bell potter research

ROC Oil Company Limited

1 H08 Result: Anzon drives future growth

􀂄 Event: Another hedge driven Loss Roc's interim 2008 result was a loss of A$14.4m (US$13.3m) pre abnormal. This
compares to a 1H07 loss of A$13.8m pre abnormal, and a UBS forecast profit of A$4.2m (pre abnormal). The loss is largely related to a higher than forecast tax
expense. Most importantly, cash flow from operations increased 81% yoy to A$93.2m (US$86.1m).

􀂄 Impact: EPS forecast reduce in ’09, but upgraded in 2010
After updating our 1H08 forecast with the actual result, our forecast Roc 2008 full year profit is now down 9% to A$27.6m (pre abnormals). However, our 2009E
EPS forecast has also increased by 44% (Basker-Manta), although 2010E is down by 6.3% (PRRT related).

􀂄 Action: Buy rating maintained
A lack of near term production growth and limited exploration drilling upside limit Roc’s investment appeal. However, we see the successful implementation of the
Anzon takeover, and the new FPSO and future development of Basker Manta as the key to delivering Roc production growth out to 2011/12. We expect Roc to progressively re-rate as the merger / FPSO / new development are committed.

􀂄 Valuation: NAV $2.44 (prior $2.58)
Our ROC NAV is based on a DCF (10% nominal discount rate) of forecast cash flow over the 2P reserve life of producing assets and all committed / highly probable projects. Our price target of $3.04 (prior $3.23) is based on our NAV plus
new projects and exploration upside potential.