Rockpool Acqui Regulatory News (ROC)

3 Jun 2005 07:00

Roc Oil Company Limited03 June 2005 3 June 2005 ROC OIL COMPANY LIMITED ("ROC") STOCK EXCHANGE RELEASE ARDMORE RE-DEVELOPMENT UPDATE: ADMINISTRATIVE RECEIVER APPOINTED FOR ACORN NORTH SEA LIMITED KEY POINTS • At the request of Roc Oil (GB) Limited ("ROCGB"), a wholly owned subsidiary of ROC, Kroll Limited has been appointed as Administrative Receiver over Acorn North Sea Limited ("ANSL"). The move is designed to preserve ROCGB's entitlements as lender with first ranking security over ANSL's assets in accordance with a Security Agreement acquired by ROCGB on 17 December 2004 (the "Security Agreement"). • ROCGB's request that an Administrative Receiver be appointed to ANSL was triggered by uncertainty concerning the future of the Operator of the Ardmore Field, Tuscan Energy (Scotland) Limited ("TESL") and consequential concerns about the future viability of the Ardmore project. • ROCGB's association with the Ardmore Field is through an Agreement which entitles, but does not oblige, the company to acquire up to 26% equity in the Ardmore Field (the "Option"). Because this Option has not been exercised, ROC has no ongoing financial obligation to ANSL or the Ardmore project and there will not be any impact on ROC's current cash position, reported reserve base or future cash flow projections. Subsequent to receipt of information indicating that the future of TESL,Operator of the Ardmore Field, is uncertain and, consistent with the terms andconditions of the Security Agreement, Administrative Receivers have beenappointed to ANSL in order to preserve and realise the maximum value of thatcompany's assets. Presently, ANSL's assets include 35% of the Ardmore Production Licence andsurrounding exploration licences, which contain exploration prospects and smallundeveloped, or partly developed fields: cash in a US$ account and anentitlement to 35% of the value of a cargo of crude oil currently in a tankerawaiting sale in Europe. ROCGB is the majority bank under the Security Agreement, which entitles thelenders to first ranking security over the assets of ANSL. Since entering intothe Agreement in December 2004, ROC has lent a total of £4.5 million, asdetailed in ROC's Quarterly Report for 1Q2005 and its Annual Financial Reportfor 2004. ROCGB has not made any loan to ANSL since 31 March 2005 and does notintend to make any further loans. In its 30 December 2004 Stock Exchange release ROC stated that it was theArdmore Joint Venture's intention to workover an existing well to bring it backon to production at a rate in excess of 2,000 BOPD and also to drill a fourthre-development well which it was hoped would further increase the field'sproduction to in excess of 12,000 BOPD by May 2005. In fact, the Joint Venture chose to work over two wells, but results from bothfell short of the Operator's predictions. In particular, although the secondworkover indicated a productive capacity considerably in excess of 2,000 BOPDthe well produced only 1,200 BOPD, probably because of well bore damage, priorto the mechanical failure of the downhole pump, after which production ceased.The new drill well, which had been planned for 2Q2005, has now been postponed,due to a variety of non-technical reasons and is not now expected to be drilled,at least not as part of the current re-development plan. Details of ROC's Option, the Ardmore Field and the immediately surroundingareas, can be found in ROC's Stock Exchange releases, particularly the releasedated 30 December 2004. Commenting on the Ardmore situation, ROC's Chief Executive Officer, Dr JohnDoran, stated that: "When ROC announced in December 2004 that it had acquired entitlements under theSecurity Agreement and the Option with regard to the Ardmore Field, it statedthat the Company expected to lend up to £4.5 million in relation to the project- and that is what it has done. In order for the Ardmore re-development concept to have had a chance of beingsuccessful four key elements were required: trouble free near term operations, acorporately stable and financially robust Operator, production rates generallyabove 6,000 BOPD and high oil prices. Unfortunately, in recent times neither theoperations nor the Operator were trouble free. Furthermore, due to downholemechanical problems, production recently fell below 6,000 BOPD. The combinationof these three factors has had an overall negative impact upon the commercialviability of the project in the immediate term that even high oil prices couldnot offset. When ROC announced its Option over Ardmore it stated that the oil that remainedto be recovered from the field could not be categorised as commercial reservesunless the re-development drilling programme yielded positive results. Becauseof this, ROC did not book any reserves from Ardmore nor take into account any ofthe production revenue that could be attributed to the equity parcel over whichit had its option. Therefore, the most recent events at Ardmore will not haveany impact upon ROC's reported reserves nor future cash flow. Similarly, ROC took care to structure the arrangement with ANSL so that itacquired an option to acquire an interest in the Ardmore Field, rather thandirect equity in that field. As a result, ROC was able to terminate thearrangement at its discretion without any ongoing financial obligation inrelation to ANSL or the Ardmore Field. Because of the circumstances referred to above, the technical concept upon whichthe latest Ardmore re-development plan was based has still not been properlytested. This is frustrating - but it is not so frustrating as to cause ROC towant to lend more money to ANSL as opposed to trying to resolve the situationvia the appointment of an Administrative Receiver over ANSL so that the value ofANSL's assets may be realised in an orderly manner. As this process unfolds, ROCwill keep its shareholders fully informed in its usual timely manner." Dr John Doran For further information please contact:Chief Executive Officer 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 (0)207 586 7935 Fax: +44 (0)207 722 3919 Email: khird@rocoil.com.au Nick Lambert Bell Pottinger Corporate & Financial Tel: +44 (0)207 861 3232 This information is provided by RNS The company news service from the London Stock Exchange