RNS The company news service from the London Stock Exchange