Sydney, Jan 25, 2008 AEST (ABN Newswire) - ROC Oil (ASX: ROC)(LSE/AIM: ROC) is pleased to provide a preliminary production, sales revenue and reserves update ahead of its 4Q 2007 report which will be released on 31 January 2008 and its 2007 Financial Results which will be released on 28 February 2008.
1. Production
ROC's 2007 production of ca 3.5 MMBOE (9,668 BOEPD) was a record; up 77% on the previous year. Ninety-nine percent of the production was oil.
2. Sales/Revenue
Despite a year-end underlift position of approximately 0.24 MMBO net ROC, the Company's 2007 sales revenue of A$248 million was also a record; up 64% on the previous year, due to increased production and strong oil prices.
3. Reserves
ROC has completed its internal 2007 year-end reserve review and RISC Pty Ltd is finalising an independent reserve audit report on ROC's production assets, excluding the Chinguetti Oil Field, offshore Mauritania. On this basis, ROC advises that:
• 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 being 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.
• There are no other material revisions to ROC's 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$21 million for the year ending 31 December 2007.
The Company's 2P reserves for end-2007 referred to above, do not include any of the oil and gas resources identified by the five discoveries ROC has made since May 2006, four of which are being actively reviewed and/or appraised and one of which has been relinquished. In this context, the following points are worth noting:
• Approximately 3.7 MMBOE of net ROC resources in the Wei 6-12S Oil Field complex in the Beibu Gulf, offshore China, will be reclassified as net ROC 2P reserves if, as expected, a declaration of commerciality is made later this year. In that event, the reclassification will effectively replace all of the 2P reserves ROC produced during 2007.
• The commercial potential of the Frankland Gas Field and the Dunsborough Oil and Gas Field in the offshore Perth Basin will be better known after completion of the two well drilling programme which is scheduled to start in early February 2008. Currently, these two fields are tentatively estimated to contain approximately 5 to 9 MMBOE recoverable reserves net to ROC.
• The Zhao Dong reserve revision does not alter the fact that a potential for 10 MMBOE net ROC possible reserves is recognised within the Block. Much of this unrisked and unbooked reserve upside will be evaluated as part of the ROC-operated >US$ 500 million development activities which are currently underway.
4. CEO's Comments
Commenting on the above, ROC's Chief Executive Officer, John Doran stated that:
"The record production and record revenue figures speak for themselves but the modest reduction in 2P reserves at Zhao Dong probably deserves further comment. Specifically:
The Zhao Dong reserve revision is a tad disappointing, but, in a Company-wide reserve and near to medium term production sense, it is far from serious. It is not expected to have any effect on Zhao Dong production performance during 2008 when it is anticipated production will be in line with last year, ca 1.7 MMBBL net to ROC.
In the end, the amount of oil recovered from Zhao Dong over the next ten or more years, will be a function of the collective recovery factors of the many different reservoirs in the three fields. While its petroleum potential is self-evident, the geology of the Zhao Dong Block has a touch of the Rubik's Cube about it. Therefore, it is not entirely surprising that it took - and is still taking - some time to get to grips with the detailed nature of the reservoir nor that the remaining in-place oil resource at Zhao Dong will not be better defined until a major subsurface data review has been completed by year end. However, what is already clear is that the magnitude of the in-place oil resource is such that if, over the next ten years, the overall recovery factor proves to be just a few percent better than that which is currently assumed, the 2007 reserves revision would be more than offset.
The first few wells in the 2007 programme generally underperformed expectations and this is necessarily reflected in the year end 2P reserves revision. However, these first few wells were just the start of an aggressive drilling programme that will see more than 100 wells drilled between 2007 and 2011. These early 2007 wells provided vital subsurface insights which were progressively fed into the data base as the drilling programme unfolded through the year. Results from the last four wells drilled towards the end of 2007 were generally better than expected. This uptick in performance in the latter part of 2007 certainly doesn't mean that we have mastered the intricacies of Zhao Dong, but it could be viewed as indicating that we are getting to grips with the challenge.
The bottom line is that it is far too early to be dogmatic as to the precise amount of oil that will ultimately be produced from the Zhao Dong fields. As such, the most recent reserve review is perhaps best regarded as a snap frozen product of the information available at this moment in time which is really just the small tip of a huge database that will be assembled over the next several years."
Contact
Dr John Doran on
Tel: +61-2-8356-2000
Fax: +61-2-9380-2635
Email: jdoran@rocoil.com.au
WEB: www.rocoil.com.au
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