Rockpool Acqui Regulatory News (ROC)

31 Jan 2008 07:01

Roc Oil Company Limited31 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 recordquarter on three key fronts: record oil production (1.08 MMBO); record realisedoil prices (A$100/BBL); and record sales revenue ($88 million). Two other important, albeit quite different, field development milestones werealso 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 ofthe next phase of ROC's Angolan drilling programme which will see four wellstarget the hydrocarbon potential of the pre-salt section in the Cabinda SouthBlock. This continuous drilling programme will run through into mid-2008 and atvarious stages will overlap with the Company's other drilling activities inChina, Australia and Mauritania to provide a record level of drilling activitywhich will see at least 9 exploration/appraisal wells and more than a dozendevelopment wells drilled during the next 6 months. These CEO comments would be delinquent if they didn't also refer to eventsduring the month immediately subsequent to Quarter-end, when a combination ofglobal equity market adjustments, a 2.1 MMBO revision to ROC's net 2P reservesat Zhao Dong, equivalent to 7.5% of Company-wide 2P reserves, and the first wellof the 2008 Beibu Gulf exploration drilling programme coming in dry, causedROC's share price to drop to a two and a half year low. Given that when theshare price was last at this level the Company produced approximately 34 BOPDand generated quarterly sales of $229,000, it is not unreasonable to suggestthat 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 9,460BOPD (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, naturaldecline which is scheduled to last many years, during which time the focus willbe on optimizing well production performance and recovery. During November 2008,18 months after production commenced, the Cliff Head Oil Field produced its 5millionth 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 theprevious quarter. This increase reflects the positive contribution from the fourdevelopment wells drilled during the Quarter together with a number ofsuccessful initiatives implemented to improve well and field performanceincluding 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 0.8MMSCFD); down 8% compared to the previous quarter. Because the production dataquoted is based on the Forties Pipeline reporting system Enoch productionvolumes have not yet been finalised and, as reported in 3Q 2007, may be subjectto 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 compressionupgrade project which will provide a dedicated gas supply for gas lift forBlane's producing wells commenced. Drilling of the planned water injection wellis 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 theprevious quarter due to continuing natural field decline. A programme of twoinfill wells and three well interventions is planned to commence in 2Q 2008 andthis is expected to increase production levels, enhance the current gas-liftcapability 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 earlyDecember 2007. Drilling activities have been temporarily suspended for thewinter and will recommence in March 2008. Upgrade work on the offshore drillingand production platforms as part of the Incremental Development Plan continued.During the Quarter, work commenced on the rig upgrade, including theinstallation of a new mud tank, together with new pipe work. A workover was alsosuccessfully completed on one of the development wells and a new electricalsubmersible 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, wheninstallation 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 1Q2008. The survey will further define the recent Frankland and Dunsboroughdiscoveries and nearby prospects and leads. The Premium "Wilcraft" jack-up rigwas contracted for an exploration and appraisal drilling programme comprisingtwo wells, Lilac-1 and Frankland-2, to be drilled in February-March 2008 (seesection 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 foracquiring a 3D seismic programme in 2008, which will focus on Triassic gaspotential. 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 reservesbase for the Wei 6-12 South and Wei 6-12 oil fields was submitted to andapproved by CNOOC, the relevant Chinese state oil company. Work on thefeasibility study and the Development Plan continues with a Final InvestmentDecision targeted for mid-2008. Pre-drill preparations were also underway for athree well exploration/appraisal programme starting in early 2008. At the end ofthe Quarter, the Premium "Murmanskaya" jack-up rig was on location preparing todrill 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 showsneither was judged to be commercial. The Simmons 80 Rig commenced drilling ROC's fourth exploration well, Milho-1, on24 November 2007. This is the first well in the programme that will specificallytarget the hydrocarbon potential of the pre-salt section. As of end January2008, the well was yet to drill the prognosed reservoir section and it is nowexpected 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 Bcontinued during the Quarter. Planning continued for the Atwood "Hunter" todrill the large, high risk, Khop-1 exploration well which is scheduled tocommence in February 2008. The well will test a dominant structural feature inPSC Area C Block 6. Following the drilling of this prospect, a Banda NWappraisal 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 alsoprogressing. In parallel with this work an Environmental Impact Study isunderway. 4.7 Blocks H15 & H16 Equatorial Guinea (ROC: 18.75% & Technical Manager) The arbitration between Pioneer Natural Resources (Equatorial Guinea) Limitedand the other joint venturers, including ROC, continued. 5. CORPORATE Mr Ross Dobinson resigned as a Director of ROC's Board, effective 31 December2007. On 17 December 2007, ROC received Government approval of its farmin toexploration permits WA-381-P and WA-382-P in the Vlaming Sub-Basin, offshorePerth. Block 30/22b in the UK North Sea, operated by Maersk Oil (UK) Limited, wasrelinquished effective 21 December 2007. Redistribution of equity effective 23 December 2007, resulted in ROC'sparticipating interest in PSC Area C, Block 2 offshore Mauritania, increasingfrom 3.2% to 5.49%. On 24 December 2007, the Company was advised by Sonangol E.P., the nationalconcessionaire that it had successfully pre-qualified as an operator in thecurrent 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 preparationof its accounts and the provision of financial reports to the market. Thisreview considered, amongst other things, the international nature of ROC'sassets, that the majority of its revenue, expenditures, assets and liabilitiesare incurred in US dollars and the Company's listing on AIM in the UnitedKingdom where entities commonly report in US dollars. As a result of the review,going forward the Company's financial information, including the 2007 FinancialStatements scheduled to be released on 28 February 2008, will be presented in USdollars. For ease of reference, in this Quarterly Report, the Company hasprovided year-to-date revenue and expenditure in Australian dollars and USdollars 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$'000 ||(BBLS) | | | | | | | |+----------+---------+--------+---------+--------+----------+---------|--------+|Cliff Head| 327,776 | 33,413 | 302,181 | 26,356 |1,185,666 | 103,215 | 86,556 ||Zhao Dong | 306,054 | 28,078 | 299,951 | 21,543 |1,326,471 | 100,565 | 84,334 ||C&D Fields| | | | | | | ||Chinguetti| 27,356 | 2,791 | 32,394 | 2,835 | 120,519 | 10,357 | 8,685 ||Enoch | 89,182 | 9,403 | 104,932 | 9,459 | 194,114 | 18,862 | 15,818 ||Blane | 125,122 | 13,971 | - | - | 125,122 | 13,971 | 11,716 ||Other | 340 | 42 | 347 | 21 | 1,836 | 153 | 128 |+----------|---------+--------+---------+--------+----------+---------|--------+|Total Oil | 875,830 | 87,698 | 739,805 | 60,214 |2,953,728 | 247,123 |207,237 ||Sales | | | | | | | |+----------|---------+--------+---------+--------+----------+---------|--------+|Gas Sales | | | | | | | ||(MSCF) | | | | | | | ||Enoch | 73,655 | 282 | 102,149 | 566 | 212,429 | 974 | 817 |+----------|---------+--------+---------+--------+----------+---------|--------+|Total | 888,106 | 87,980 | 756,830 | 60,780 |2,989,133 | 248,097 |208,054 ||Sales | | | | | | | ||(BOE) | | | | | | | |+----------+---------+--------+---------+--------+----------+---------+--------+ Note: ROC's net entitlement crude stock position increased by 127,612 BBLSduring the period so that at the end of 4Q 2007 ROC was in an underlift positionof 243,571 BBLS compared to a 115,959 BBLS underlift position at the end of theprevious quarter. 6.4 Expenditure Incurred +---------------------+-----------+-----------+-----------+-----------+| | 4Q 2007 | 3Q 2007 | YTD | YTD || | A$'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 December2011 is summarised below. This hedge is equivalent to 15% of ROC's Company-wide2P 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 ina cash flow loss of $4.7 million (US$ 3.9 million). As advised during the year, because of the volatility in the differentialbetween the Brent oil price and the underlying realised price of ROC's crude oilsales during 2007, it became inappropriate for ROC to hedge account the majorityof the Company's oil price derivative contracts under the technical requirementsof the Australian accounting standards. Therefore, ROC has decided to value all its oil price swap hedge book using themark-to-market value and to report the movement in this value in its incomestatement rather than using hedge accounting to report the movement in value forparts of the hedge book as changes to equity. As a result, ROC will report a netderivative 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) primarilybecause of the movement in the mark-to-market value of these contracts caused bythe high oil price environment prevailing at year end. 7. POST QUARTER EVENTS On 1 January 2008, ROC commenced a three-well exploration and appraisalprogramme in Block 22/12, Beibu Gulf, Offshore China. The first explorationwell, Wei 6-12W-1 reached a Total Depth of 2,333 mBRT without findinghydrocarbons and was plugged and abandoned on 28 January 2008. The Premium"Murmanskaya" jack-up rig is currently preparing to jack down and move off theWei 6-12W -1 location. The result for the Wei 6-12W-1 well does not have any adverse impact on thepotential 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 theoffshore north Perth Basin. As at the end of January, 345 km2 of seismic hadbeen acquired. On 25 January 2008, RISC Pty Ltd completed its independent audit of ROC'sreserves excluding the Chinguetti Oil Field offshore Mauritania. When combinedwith ROC's internal reserves review and as set out in ROC's Stock Exchangerelease dated 25 January 2008, the status of ROC's reserves can be summarised asfollows: • 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, JohnDoran, Chief Operating Officer, Bruce Clement, or General Manager, ExternalAffairs & Investor Relations, Damian Fisher, 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 +------------------------------------------------------------------------+|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 beenreviewed and approved by Dr John Doran, Chief Executive Officer, Roc Oil CompanyLimited, BSc (Hons) Geology, MSc and PhD. Dr Doran, who is a member of theSociety of Petroleum Engineers, has more than 30 years of relevant experiencewithin the industry and consents to the information in the form and context inwhich it appears. Dr Kevin HirdGeneral Manager - Business DevelopmentTel: +44 (0)20 7495 5707/+61 (0)2 8356 2000Mob: +44 (0)7751 3671 49/+61 (0)417 261 727Email: khird@rocoil.com.au Michael ShawOriel Securities Limited (Nominated Adviser)Tel: +44 (0)20 7710 7600 Bobby MorseBuchanan CommunicationsTel: + 44 (0)20 7466 5000Fax: + 44 (0)20 7466 5001E-Mail: bobbym@buchanan.uk.comMob: +44 (0)7802 875 227 This information is provided by RNS The company news service from the London Stock Exchange