Rockpool Acqui Regulatory News (ROC)

24 Oct 2006 07:02

Roc Oil Company Limited24 October 2006 ROC OIL COMPANY LIMITED (ABN 32 075 965 856) REPORT TO SHAREHOLDERS Activities for the Quarter Ended 30 September 2006 CEO COMMENTS During the Quarter, ROC became a different company. Daily net oil productionaveraged slightly in excess of 11,000(1) BOPD, compared to virtually noproduction at the beginning of the year. Gross sales revenue increased to $63.4million compared to $5.1 million in 1Q 2006. With a significant amount of this new production and revenue coming from twoROC-operated fields in China and with the successful appraisal during theQuarter of a potentially commercial, ROC-operated, oil discovery in another partof that country, ROC's profile in China has increased significantly. ROC's profile in Angola is also about to change. The Company negotiated atwo-year drilling rig contract which was signed post-Quarter. As a result, ROCcan move forward to deliver on its commitment to start a ground-breakingexploration drilling campaign onshore Angola in 1H 2007, the first in more than30 years. In Australia, the reservoir performance at the ROC-operated Cliff Head Oil Fieldperformed at the higher end of expectations, thereby providing a valuableunderpinning of the Company's overall revenue stream. As ROC emerges from a very eventful Quarter, the Company finds itself with anarray of portfolio activities that is unique among western, publicly listed, oilcompanies - and one that sets the scene for sustained growth in the near, mediumand long term future. KEY ACTIVITIES 1. PRODUCTION • Total production of 825,039 BBLS (8,968 BOPD(2)): up 230% compared to 250,107 BBLS (2,748 BOPD) in the previous Quarter. • Total sales revenue of $63.4 million; up 279% compared to $16.8 million in the previous Quarter. • Total sales volume of 788,749 BBLS; up 316% compared to 189,554 BBLS in the previous Quarter. 1.1 Cliff Head Oil Field, WA-31-L, Offshore Western Australia (ROC:37.5% & Operator) Development drilling operations were completed on 16 July. Hookup andcommissioning of the remaining two designated oil producers were completed on 23July. Gross oil production rates generally ranged between 8,000 BOPD and 12,500BOPD reflecting intermittent downstream constraints. Production for the Quarteraveraged approximately 9,325 BOPD. See Section 6: Post Quarter Events. 1.2 Zhao Dong C & D Fields, Bohai Bay, Offshore China (ROC: 24.5% &Operator) Gross oil production from the Zhao Dong C & D Fields averaged 27,449 BOPD(3) forthe Quarter. Production was temporarily pared back from about 30,000 BOPD to22,000 BOPD effective 29 September, due to a Government requirement that theproduction rate adhere to the approved Development Plan. 1.3 Chinguetti Oil Field, PSC Area B, Offshore Mauritania (ROC: 3.25%) Gross oil production averaged approximately 31,000 BOPD for the Quarter. 2. DEVELOPMENT 2.1 Blane Oil Field, North Sea (ROC: 12.5%) Development drilling continued during the Quarter with the first of twodevelopment wells completed on 26 September. By Quarter-end the seconddevelopment well had been drilled and was in the process of being completed andpreparations were underway to commence pipelay works for the flow line to theUla platform. First oil production is expected 2Q 2007. 2.2 Enoch Oil and Gas Field, North Sea (ROC: 12.0%) The drilling of the single development well and pipelay works for the flow lineto the Brae platform were completed by Quarter-end. First oil production isexpected 1Q 2007. See Section 6: Post Quarter Events. 2.3 Zhao Dong C & D Fields, Bohai Bay, Offshore China (ROC: 24.5% &Operator) In-fill drilling continued during the Quarter with five wells being completed. Three of these wells were designated oil producers while the other two wellswere intended to be water injectors. Both designated water injection wellsencountered oil, not water, in the targeted water zone which resulted in alowering of the respective oil-water contacts; one was completed as a waterinjection well while the other was completed as an oil producer. These latestwells bring the total number of production wells to 31 and water injection wellsto 20. 3. EXPLORATION AND APPRAISAL 3.1 Perth Basin, Offshore Western Australia (ROC: 7.5% - 50% &Generally Operator) On 31 July, the Moondah-1 exploration well in TP/15 was plugged and abandonedwithout encountering significant hydrocarbons. Due to adverse weather conditionsit was not possible to commence drilling the next scheduled well, Frankland-1 inWA-286-P, prior to the expiry of the drilling rig contract. As a result theENSCO 67 rig was released on 11 August and the 2005 Perth Basin OffshoreDrilling Programme concluded. The remaining wells in the 2006 programme,Frankland-1 and Perserverance-1 in WA-325-P, have been deferred to 2007, subjectto securing a suitable rig. 3.2 Wei 6-12 South Oil Field, Block 22/12, Beibu Gulf, Offshore China(ROC: 40% & Operator) Appraisal of the Wei 6-12S-1 oil discovery continued during the Quarter with thedrilling of two side-track wells: • the first sidetrack well, Wei 6-12S-1Sa, reached a Total Depth of 2,530 mBRT on 4 July with initial analysis indicating that the five cores (78 metres) cut displayed similar reservoir quality to the discovery well; • the second sidetrack well, Wei 6-12S-1Sb, reached a Total Depth of 2,950 mBRT on 26 July. The well was designed to intersect all the reservoir intervals in the upper part of the discovery well in the oil zone, downdip from that well. Preliminary appraisal results are encouraging, confirming oil in the expected target horizons. On 22 September, government authorities in China extended the term of theProduction Sharing Contract for Block 22/12, for a further two years with a twowell drilling commitment to 30 September 2008. 3.3 Mauritania (ROC: 2.0 - 5.0%) The 2006 Mauritanian Offshore Drilling Programme commenced on 21 July with theAtwood Hunter rig drilling the Woodside-operated Colin-1 exploration well in PSCArea A. The well was plugged and abandoned without encountering any significanthydrocarbons. On 13 August, the rig commenced drilling the Dana-operatedexploration well, Flamant-1 in Block 8 which was also plugged and abandonedwithout encountering any significant hydrocarbons. See Section 6: Post QuarterEvents 3.4 Equatorial Guinea (ROC: 18.75% & Technical Manager) The drilling of the Aleta prospect in Blocks H15 & H16, offshore Rio Muni Basincontinues to be dependent on contracting a suitable rig. Discussions with thepotential rig contractor suggest that the well may be drilled in 1H 2007. 3.5 Angola (ROC: 60% & Operator) The 2006 2D and 3D seismic programme commenced on 2 July in the onshore CabindaSouth Block. The 254 sq km 3D component was completed on 20 September. AtQuarter-end approximately 24% of the 217 km 2D component was completed. SeeSection 6: Post Quarter Events On 7 September, a Letter of Intent was signed with regard to a rig contract forthe multi-well exploration drilling programme expected to commence between Marchand May 2007. See Section 6: Post Quarter Events 4. CORPORATE On 8 August, ROC completed its acquisition of a 24.5% operated interest in theZhao Dong Block, Bohai Bay, offshore China for US$260 million/$354 million plusworking capital. On 27 September, ROC paid CAD$1.8 million to terminate a 3% Net Profit Interestapplicable to production from the Blane Oil Field and Enoch Oil and Gas Field. On 27 September, ROC exercised its option to acquire an additional 3% from DanaPetroleum (E&P) Limited in Block 8, offshore Mauritania. The acquisition of the3% interest which would take ROC's total equity in Block 8 to 5%, is subject tonormal government and joint venture approvals. 5. FINANCIAL At Quarter-end ROC had approximately $49.3 million in cash and debt of $387.7million. To fund the Zhao Dong purchase, the Company established a 12-month loan facilityfor US$275 million and a working capital facility for US$30 million with theCommonwealth Bank of Australia. At Quarter-end US$18 million was undrawn on theworking capital facility. 5.1 Production+----------------------------------+-------------+-------------+-------------+| | 3Q 2006 | 2Q 2006 | Change || | BBLS | BBLS | % |+----------------------------------+-------------+-------------+-------------+|Australia - Cliff Head | 321,721| 126,409| 155 |+----------------------------------+-------------+-------------+-------------+|China - Zhao Dong C & D Fields | 410,225| -| N/A |+----------------------------------+-------------+-------------+-------------+|Mauritania - Chinguetti | 92,687| 123,055| (25) |+----------------------------------+-------------+-------------+-------------+|Other | 406| 643| (37) |+----------------------------------+-------------+-------------+-------------+|Total Production | 825,039| 250,107| 230 |+----------------------------------+-------------+-------------+-------------+ Notes: 1. Production for Zhao Dong C & D Fields is reported for August andSeptember only. This is because, despite ROC acquiring the asset effective 1July 2006, and having economic ownership from that date, the acquisition was notcompleted until early August. 2. Production quoted is ROC's working interest share of total production. 5.2 Sales+----------------------------+-----------------------+-------------------------+| | 3Q 2006 | 2Q 2006 |+----------------------------+-----------+-----------+-----------+-------------+| | BBLS | $'000 | BBLS | $'000 |+----------------------------+-----------+-----------+-----------+-------------+|Australia - Cliff Head | 320,604| 28,789| 126,409| 11,397|+----------------------------+-----------+-----------+-----------+-------------+|China - Zhao Dong C & D | 405,036| 29,334| -| -||Fields | | | | |+----------------------------+-----------+-----------+-----------+-------------+|Mauritania - Chinguetti | 62,740| 5,268| 62,093| 5,261|+----------------------------+-----------+-----------+-----------+-------------+|Other | 369| 34| 1,052| 94|+----------------------------+-----------+-----------+-----------+-------------+|Total Sales | 788,749| 63,425| 189,554| 16,752|+----------------------------+-----------+-----------+-----------+-------------+ 5.3 Expenditure +----------------------------------+--------------+--------------+ | | 3Q 2006 | 2Q 2006 | | | $'000 | $'000 | +----------------------------------+--------------+--------------+ |Exploration | | | +----------------------------------+--------------+--------------+ |Angola | 14,882| 7,056| +----------------------------------+--------------+--------------+ |China | 4,306| 9,543| +----------------------------------+--------------+--------------+ |Mauritania | 4,643| 485| +----------------------------------+--------------+--------------+ |Australia | 1,863| 4,201| +----------------------------------+--------------+--------------+ |UK | 694| 4,284| +----------------------------------+--------------+--------------+ |Equatorial Guinea | 51| 124| +----------------------------------+--------------+--------------+ |Other | 558| 763| +----------------------------------+--------------+--------------+ |Total Exploration | 26,997| 26,456| +----------------------------------+--------------+--------------+ +----------------------------------+--------------+--------------+ |Development | | | +----------------------------------+--------------+--------------+ |Cliff Head | 9,926| 17,173| +----------------------------------+--------------+--------------+ |Zhao Dong C & D Fields | 4,155| -| +----------------------------------+--------------+--------------+ |Blane | 13,723| 12,689| +----------------------------------+--------------+--------------+ |Enoch | 5,239| 1,939| +----------------------------------+--------------+--------------+ |Chinguetti | 545| (312)| +----------------------------------+--------------+--------------+ |Total Development | 33,588| 31,489| +----------------------------------+--------------+--------------+ | | | | +----------------------------------+--------------+--------------+ |Total Exploration & Development | 60,585| 57,945| +----------------------------------+--------------+--------------+ 5.4 Hedging In conjunction with closing the Zhao Dong acquisition and in addition toprevious oil price hedging at 30 June, further Brent oil price swaps of 2.327MMBO were executed for the period 1 July 2008 to 30 June 2011 at a weightedaverage Brent oil price of US$72.80/BBL. At Quarter-end, ROC's hedging exposurefor the period through to 30 June 2011 was: +------------------------+---------+----------+----------+----------+----------+| | BBLS | Weighted | BBLS | Weighted |TOTAL BBLS|| | | Average | | Average | || | | Brent | | Brent | || | |Price USD/| | Price | || | | BBL | | USD/BBL | |+------------------------+---------+----------+----------+----------+----------+|Oil Price Swaps | 576,000| 49.58| 3,226,956| 72.47| 3,802,956||October 2006 - June 2011| | | | | || | | | | | |+------------------------+---------+----------+----------+----------+----------+|Oil Price Puts | 420,000| 50.00| 240,000| 67.00| 660,000||October 2006 - December | | | | | ||2007 | | | | | |+------------------------+---------+----------+----------+----------+----------+ 6. POST QUARTER EVENTS 6.1 On 10 October, ROC reported that recent gross oil production rates from theCliff Head Oil Field, Perth Basin, offshore Western Australia (ROC: 37.5% &Operator) ranged between 11,000 BOPD and 12,500 BOPD with a high of 15,800 BOPD.This variability reflects intermittent downstream constraints relating totrucking capacity which have been addressed. On 15 October, production wastemporarily shut-in due to electrical problems at the offshore platform.Production resumed on 21 October. 6.2 Production testing of the single development well at the Enoch Oil and GasField, North Sea (ROC: 12.0%) was in progress as of 18 October. The wellrecorded several flow rates on various choke sizes and results appear to begenerally in line with expectations. 6.3 On 19 October, ROC signed a two-year contract with Simmons Drilling OverseasLimited for the Simmons 80 Rig to commence drilling in the onshore Cabinda SouthBlock between March and May 2007. The 1,200 horsepower rig which is currentlybeing upgraded in Dubai is capable of drilling to 4,000 metres in conventionalholes sizes. 6.4 On 18 October the 217 km 2D seismic programme was completed in the CabindaSouth Block, onshore Angola marking the end of an 18-month seismic acquisitionphase which acquired a total of 416 sq km of 3D and 722 km of 2D in two separatesurveys. 6.5 The Dana-operated Aigrette-1 exploration well in Block 7, offshoreMauritania (ROC: 4.950%) commenced drilling on 7 October and as at 23 Octoberwas at a depth of 2,809 metres with the current operation drilling ahead to aplanned Total Depth of 4,925 metres. 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. Dr Kevin HirdGeneral Manager Business DevelopmentTel: +44 (0)207 586 7935Fax: +44 (0)207 722 3919Email: khird@rocoil.com.au Nick LambertBell Pottinger Corporate & FinancialTel: +44 (0)207 861 3232 --------------------------(1) Includes production from Zhao Dong C & D Fields from 1 July 2006(2) Production from Zhao Dong C & D Fields for August and September only. Thisis because, despite ROC acquiring the asset effective 1 July 2006, and havingeconomic ownership from that date, the acquisition was not completed until earlyAugust.(3) Production from Zhao Dong C & D Fields is reported for August and Septemberonly. This is because, despite ROC acquiring the asset effective 1 July 2006,and having economic ownership from that date, the acquisition was not completeduntil early August. For a complete copy of this report please see ROC's website:http://www.rocoil.com.au/Public/Announcement/2006/Report_for_Quarter_Ended_30_September_2006.aspx This information is provided by RNS The company news service from the London Stock Exchange