oversold?, page-2

JB Were (25.2.10) have a 12 month price target of $0.55 on ROC.

Comments from their report are below:

"Result:
� ROC's underlying NPAT US$3.7m was below our forecast ($18.9m),with higher costs, higher tax and higher exploration write-off than we expected.
Key Take-outs:
� Basker-5 Decision: The BMG JV will need to make a decision on whether to invest further cash into optimisation activities at BMG - in the short term, a workover of B5 is an option being considered - a Kan
Tan IV rig slot is available and ROC suggests the workover would cost US$40m gross. While the workover could potentially add 1-2mbbls of recoverable oil reserves in the success case, we note ROC encountered difficult conditions when it attempted a workover of this well last year and hence the risk/reward of drilling the well looks uncertain.
� New Opportunities: ROC has a team looking at new opportunities in SE Asia & Australasia. It does have some incremental opportunities in existing projects (eg. Cliff Head), however these don't appear material.
� Likely to Take Higher Risks: Following the earlier than expected decline of BMG, Roc faces a shortened average reserves life (~4 years avg on current production rates or ~6 years if Beibu Gulf progresses).
US$77m of equity was raised in CY09, and hence Roc now has available liquidity in excess of US$100m (US$40m unused debt facility + US$67m gross cash at Dec-09). We believe these two factors combined mean that a higher risk strategy is likely to be pursued in CY10 and on - acquisitions or high risk exploration farm-ins. Given the significant tax losses now held in Roc's Australian entity that appear
unlikely to be used (post-BMG downgrade), this may enhance/distort Roc's view on project economics from potential Australian projects.
� Beibu Gulf Oil: This is ROC's only new growth project, however very little was mentioned today on this project (it comprises 8cps of our 77cps valuation). We see this project as a source of valuation risk given the uncertainty around tolling & processing commercial terms.
Earnings and Valuation Impact:
� We downgraded our earnings outlook in CY10 and CY11 which primarily reflects deferred production (today's guidance for CY10 of 8-9kbd was below our estimate). Our valuation is largely unchanged at 77cps..."

I agree that it has been oversold.