Rockpool Acqui Regulatory News (ROC)

27 Feb 2007 07:05

Roc Oil Company Limited27 February 2007 27 February 2007 ROC OIL COMPANY LIMITED ("ROC") STOCK EXCHANGE RELEASE ZHAO DONG DEVELOPMENT PROJECTS APPROVED KEY POINTS The Zhao Dong Joint Venture and relevant Government authorities in China haverecently provided a number of key approvals covering ROC's operations in theBohai Bay. Approvals received cover a number of activities which represent morethan US$500 million of proposed development expenditure relating to theexpansion of existing facilities, the installation of new facilities and thedrilling of more than 120 development wells between now and 2011. In summary: • The production constraints announced in October 2006 and revised in January 2007, have been removed. As a consequence, production for 2007 from the Zhao Dong C and D oil fields is forecast to be about 9 MMBO, approximately 25,000 BOPD (ROC net: 6,125 BOPD). • The US$373 million Incremental Development Plan ("IDP") for the C and D oil fields has been approved. • The US$169 million 2007 Work Programme and Budget for the C and D fields has been approved, including the drilling of 15 wells which represent the first phase of the IDP. • The US$150 million development programme for the C4 Oil Field has been approved. • As part of the IDP, the undeveloped Extended Reach Area ("ERA"), in the northeastern part of the C Field, will be targeted over the next five years by at least 35 wells. 1. Background ROC, on behalf of its wholly-owned subsidiary, Roc Oil (Bohai) Company, whichholds a 24.5% operated interest in the Zhao Dong Block in Bohai Bay, offshoreChina, is pleased to advise that a number of important Government and JointVenture approvals have been received. 2. C and D Fields: 2007 Production Rates The oil production constraints announced 10 October 2006 and revised in January2007, have been lifted. A well optimisation programme has commenced for the C and D oil fields whichtogether with development drilling is designed to achieve a total gross oilproduction of approximately 9 MMBO for 2007, equivalent to a daily gross averageproduction rate of about 25,000 BOPD. This target is relatively ambitious giventhe production constraints under which the fields operated for the first fiveweeks of 2007, but it still compares favourably to 2006 production of 8.7 MMBO,approximately 23,800 BOPD (ROC net: 5,835 BOPD). 3. C and D Fields: IDP Government and Joint Venture approvals have been received to proceed with theIDP for the C and D oil fields. The first phase of this five year programme willbegin immediately with the implementation of the 2007 Work Programme and Budget(see below). Total costs for the IDP, including work to be undertaken as part ofthe 2007 approved budget, are anticipated to be approximately US$373 million(ROC net: US$91 million) of which US$331 million relates to drilling with thebalance for construction of facilities. The IDP requires the construction and installation of a second drilling platformand a second fluid processing and storage facility, both of which will belocated adjacent to the existing Zhao Dong platforms. The IDP includes the drilling of approximately 100 wells of which 15 will bedrilled as part of the 2007 budget for the C and D fields and at least 35 willbe drilled into the ERA (see below). 4. C and D Fields: 2007 Budget The Joint Venture has approved a 2007 Work Programme and Budget of US$169million (ROC net US$41.4 million) for the C and D oil fields. This budgetincludes US$54 million for the drilling of 15 wells as part of the IDP,comprising 9 oil producers and 6 water injectors. Drilling is scheduled tocommence during April 2007. Approximately US$43 million of the 2007 approvedbudget is for the expansion of the existing facilities, which is also part ofthe IDP.5. C4 Field: Development Programme Approval has also been received for the C4 Oil Field development (ROC: 11.575%operated unitised interest). The total budget for the project is US$150 million(ROC: US$17.4 million) including approximately US$88 million for drilling andUS$52 million for facilities. The approved C4 Budget for 2007 is US$56 million (ROC net US$6.5 million) thebulk of which will relate to new facilities design and procurement. Thedevelopment of the C4 field contemplates drilling 24 wells, comprising 15 oilproducers and 9 water injectors from two conductor pods. A third, separate, podwill also be installed to serve as a pipeline terminal which will be tied backto the existing Zhao Dong platforms via a 4.5 km pipeline. The current target for first oil from the C4/ERA is end 2008. 6. C Field: Extended Reach Area Drilling Programme A key part of the IDP is the drilling of at least 35 wells from the future C4facilities into the undeveloped ERA in the northeast of the C Field (Attachment1) which contains a significant part of the possible reserves in the Zhao DongBlock. 7. Drilling Rig Availability To ensure timely execution of the C4 drilling activities, the C4 Unit OperatingCommittee has authorised ROC to enter into a pre-identified rig contract whichis expected to allow C4 development drilling to commence in mid-2008 and tocontinue to 2011. The IDP wells to be drilled in the C and D fields will be drilled by theexisting rig located on the C-D Drilling Platform. Development drilling usingthis rig has been an integral part of the Joint Venture's activities since theinitial Zhao Dong field development. 8. New Co-Venturer Sinochem Corporation ("Sinochem"), one of the major Chinese state-owned oilcompanies, recently announced that it has purchased New XCL-China, LLC, whosesole asset is a 24.5% interest in the Zhao Dong Block. In its release, Sinochemalso states that "The Acquisition represents Sinochem's entry into the domesticpetroleum E&P industry in China, and complements our international petroleumproduction portfolio. From the perspective of Sinochem's global petroleumpicture, it is of unique significance...." ROC already works closely with two other state-owned Chinese oil companies,CNOOC Limited and PetroChina, and looks forward to working with its new partnerin the Zhao Dong Block. 9. Chief Executive Officer Comments Commenting on the developments referred to above, Dr John Doran, ROC's CEO,stated that: "The recent Government and Joint Venture approvals is good news for ROC's 19,000shareholders. The approvals set the scene for a very active and productive five yearmulti-field development growth phase; well beyond the predictive horizon whichmost Australian independents normally contemplate. When ROC agreed to acquire its interest in the Zhao Dong Block in mid-2006, itsaid that the rationale was two-fold: access to the proved and probable reservesand realisation of the upside potential. The scale of the planned activities andthe magnitude of the related expenditures announced today, mean that both goalswill be well and truly addressed during the next five years. The timing of the Zhao Dong approvals fits very neatly into ROC's company-widedevelopment schedule coming, as it does, a few months before production is dueto begin at the Blane and Enoch oil fields in the North Sea and a few weeksafter the Company announced that it is moving its fields in the Beibu Gulf,offshore southern China, towards development. Importantly, the approvals also highlight the very good working relationshipwhich has been established, in a relatively short time, between ROC andPetroChina, China's largest oil company, which, with a 51% interest, is themajority equity holder in the Zhao Dong Block." John DoranChief Executive Officer For further information please contact: 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