Oil prices continued to slide during the quarter, with the Brent oil price averaging $44.46/bbl. In this environment Roc Oil continued to focus on meeting operational and development targets. Production averaged 12,789 BOEPD for the quarter and is on target to exceed the company’s 2008 annual production record of 11,023 BOEPD. The 2009 development drilling programme commenced on schedule at Zhao Dong with initial wells showing good production performance and substantial progress has been made on development planning work for the Basker-Manta-Gummy (BMG) and Beibu Gulf projects.
Sales revenue was down due to lower oil prices and lower sales volumes. Despite the lower sales revenue, the company’s net debt position improved by $16.8 million to $97.7 million at quarter -end, positively impacted by action taken to reduce exploration and development expenditures. Roc Oil also secured additional funding support from CBA during the quarter through a new 12 month $35 million bridge loan facility and the extension of the term of the existing $30 million working capital loan facility to 30 June 2010, which together with forecast cash flow from production during the year will underpin funding for the company’s 2009 development activities.
By the end of the quarter, some improvement in oil prices was evident and during April the Brent Oil price has averaged $51.24/bbl. Roc Oil’s production has been enhanced by initial production performance from the first four wells in the 2009 development drilling programme at Zhao Dong, which increased gross oil production from the block to about 22,000 BOPD.
In a volatile oil price environment, the board and management have taken action to ensure the company continues to operate successfully in the current financial environment with its focus on meeting operational and development goals and managing financial resources. During the quarter, Roc Oil took action to reduce development expenditure for the year, including cutting the scope and cost of the planned 2009 development drilling programme in the Zhao Dong project. This approach was further reinforced with the announcement today of the farmout of 45% of the company’s interest in the Cabinda Onshore South block , Angola, further reducing forecast 2009 exploration expenditure.
Key Activities
Consolidated Revenue & Production:
Total working interest production of 1.151 MMBOE (12,789 BOEPD); down 9% compared to 1.266 MMBOE (13,763 BOEPD) in the previous quarter.
Sales volumes of 1.214 MMBOE; down 8% compared to 1.320 MMBOE in the previous quarter. Roc Oil’s net crude oil underlift position at quarter-end was 0.2 MMBOE.
Average realized oil price (excluding hedging) in the quarter of $43.12/BBL; down 30% compared to $61.82/BBL in the previous quarter. The Brent crude oil price averaged $44.46/BBL in the quarter; down 20% compared to $55.48/BBL in the previous quarter.
Production Assets:
— Cliff Head Oil Field, WA-31-L, Offshore Western Australia (Roc Oil: 37.5% & Operator)
Gross oil production averaged 5,164 BOPD (Roc Oil: 1,936 BOPD); down 10% compared to the previous quarter due to natural reservoir decline, the temporary failure of a down-hole pump and planned maintenance activities.
Basker-Manta-Gummy Oil and Gas Fields, VIC/L26, VIC/L27 & VIC/L28, Offshore Victoria (Roc Oil: 40% & Operator)
Gross oil production averaged 7,939 BOPD (Roc Oil: 3,175 BOPD); down 9% compared to the previous quarter due to unscheduled downtime caused by poor weather and facility related issues. Corrective plans are being implemented to improve performance.
The Basker 6ST1 well has been shutdown since 23 March due to a subsea flowline blockage; work to clear the blockage is continuing. The Basker 3 well was brought online on 27 March to utilize spare production capacity and to offset the Basker 6ST1 shutdown. Production from Basker 3 is in line with expectations.
Oil production from the Manta 2a and Basker 6 wells declined as anticipated during the quarter due to increasing produced water volumes.
Gas flaring conditions for the BMG project have been revised to allow production to continue while modifications are made to the Crystal Ocean FPSO to remove the need for flaring during normal operations. The limit for the total volume of gas flaring remains unchanged. The requirement for gas flaring to cease by March 16, 2009 has been removed. The BMG joint venture (BMG JV) anticipates that work on the upgrade of the Crystal Ocean facilities will be completed during fourth quarter of 2009, before the gas flaring volume limit is reached. Until completion of the upgrade, flaring volumes are expected to be below the allowable daily average rate.
— Zhao Dong C & D Oil Fields, Bohai Bay, Offshore China (Roc Oil: 24.5% & Operator)
Gross oil production averaged 18,005 BOPD (Roc Oil: 4,411 BOPD); down 10% compared to the previous quarter due to natural field decline. Production decline was offset by two production wells that were brought on line later in the quarter.
— Zhao Dong C4 Oil Fields, Bohai Bay, Offshore China (Roc Oil: 11.575% unitised & Operator)
Gross oil production averaged 3,240 BOPD (Roc Oil: 375 BOPD); up 11% compared to the previous quarter.
— Enoch Oil and Gas Field, North Sea (Roc Oil: 12%)
Gross oil production averaged 6,317 BOPD (Roc Oil: 758 BOPD); down 4% compared to the previous quarter primarily due to a shutdown at the end of March to repair a gas lift pipeline flange. Gross gas production averaged 3.5 MMSCFD (Roc Oil: 0.43 MMSCFD).
— Blane Oil Field, North Sea (Roc Oil: 12.5%)
Gross oil production averaged 12,057 BOPD (Roc Oil: 1,507 BOPD); up 1% compared to the previous quarter. Gas lift on the Blane wells commenced on 11 February.
— Chinguetti Oil Field, PSC Area B, Offshore Mauritania (Roc Oil: 3.25%)
Gross oil production averaged 14,815 BOPD (Roc Oil: 482 BOPD); down 4% to the previous quarter due to natural field decline.
