Company Overview - Roc Oil Company Limited (ROC) is an Australia-based company engaged in oil and gas exploration, development and production. The Company operates across the range of upstream business activities, from exploration and appraisal to development, and production delivery. The Company operates the Zhao Dong Oil Fields, Bohai Bay, Offshore China; Cliff Head Oil Field, WA-31-L, Offshore Western Australia; Blane Oil Field, North Sea; Enoch Oil and Gas Field, North Sea; WZ 6-12 and WZ 12-8 West Oil Field Development, Beibu Gulf, Offshore China, and BMG Oil and Gas Fields, VIC/L26, VIC/L27 and VIC/L28, Offshore Victoria. The Beibu gulf project (offshore china) commenced production in March 2013 and the production is expected to reach peak production in late 2013. ROC also has a 15 year small field risk service contract for the development of the Balai cluster fields in Malaysia which could be in production as early as 2015.
Analysis – December quarter production was up 23% thanks to Beibu. Production volume of 0.815 mmboe indicated that Beibu Gulf performed at close to nominal capacity at 14,816 bopd. FY13 production ended at 2.65 mmboe towards the upper end of the guidance range at 2.4 – 2.7 mmboe. The Balai cluster Field Development Plan was submitted to petronas in December though the initial development phase is focused on Bentara field that is more modest in scope than was originally envisaged.
The sale of Roc’s interest in the Juan de Nova block to South Atlantic Petroleum announced in July 2011 has now been approved by the French government. During the quarter ROC submitted bids for two offshore shallow water blocks in Myanmar and it continues to pursue farm in opportunities for onshore Myanmar acreage near existing infrastructure.
We see four areas of potential production growth for ROC. Ongoing drilling at Zhao Dong, final investment decision of Balai cluster, possible final investment decision of Beibu phase 2 development and acquisitions. We do note that there is uncertainty around the timing, production and capex for the Balai cluster development. Roc’s focus over the next few months will be eon the successful final investment decision of the Balai Cluster phase 1 development plan and start of construction . We expect this phase will be funded via 70% project finance and 30% equity. In the interim we expect oil production at Beibu Gulf to remain on plateau production for another 3 months before declining and ongoing development drilling to add reserves and production at Zhao Dhong. ROC is actively seeking new growth opportunities and whilst these contain inherent risks, ROC’s track record to date has been positive.
We expect production growth in 2014 to reflect a full year’s contribution from Beibu asset but this field and the other key producer Zhao Dong are now fully developed and beyond this quarter will begin to deplete. Commercial development of the Balai Cluster offshore Sarawak took a step forward. Developer BC Petroleum (BCP, 48% owned by ROC) submitted a field development plan before the end of 2013 and expects approvals this quarter. Development of the oil clusters will be in phases beginning with the benatara field. Meanwhile extended well testing commenced in November on smaller Balai field and continues on the Balai 2 well. Capex is winding down and we expect cash to continue building ahead of reinvestment into the Balai project. Net cash at December 31 rose to US$65 Million. ROC’s production in Q4 reflects the first full quarwterly contribution frorm the newly developed Biebu Gulf oil field. Gross production from Beibu averaged 14,814 bopd, close to the targeted 15 kbopd. At Zhao Dong, gross productio4n rose 2% to 17,944 bopd due to ongoirng development drilling.
ROC is pursuing incremental resources in Zhao Dong. With the production license due to expire in 2018, management had previously guided that development drilling would largely cease from 2015. However as part of its 5 year incremental plan, ROC has applied for development activities beyond this timeframe. If successful this could see development drilling post 2014 and an estimated 11 mb of contingent resource developed. Separately following processing of a recently complete 3D seismic program, ROC expects to commence drilling across 09/05 Block in 3Q14. Furthermore subject to Horizon oil exercising an option to farm in to a 40% interest, ROC could be potentially fully carried through 2 wells.
Source – Company Reports
One of the key strengths of ROC oil is their geographically diversified asset portfolio. Its exploration and production portfolio includes working interest in approximately 55,000 sq km in various assets located in Australia, South East Asia, China and the UK. In Australia the company holds 37.5% and 42.5% working interest respectively in Basker Manta Gummy (BMG) oil and gas development project and Cliff head oil field. In China the company holds 24.5% and 40% working interests in Zhao Dong Field and Beibu Field. In the UK the company holds 15.24% and 15% working interests in Blane oil and gas producing field and Enoch Oil and gas field in the North Sea. In south East Asia the company holds varying interests interest in exploration and assets include Balai Cluster Service Contract in offshore Malaysia.
From Beibu Gulf in offshore china during the last quarter production averaged 14,816 BOPD up 37% from the previous quarter with all 15 wells on line for the full period. Five of the 15 wells continue to flow naturally whilst 10 of the wells are being produced with artificial lift by electric submersible pumps. Zhao Dong Oil field in Bohai Bay, offshore china gross oil production averaged 17,944 BOPD up 2% from 3Q13. During the quarter Zhao Dong development drilling continued to ramp up utilising two rigs simultaneously for part of the quarter. A total of 18 wells were drilled in 2013 and the annual production target was achieved. Cliff Head Oil Field in offshore western Australia averaged 2286 BOPD down 6% from the previous quarter as a result of scheduled critical function testing of key equipment and pipeline intelligent pig operations. Gross oil production in Blane oil Field North Sea averaged 7061 BOPD up 846% from the previous quarter following resolution of the Ula platform repairs. The rig for Enoch restoration completed operations with the new tree deployed and production testing completed in December. Production is expected to resume in the early part of 2014.
Source - Thomson Reuters
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Close: |
0.47 (06-Feb-2014) |
3M: |
(0.00%) |
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52 Wk High: |
0.64 (19-Feb-2013) |
6M: |
(7.92%) |
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52 Wk Low: |
0.33 (24-Apr-2013) |
1Y: |
(17.70%) |
Exploration and development expenditure was lower with minimal exploration and completion of development at Beibu. The only material capex in the quarter was for drilling at Zhao Dong and equity contributions to BCP, the developer of Balai Clusters. The company was cash generative again in the quarter and net cash increased to US$65M at the year end. We will be putting a BUY on ROC at the current closing price of $0.465.
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