Roc and Fosun, page-40

Cujo - The exact reasons for ROC buying into Ungani and the exploration J/V is never exactly going to be known. Of course, at the time of sale, things on paper did indeed seem good, with high production plans to ensure its stability. They fell through, in fact, I think they started to fall apart whilst all the paperwork for the deal was going ahead, yet ROC did not pull out (I think they could have). Also, oil prices were high, Fosun was clearly in a different position (cash, management goals etc). There is a whole lot of other potential reasons for why they bought in (remember, there were other parties that made firm offers, but they likely put up the most cash, plus perhaps allowing BRU to keep operational control etc).

I will just show these two maps again. Whilst Ungani is proving to be a bugger to master, its most likely still has a lot of oil yet to produce. Hopefully the CTU will be tool to finally start mastering it.



I do note the 3rd possible horizontal drilling location, could be taken lots of ways, 2nd option if U7 is too tight perhaps? Or if you want to be the optimist (CEO), another drainage point if things go to plan.

I have no doubt that the ROC Australian team are frustrated (like BRU staff would be too). No one wants Ungani to producing at just 1000bopd.
As @occam mentions though, ROC has a professional team and they knew what they were doing.

btw - regarding the non-participation in Rafael, Strachan mentions that the ROC team were extremely positive about Rafael, so... its it would seem the biggest reason they opted out at this stage, was costs, not.... COS etc. Eric I think mentioned that all the corporates that entered the data room saw Rafael as a very exciting target. It is interesting that ROC did still participate in Adoxa (50%). When I think the company provides a COS which viewed Rafael as having a higher chance.... very intriguing.

As for Peter Strachan, I think that is a very harsh call, he is only able to work with what companies provide him. As I understand it, Eric himself has a very high regard for Strachan (plus other ASX listed oiler MDs)(some of which posted personal well wishes on his site very recently).

As for BRU potentially finding another interested party in the exploration targets if ROC walks, I just have to disagree, exploration is high risk... more so off shore considering the huge costs. The trend is proven, multiple fields have been discovered, with multiple play types and formations. Even ROC did not pay 100% for the exploration wells, but 80/20. Again, this might be a moot point if Adoxa proves commercial. Perhaps ROC will be able refocus on exploration considering that the only exploration well actually drilled this year to date has potentially hit a commercial discovery. This is a very very good outcome so far. The trend just keeps getting more fleshed out.

As for the costs for the next 4 months or so. I am hopeful that whilst it won't be a cheap period, it has to be done. Plus, with Rafael now deffered, the Sept Q spend forecast included 50% for drilling Rafael, which I am guessing was around $4m. That should significantly reduce the cash outflow. BRU will likely end the quarter with close to $48m. With perhaps another $10-12m spend for the Dec quarter. Which will see BRU end the year with around $35m. Not sure if you have noticed, but oilers go through a heap of cash even if they are producing (much worse when they are not at all... FAR and CVN for example).

The last part of post we both agree on. Very important the CTU goes well, but.... I guess there is still some risk, as its not something that BRU is experienced with (perhaps a reason for expanding the drilling teams credentials).