Perth Basin Showcase Presentation Document date: Thu 27 Mar 2003...

Perth Basin Showcase Presentation

Document date: Thu 27 Mar 2003 Published: Thu 27 Mar 2003 13:01:25
Document No: 291831 Document part: A
Market Flag: N
Classification: Other
ROC OIL COMPANY LIMITED 2003-03-27 ASX-SIGNAL-G

HOMEX - Sydney

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PRESENTATION

The Chief Executive Officer of Roc Oil Company Limited ("ROC"), Dr
John Doran, is scheduled to present today to the Securities Institute
of Australia an update on the Company's activities in relation to the
Cliff Head Oil Field in the northern part of the offshore Perth
Basin. Please find attached a summary of the text and the key
illustrations used in this presentation. A copy of the full
presentation can be obtained upon request to the Company and the
summary distributed herein will be posted on ROC's web site.

For further information please contact:

Dr John Doran on
Tel: +61-2-8356-2000
Fax: +61-2-9380-2635
E-mall: [email protected]
Or visit ROC's website: www.rocoil.com.au

Dr J Doran
CHIEF EXECUTIVE OFFICER


THE SIGNIFICANCE OF THE CLIFF HEAD OIL DISCOVERY,
OFFSHORE NORTHERN PERTH BASIN

EXECUTIVE SUMMARY

Exploration drilling on Australia's continental shelf, which covers
three million square kilometres, began in 1965. Since then, 1,023
exploration wells have been drilled. Relatively few have been
successful. The commercial oil fields which have been found have been
confined to three geographic areas: the Bass Strait, the North West
Shelf and the Timor Sea. If the Cliff Head Oil Field, in the offshore
northern Perth Basin, is declared commercial later this year, it will
become only the fourth part of the Australian continental shelf to
yield a commercial oil field.

Fifteen months ago, the Cliff Head Oil Field had not been discovered.
Since then the reservoir has been penetrated by four wells, all of
which found a common oil-water contact. Two of the wells have been
thoroughly cored and one has been production tested with very
encouraging results. Technical and commercial studies are underway
with a view to determining whether or not the field can be developed
commercially. The results of these studies are expected in 3Q03.

Already the Cliff Head Oil Field has achieved a number of industry
"firsts". If it is declared commercial it will achieve several other
industry milestones, not least of which is the fact that it will be
the first commercial oil field to be discovered offshore Australia by
a Joint Venture composed predominantly of a diverse group of junior
Australian oil explorers without the involvement of a large
conventional oil company.

Prior to the discovery of the Cliff Head Oil Field, the offshore
northern Perth Basin was considered to be poorly prospective for oil
and largely devoid of good reservoir. The results from Cliff Head
have clearly shown that this perception was wrong.

ROC, as operator of the Cliff Head Oil Field, has not previously
issued an explicit estimate of the recoverable proved and probable
reserves at Cliff Head. However, following the recently completed
drilling campaign a reserve range can now be estimated: between 20
MMBO and 30 MMBO recoverable. The likely threshold for commercial
development is believed to be about 15 MMBO recoverable, assuming
receipt of US$17.00 for each barrel sold.

The recoverable reserve estimate referred to above is based on an oil
In-place range of 66 MMBO to 99 MMBOIP and a recovery factor of
approximately 30%.

One of the key technical results achieved during the last round of
drilling was the successful production testing of CH-3-chl which
provided positive results relating to reservoir quality, thereby
giving the Joint Venture more confidence regarding the likely
recovery factor. The 3,000 BOPD flow rate through a 28/64 inch choke
was constrained by surface facilities, but it was still significantly
better than expected. The flow provided the rationale that was needed
to cause the Joint Venture to seriously consider the commercial
development of the field.

The Cliff Head Oil Field is currently mapped as covering just over 6
sq km/1,500 acres with a maximum vertical relief of 100 metres. The
field is currently defined by approximately 130 kilometres of 2D
seismic and four wells. The oil is waxy (30%) and viscous (6 to 8
Centipoise) but has no problem flowing to surface via a down hole
pump, as clearly evidenced by the production test.

It is too early to be dogmatic as to how the Cliff Head Oil Field may
be developed - or even if it will be developed. However, there are a
number of possible development options which are being considered
including the transportation of the fluids produced offshore to
onshore facilities via a 11 kilometre insulated pipeline. Fluid
separation and processing would take place onshore before produced
water is transported back to the field, via a separate pipeline, for
water injection. Depending on the production rates, there are a
number of options available with regard to moving the oil to market.
The 10,000 BOPD to 20,000 BOPD production rates envisaged for the
early stages of the field's life means that one of the more
compelling options is to transport the oil by pipeline to an offshore
single buoy mooring for loading into visiting tankers.

Production would be from between five and seven wells, all horizontal
or highly deviated and all with down hole pumps. There would be two
or three water injectors to maintain reservoir pressure. All wells
would be drilled from one or two small well head platforms - probably
only one if the reserves end up at the low end of the current 20 MMBO
to 30 MMBO range.

First oil is expected during 2005 - but the Joint Venture will do its
utmost to bring this date forward. The optimum development concept
and timing will be determined by the results of the technical studies
that are currently underway. The detailed timing of the project will
also reflect the speed with which the administrative and
environmental approvals can be expedited.

The three exploration wells that were also drilled during the recent
drilling campaign were all dry. This is not entirely unexpected given
the fact that exploration in this area is still at an early stage.
The overall commercial success ratio for exploration drilling in this
part of the offshore northern Perth Basin between late-2001 to
early-2003 is 1 in 4 - still good by industry standards.

One of the attractive features of the offshore Perth Basin is that,
by global standards, the wells are relatively inexpensive. A typical
vertical exploration well costs US$1.5 million/A$2.5 million. Cored
deviated appraisal wells cost about US$2.4 million/A$4.0 million and
a production test costs approximately US$2 million/A$3.0 million. All
of these figures are exclusive of rig mobilisation/ demobilisation
costs which vary according to many factors including the area from
which the rig is sourced and the number of wells in the programme. As
a ballpark figure, more than US$0.5 million/A$1 million can be added
to each well to cover these costs. Excluding the rig
mobilisation/demobilisation costs, the total cost of the five well
2003 drilling programme, including two cored appraisal wells and a
production test, was about US$13 million/A$22 million - about the
same cost as a single dry hole in some parts of the world.

The precise cost of the potential development is not yet known. The
range currently available is rather broad because the present
recoverable reserve range of 20 MMBO to 30 MMBO spans a number of key
decision points which will significantly affect the cost of the
development, eg whether or not there will be one or two Well Head
Platforms. On this basis it is probably best for Investors to view
the potential cost of developing the Cliff Head Oil Field in terms of
dollars per barrel. In this context, an approximate cost of
US$3.50/bbl is currently considered to be a reasonable estimate.

The Cliff Head Oil Field is in an area where there is a very
important rock lobster fishing industry. ROC and its co-venturers
have been quick to recognise that this is a fact of life in the
offshore northern Perth Basin. So far, there have not been any
significant problems. ROC has found the rock lobster fishermen, both
individually and collectively, to be fair and reasonable, perhaps
because all relevant parties are doing the same thing - making their
livelihoods by managing a resource in the real world.

ROC has also gone to some lengths to work with the environmental
community, particularly that part of it interested in the migration
of Humpback whales. This is simply part of the Company's corporate
culture: wherever it works in the world it considers itself to be an
integral and constructive member of the local community and tries to
act in an appropriate manner by working within the constraints of
that community.

The Cliff Head Oil Field is relevant to ROC for a number of reasons.
Most importantly, it has the potential to add commercial reserves to
the Company's reserve base, which, at the moment, is far too small.
It has also established the Company as a bona fide offshore drilling
operator. If the field is declared commercial it will provide the
Company with its first operated offshore development. The field also
has the potential to be a cornerstone upon which ROC can build a
bigger business, both in Australia in general and the Perth Basin in
particular. Finally, if the field proves to be commercial it will
lend further weight to the argument that, for a company like ROC,
pursuing a "sensibly contrary" strategy is the most appropriate way
to add fundamental value to the Company.

ROC is highly leveraged to success in both the area immediately
around Cliff Head and the entire offshore northern Perth Basin. The
company has interests between 20% and 37.5% in seven million
contiguous acres, all of which are operated by ROC. These permits
stretch for more than 350 kilometres along the West Australian
coastline and incorporate the prospective Permian Play Fairway in the
southern part of which lies the Cliff Head Oil Field.

ROC is an internationally focussed company, active in five other
countries apart from Australia: the UK, Equatorial Guinea,
Mauritania, Angola and China. The Company's workforce is drawn from
21 different countries and, collectively, it speaks 15 different
languages fluently. However, the Company's net acreage position is
totally dominated by Australia, specifically the Perth Basin.

Cliff Head is one of three appraisal projects currently being
considered for commercial development by ROC and its various
co-venturers around the world. The other two are the Chinguetti Oil
Field, offshore Mauritania and a collection of five fields in Block
22/12 in the Beibu Gulf, offshore China, where ROC has a 40% interest
and operatorship. Coincidentally, all of these projects are aiming to
achieve first oil during 2005.

The Cliff Head Oil Field is poised to become a core asset for ROC. If
Cliff Head is declared commercial it will establish the northern
offshore Perth Basin as Australia's fourth offshore oil producing
province - and ROC as a significant operator of oil production from
Australia's continental shelf.

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