By Sarah Belfield 20 Jul 2007 at 12:00 PM GMT-04:00
PERTH, Australia (ResourceInvestor.com) -- Sydney-based independent oil and gas producer ROC Oil [ASX:ROC; AIM:ROC] is hoping its 12.5% interest in the North Sea's Blane field will deliver extra oomph in August to the company's "production bounce."
In October, ROC Oil forecasted that its production would bounce upward, to between 10,000 and 12,000 barrels of oil per day (bopd).
"Currently we are at the bottom end of that range," ROC Chief Executive John Doran said.
"If Blane comes on next month it should kick us up to a more comfortable level within that zone."
Blane was anticipated to produce initially at gross levels of around 18,000 bopd, according to ROC. Development of the field involved a sub-sea tieback to a BP-operated platform 34 kilometres away on the Norwegian continental shelf. Among participants in Blane was the field's operator Talisman Energy [TSX:TLM].
ROC's recent aggregate production average of around 10,000 bopd came from the North Sea's Enoch oil and gas field (ROC: 12%), which came on-line in May, the Cliff Head oil field (ROC: 37.5%) in offshore Western Australia, the Chinguetti oil field (ROC: 3.25%) in offshore Mauritania, and the Zhao Dong C and D oil fields (ROC: 24.5% and operator) offshore of China in Bohai Bay.
Regrets Nothing from the Past Year
ROC began significant petroleum production in early 2006, and since then had been travelling "not brilliantly, but, on the other hand, not too badly either," according to Doran.
"Applying hindsight to the last 12 months' production history, I really don’t think there is much we would have done differently, because most of the challenges have been related to standard operating problems that are a routine part of the production business," he said.
Earlier this year, the company's overall production profile had softened largely due to underperformance of assets in offshore Mauritania and offshore China, he said.
A report card appearing in a June ROC presentation listed mechanical, facility and weather constraints as having contributed to a delay to expanding Zhao Dong production. The report card comment for the Chinguetti field was that "bad behaviour [had] established early" with little to no change since. And while Enoch's initial promise had been confirmed, the field's initial production performance had been subdued because of minor teething problems.
Doran was sanguine about the overall picture for the company.
He said ROC derived strength from a diverse production portfolio of five, soon to be six, fields, "so that at any given time if a couple of fields are underperforming, we have got a reasonable chance that the other fields are performing as good as or better than expected".
China Barrels Set to Burgeon
As at the end of 2006, the China-based Zhao Dong C and D fields accounted for 49% of ROC's overall proven and probable reserves, which totalled to 27.4 million barrels of oil equivalent.
The company is now looking eventually to augment Bohai Bay production from the Zhao Dong block's C4 oil field, where is has 11.6% unitized interest.
Early-stage development has begun at C4 and hopes were that first oil would arrive in late calendar 2008. Reserves attributable to ROC amounted to 2 million barrels of oil.
According to Doran, more than $500 million would be spent on in-field expansion and new-field development at the Zhao Dong block by its joint venture partners over the next five years.
Elsewhere in the Beibu Gulf in offshore China, the Wei 6-12 South field discovery made last year (ROC: operator, 40% subject to back-in rights) was being appraised. Potential gross reserves across the Wei 6-12 South and Wei 6-12-1 fields were thought to be 19 to 27 million barrels of oil equivalent. Other undeveloped oil accumulations in nearby fields would also be reviewed from technical and commercial standpoints, the company said.
All going well, a final investment decision and a transition to the front-end-engineering-and-design stage was expected to happen there in the second half of 2007. First oil would involve anticipated gross rates of 10,000-15,000 bopd in 2009.
Late 2007 would also see the start to drilling for a program of at least four exploration wells in the China region.
Offshore Perth Basin Is Back in ROC's Good Books
The Cliff Head field offshore of Western Australia has been proving itself a production stalwart for ROC. Production first kicked off there in May 2006, with 3 million barrels of oil produced within a year.
Despite "challenging cost, contractor and natural environments" during the field's first 12 months of Cliff Head production, the reservoir was said to be performing at the high end of expectations.
But the standout news in the region has been the results of ROC's last-ditch efforts at exploration in the offshore Perth Basin.
Three discoveries were recently made from the three exploration wells – Frankland-1, Perseverance-1 and Dunsborough-1 – which had net pay heights of 30, 28 and 17 metres respectively.
Doran said this latest drilling had increased technical success to 36% (4 out of 11 wells) from 12.5%. If Frankland and Dunsborough were commercialized, the company's commercial success rate would rise to 27% (3 out of 11).
"One of the discoveries, Perseverance, is a small gas field with 40% CO2, and therefore it is about as commercial as a dead duck," Doran said.
However, he said the company now thought the offshore Perth Basin had potential overall.
Exploration was also underway onshore of the African nation of Angola, with the final depth scheduled to be reached by early August.
"We believe that any exploration success during the second half of this year in Angola or China would cause the stock to outperform both its peer group and the oil price trend," Doran said.
ROC's share price has been on an upswing lately following a series of retreats and rallies since historic highs around July last year.
Company shares have been travelling at around A$3.68 on the ASX and 154 pence sterling on AIM.
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