Rockpool Acqui Regulatory News (ROC)

28 Feb 2008 07:02

Roc Oil Company Limited28 February 2008 28 February 2008 ROC OIL COMPANY LIMITED ("ROC") STOCK EXCHANGE RELEASE 2007 FINANCIAL RESULTS SUMMARY Today, ROC released its ASX Preliminary Final Report (Appendix 4E), Directors'Report and Annual Financial Report for the Financial Year ended 31 December2007. As noted in ROC's 4Q 2007 Report to Shareholders, ROC is now using USdollars as its functional and reporting currency. The key highlights are: FINANCIALS • Record sales revenue of US$208.5 million (2006: US$109.7 million); up 90% on the previous year. • Record oil prices with an average sales price of US$70.16/BBL, (before hedging); a 3% discount to the Brent oil average price. • Record net cash flow from operations of US$138.1 million (2006: US$47.0 million); up 193%, due to increased production and higher oil prices. • Record trading profit of US$87.4 million (2006: US$22.7 million); up 284%. • Record EBITDAX (excluding exploration expense) of US$108.7 million (2006: $US64.1 million); up 70%. • Net loss after income tax of US$83.3 million (2006: loss of US$44.9 million) after exploration expensed of US$88.9 million and a hedging and derivative expense of US$68.8 million, partially offset by a tax benefit of US$21.4 million relating to a change in the Chinese Corporate tax rate. • Amortisation expense of US$98.7 million (2006: US$51.4 million) including accelerated amortisation of US$17.3 million relating to a 2.1 MMBBL decrease in 2P reserves and estimated future cost increases for the Zhao Dong C & D Oil Fields, offshore China. • New four year revolving US$200 million debt facility. • Year end debt of US$133.3 million (2006: US$137.5 million), partially offset by cash of US$41.4 million (2006: US$48.0 million). OPERATIONS • Record production of 3.5 MMBOE from six producing fields in Australia, Africa, China and UK compared to 2 MMBOE produced from four fields in 2006, an increase of 77%. • Exploration drilling; a statistical success with four discoveries from the six exploration wells completed during the year: - the potentially significant Massambala-1 heavy oil discovery, onshore Angola; - three discoveries, two potentially commercial, in the North Perth Basin, offshore Western Australia. • Total exploration and appraisal expenditure of US$94.7 million (2006: US$59.1 million). • Development expenditure of US$57.4 million (2006: US$93.6 million) relating to: - the completion of two major field developments - Enoch and Blane in the North Sea; - significant progress on the Zhao Dong C & D Oil Fields Incremental Development Project and the C4 Oil Field Development Project, offshore China; and - completion of the Chinguetti-18 development well, offshore Mauritania. • Progress was made on the Wei 6-12 South and Wei 6-12 pre-development project in Block 22/12, Beibu Gulf, offshore China, which is expected to reach a development decision in mid 2008, offering near term development upside for shareholders. Commenting on the 2007 Financial Results, ROC's Chief Executive Officer, Dr JohnDoran, stated that: "The 2007 Financial Results have been well flagged by ROC's previous stockexchange releases, particularly the ones dated 25 and 31 January 2008.Therefore, there are no surprises. In this context, the results could even bedescribed as 'boring' - in the very best sense of that word. The fundamental results speak for themselves. New records were established withregard to those metrics which are most important to the running of the Company'sbusiness: production; sales revenue; net cash flow from operations; EBITDAX andtrading profit. These are the measurements that best describe the Company's 2007financial results. There are two significant charges in the 2007 results which are, quite frankly,a source of frustration, because, for some shareholders, their sound biteprominence and their impact on the Profit and Loss line could obscure theunderlying quality of the results referred to above. In reality, these chargessimply reflect the accounting methodology which the Company applies to its hedgeposition and its exploration drilling activities. 'Onerous' is one descriptionthat comes to mind. 'Conservative' is another. Using such adjectives to describethe accounting practices is not to criticise them in any way as much to describethem in an attempt to ensure that all shareholders clearly understand that theydo not impact the Company's basic business operation. Both issues were addressedin some detail in the CEO's Comments which accompanied the Half Year Resultsthat were released on 30 August 2007 and therefore there is no need to delve toodeeply into the accounting philosophy other than to say that: • There is a self evident irony about being required to expense a total of US$22.6 million during 2007 in relation to three exploration wells, each of which made a discovery that is considered to be potentially commercial thereby meriting further evaluation; • Similarly, with only a minority of its proved and probable reserves, about 15% hedged (at US$ 70/BBL), ROC's cash flow benefits enormously from high oil prices. Yet, because of the requirement that ROC mark-to-market its hedge position at the end of each report period, the higher the oil price goes the bigger the derivative loss ROC posts in its Profit and Loss line. For example, because the Brent Oil Price forward curve on 31 December 2007 was an average of US$88.46/BBL the Company recorded a non-cash loss of approximately US$65 million. If Brent had been selling for US$ 50/BBL on the same date, a non-cash profit of approximately US$ 50 million would have been recorded. However, in the latter case, most of ROC's oil would have been sold at the realised equivalent of US$50/BBL instead of the almost US$90/BBL. There is no doubt which scenario benefits ROC shareholders: a high oil price generating more cash and a bigger non-cash derivative loss is a whole lot better than a low oil price that provides a non-cash book profit and much less cash to the Company. Perhaps, it is a measure of the current financial market climate that the bulkof this CEO's report has to focus on the least important - but most easilymisunderstood - part of the 2007 Financial Results, whereas the real financialmeat of the results can be addressed in one and a half lines as in the secondparagraph of these comments; or, even more succinctly, in just four words - anexcellent fundamental result. So much for the past. A forward glance into the balance of 2008 identifies thelargest exploration drilling programme ever undertaken by the Company, includingfour pre-salt exploration wells in Angola; major developments in both the BohaiBay and, subject to a development decision, in the Beibu Gulf, offshore Chinaplus continuing production from six established fields in four countries. In anutshell: an outlook that is both well balanced and potentially very exciting." Dr John DoranChief Executive Officer For further information please contact: Mr Bruce Clement Chief Operating Officer Tel: +61-2-8356-2000 Fax: +61-2-9380-2066 Email: bclement@rocoil.com.au Or visit ROC's website: www.rocoil.com.au 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