Ann: Activities for Quarter Ended 30 September 20, page-3

re: Ann: Activities for Quarter Ended 30 Sept... Well I will make a few comments:

The Disappointing:

1. Zhanghai Block

"Zhanghai Block (ROC 39.2% & Operator) gross oil production has averaged 551 BOPD (ROC: 216 BOPD) since the commencement of production through C4 platform facilities
on 22 August and the well is experiencing natural decline."

compared to the 25/8/11 announcement

"The appraisal well (ZD CP2N-H-1) commenced drilling from the Zhao Dong C4 platform on 15 July and intersected 310 metres of horizontal reservoir section. The well was completed and production through existing C4 facilities has commenced at an initial rate of 3,546 BOPD."


2. Cash Position

"At Quarter-end ROC had net cash of US$36.7 million"

compared to 30/6/11:

"At Quarter-end ROC had net cash of US$40.7 million"

I would have expected cash accumulation in the quarter and for the year. However, we seem to be marking time.



However, I have a research report dated 26/8/11 on ROC which values it at $478M compared to the current MC of $228M.

From an operational perspective they still seem on track to make the projected 2011 result:

......................Projected.......as at 30/9

Production............2.7 mmboe...........2.0 mmboe

Sales................$292M................$210M

They are projecting a net operating profit for 2011 of $25M or 3.4 cents per share which still seems achieavable.

So where has the cash gone. For the 2nd six months thay are projecting ROC will generate cash for operations of $74M or $37M per quarter.

From the quarterly we know:

Sales...............$79.1M

Hedge loss...........($6.6) (136,000 x $48.33)

Net Sales...........$72.5M

Less:
Est Operating ......$29.0M
Est. Tax............$ 7.0M

Est Cash from Ops...$36.5M

Less:

Act Exp & Dev......$13.9M

Sub-total..........$22.6M

Less:

Cliffe Head 5%....$4.5M
Buyback...........$6.8M

Difference...... $11.3M

This difference could easily be accounted for with sales been made prior to 30/9 but with the cash received after 30/9.

Consequently, can still conclude that ROC oil is still on track to meet forecast in 2011 (maybe fall short slightly on production and revenue).

The same research report predicts that ROC will earn $59M and $92M in 2012 and 2013.

Regards

SP