· Ahead of the release of ROC’s Half Yearly Financial Results for the six month period ended 30 June 2002, scheduled for late next week, the Company advises that it expects to report a profit before income tax of approximately $5 million, after taking into account a $1.4 million, largely unrealised, net foreign currency loss.

· After tax, this profit is expected to be reduced to a loss in the order of $6 million. The after tax result is primarily influenced by provisions made with regard to the previously announced changes to the UK Petroleum Taxation legislation and an additional provision made for the possible payment of a one-off UK capital gains tax on the proceeds of the sale of some of the Company’s interests in the North Sea, details of which were announced earlier this year.

· The majority of the tax provisions relate to one-off, non-cash items and do not impact on ROC’s previously reported unaudited $27 million sales revenue for the six months ended 30 June 2002 nor its $19 million unaudited cash flow from operating activities for the same period.

An unaudited $19 million cash flow from ROC’s operating activities for the six months to 30 June 2002, has not been significantly impacted by the changes in UK tax legislation because the tax provisions referred to above are largely, one-off, non-cash adjustments to the Company’s Statement of Financial Performance.

The Statement of Financial Performance for ROC for the six month period ended 30 June 2002 shows an unaudited trading profit of approximately $12 million; an unaudited profit before income tax of approximately $5 million, including $1.4 million of, largely unrealised, net foreign currency losses; and a tax expense of approximately $11 million, resulting in an unaudited loss after tax in the order of $6 million.

The majority of the tax expense relates to the adjustment to ROC’s deferred income tax liability for the change in UK Petroleum Taxation, announced in ROC’s release to ASX dated 24 April 2002. The application of the additional 10% supplementary tax on upstream oil and gas activities in the UK has resulted in the adjustment to the deferred income tax liability on the ROC balance sheet, in accordance with Australian Accounting Standards. This has resulted in a non-cash, one-off, additional income tax expense of approximately $4.7 million. In addition, a one-off capital gains tax provision of $1.7 million has been made in relation to ROC’s sale of its Kyle and Chestnut assets.

As previously reported in the Company’s release to ASX dated 31 July 2002, ROC’s sales revenue is expected to be in the order of $27 million, reflecting lower UK gas prices and temporary interruptions to ROC’s UK gas production due to mechanical constraints at third party facilities, as detailed in ROC’s releases to ASX dated 22 July 2002 and 8 August 2002.

ROC’s Half Yearly Financial Report for the six months ended 30 June 2002 will be released to ASX on schedule at the end of next week.

Commenting on the impact of the tax effect, ROC’s Chief Financial Officer, Bruce Clement, stated that:

“The Company remains in a strong financial position despite the after tax loss which it expects to report for the half year to 30 June 2002. Unaudited cash flow from operating activities was $19 million for the half year and cash assets plus receivables from the sale of Kyle and Chestnut were $96 million at 30 June 2002, compared to $76 million at 31 December 2001.”

Robert Gerrard
General Counsel & Company Secretary
E-mail: rgerrard@rocoil.com.au

· Preparations for testing Chinguetti-4-2, offshore Mauritania, are proceeding.

· East Tsagaan Els-1, onshore Mongolia, has started drilling.

· The 421 sq km 3D seismic survey, offshore China, is 63% complete

1.1 DRILLING

1.1.1 PSC Area B, Offshore Mauritania (ROC: 2.4%)

As of 21 August 2002, the Chinguetti 4-2 wireline sampling programme had recovered three oil samples from the primary objective and a gas sample from a shallower zone in the well. That wireline logging programme has been completed. The current operation is running 9 5/8 inch casing prior to production testing.

1.1.2 East Gobi Basin, Mongolia (ROC: 50% and carried)

The East Tsagaan Els-1 exploration well, the second and last well in the current programme, started drilling on 17 August 2002 and was drilled to a depth of 103 metres. Surface casing has been run and cemented to 101 metres. Preparations are currently being made to drill ahead. ROC will be carried through the costs of this well by Dongsheng Jinggong Petroleum Development Group Co Limited, which is farming in and managing well operations.

1.2 SEISMIC

1.2.1 Block 22/12 Beibu Gulf, Offshore China (ROC: 40%1 and Operator)

The 421 sq km 3D seismic survey, which started recording on 28 July 2002, had acquired approximately 63% of the programme by 18 August when recording operations ceased temporarily due to a tropical storm. Operations are expected to re-commence today. The survey covers both exploration leads and existing discoveries and is expected to provide the basis for the drilling of one or more wells during 2003.

Robert Gerrard
General Counsel & Company Secretary
E-mail: rgerrard@rocoil.com.au


1 Details of the additional 15% interest acquired by ROC in Block 22/12 since last week's activity update were the subject of a separate release to the market earlier today.

ROC INCREASES EQUITY IN BLOCK 22/12, BEIBU GULF, OFFSHORE CHINA

KEY POINTS

· ROC has agreed to increase its equity in Block 22/12 in the Beibu Gulf, offshore China, to 40%, through the acquisition of additional separate 10% and 5% interests from two of its co-venturers, Bligh Oil & Minerals NL (“Bligh”) and Oil Australia Pty Ltd, a wholly-owned subsidiary of First Australian Resources Limited (“FAR”), respectively.

· The terms of the two transactions are essentially the same: both are based on ROC providing work programme carries in consideration for the interests received. The transactions are subject to the approval of the relevant government authorities in China and finalisation of farmin documentation.

Since then, events have moved quickly: an exploration well has been drilled; an oil discovery has been made; ROC’s operatorship status has been formally approved by the authorities in China; a 421 sq km 3D seismic survey has commenced and an engineering and reservoir review has been initiated in order to better understand the commercial potential of the five undeveloped discoveries which exist within the Block.

Importantly, relationships with the relevant government authorities in China have developed in a very encouraging manner. Also, the newly formed Joint Venture has demonstrated that it is composed of like-minded companies, all of whom are keen to explore and appraise the area in a technically sound and timely manner.

2. THE TRANSACTIONS

The essence of the proposed transaction with Bligh is:

· In consideration for acquiring a 10% interest from Bligh, ROC will carry Bligh’s current 40% interest through the approved US$3.5 million 2002-2003 work programme, until a total of US$933,000 has been spent in relation to that interest. This fixed cost, partial carry, represents 26.67% of the currently approved 2002-2003 work programme, most of which relates to 3D seismic acquisition, which is currently 60% complete.

· ROC will also provide Bligh with an additional partial work programme carry through the next well to be drilled in the permit, up to a maximum fixed net expenditure by ROC on Bligh’s behalf of US$100,000. This well is expected to be drilled between March and December 2003.

· If, after receiving appropriate formal approvals from the Chinese authorities, ROC, at its sole discretion, decides to proceed either into the Third Exploration Phase (one year from 1 April 2004) or, alternatively, enter into a full Development Phase approved by the China National Offshore Operating Company (“CNOOC”), it will provide Bligh with a further fixed work programme carry up to a maximum of US$233,000.

The parallel transaction with FAR has been structured on a pro-rated basis with reference to the fundamental terms of the transaction with Bligh. However, because FAR is farming out a proportionately greater share of its currently held interest than Bligh (50% versus 25% respectively), the magnitude of the carry provided by ROC to FAR is proportionately larger than the carry provided to Bligh. Specifically:

· In consideration for acquiring a 5% interest from FAR, ROC will carry FAR’s current 10% interest through the approved US$3.5 million 2002-2003 work programme until a total of $466,500 has been spent in relation to that interest. Because this fixed cost, partial carry represents more than FAR’s 10% anticipated share of the approved 2002-2003 work programme, any portion of the carry which remains unspent at the end of that programme will be expended by ROC, on behalf of FAR, on the next well drilled in the permit.

· ROC will also provide FAR with an additional work programme carry through the next well to be drilled in the permit, up to a maximum fixed net expenditure by ROC of US$50,000 plus whatever unspent work programme carry remains from the approved 2002-2003 US$3.5 million work programme referred to above.

· If, after receiving appropriate formal approvals from the Chinese authorities, ROC decides to proceed either into the Third Exploration Phase or, alternatively, enter into a full Development Phase approved by CNOOC, it will provide FAR with a further fixed work programme carry up to a maximum of $116,500.


Following this redistribution of the equity, the Joint Venture will be composed of:

Roc Oil (China) Company. . . . . . . . . . . . . . . . .40% and Operator
Bligh Oil and Minerals NL . . . . . . . . . . . . . . . . .30%
Petsec Energy Limited . . . . . . . . . . . . . . . . . . 25%
Oil Australia Pty Limited, a wholly-owned . . . . . . .5%
subsidiary of First Australian Resources

3. BLOCK 22/12

Following recent relinquishment, the Block covers approximately 450 sq km, 60 km off the coast of China, northwest of Hainan Island (Attachment 1). Water depths are shallow ranging from approximately 25 metres to 40 metres.

Adjacent to the Block is the Wei-12-1 Oil Field, which is linked to the Weizhou Island Oil and Gas Export Facility by an oil and gas pipeline which has spare capacity and which passes through the northwestern part of Block 22/12 (Attachment 1). The Wei-12-1 Field is believed to be the largest and most prolific field in the Beibu Gulf with cumulative oil flows in excess of 30,000 BOPD being reported from highly deviated wells. In-place oil estimates for the Wei-12-1 Field are reportedly in the order of 200 MMBO while current production from the field is understood to approximate 25,000 BOPD of 25-37° API oil from excellent quality sandstone reservoirs.

Within Block 22/12, there are five undeveloped oil discoveries. Four of these discoveries relate to wells that were drilled on 3D seismic acquired in 1993-1994 while one was drilled on 2D seismic acquired earlier. Oil flows have been recorded from three horizons within the Block: the Eocene, Miocene and Oligocene. Flow rates vary, but are generally in the 1,000 to 3,000 BOPD range from vertical wells, with the higher rates reflecting cumulative production from several sands. Reservoir quality in the Miocene and Oligocene is excellent, with porosities ranging up to 30% and permeabilities measurable in Darcys. Oil gravities vary, but generally range from low 20° API to above 30° API.

It is hoped that the Joint Venture’s recently initiated reservoir and engineering studies will provide a much better understanding of the true commercial potential of these accumulations, particularly when viewed in the light of the 3D seismic, which is currently being acquired.

4. CEO’S COMMENTS

Commenting on this latest Block 22/12 Farmin, ROC’s Chief Executive Officer, Dr John Doran, stated:

“When ROC originally farmed into this Block six months ago, it had a positive view of upstream oil and gas opportunities in China. That view has been enhanced by subsequent events. In particular, we appreciate the relationship which has been developed with the relevant government authorities, both in Beijing and in Zhanjiang, which is ROC’s operations base in Southern China.

The physical, geological and hydrocarbon setting of Block 22/12 prompts comparisons with certain parts of the Gulf of Mexico and the area around the Harriet Field, offshore Western Australia, where high resolution 3D seismic has been used in conjunction with fast track, low cost, development concepts to collectively commercialise fields around a core existing facility.

If ROC, and its 100% Australian, predominantly Sydney-based, Joint Venture, together with CNOOC, are able to unlock the hydrocarbon potential of Block 22/12, all participants will derive very significant benefits.”

Robert Gerrard
General Counsel & Company Secretary
E-mail: rgerrard@rocoil.com.au

· The step-out exploration well, Chinguetti-4-2, offshore Mauritania, has confirmed oil-bearing sands on the northern side of the Chinguetti structure, approximately 2.5 km from the 2001 discovery well.

· As of 19 August the Chinguetti-4-2 step-out exploration well is running wireline logs at the total depth of 2,655 metres. A preliminary evaluation of the wireline log data indicates that the well has intersected several oil-bearing sandstones in the primary objective over a gross hydrocarbon interval of 94 metres within the well. The logging and evaluation programme is continuing. Following the completion of the logging programme it is now planned to run a production test of the primary objective interval.

Commenting on the preliminary results from Chinguetti-4-2, ROC’s CEO, John Doran, stated that:

"Information obtained from the well is still being reviewed and ROC is hopeful that additional data, including specific net oil pay figures, will be released to the public domain in the next day or two, as soon as the interpretation has been completed."

· As of 14 August, Chinguetti-4-2, the first well in a multi-well 2002 drilling programme offshore Mauritania, was drilling ahead.

· Site Preparation for the East Tsagaan Els-1 nearly completed and drilling expected to start soon.

· The 421 sq km 3D seismic survey, offshore China, is 50% complete

1.1 DRILLING

1.1.1 PSC Area B, Offshore Mauritania (ROC: 2.4%)

As of 14 August 2002 Chinguetti-4-2, the first well to be drilled on the Chinguetti structure since the Chinguetti oil field was discovered in 2001, preparing to drill ahead, with 12 1/4 inch hole having been drilled to a depth of 2505 metres. Four (4) cores have been recovered over the interval 2385 to 2428 metres. Reported depths are referenced to the rig rotary table.

1.1.2 East Gobi Basin, Mongolia (ROC: 50% and carried)

Preparation of the site for the East Tsagaan Els-1 exploration well, the second and last well in the current programme, is continuing and the well is expected to start drilling before the end of August 2002. ROC will be carried through the costs of this well by Dongsheng Jinggong Petroleum Development Group Co Limited, which is farming in and managing well operations.

1.2 SEISMIC

1.2.1 Block 22/12 Beibu Gulf, Offshore China (ROC: 25% and Operator)

The 421 sq km 3D seismic survey, which started recording on 28 July 2002, has acquired approximately 50% of the programme. The survey covers both exploration leads and existing discoveries and is expected to provide the basis for the drilling of one or more wells during 2003.

1.2.2 Onshore UK (ROC: 100% and Operator)

The 10 km Old Hills 2D Seismic Survey in PEDL003, which commenced on 6 August 2002, was completed on 8 August 2002. The survey acquired in-fill seismic designed to firm-up a prospect for possible drilling in 2003.

· As of 7 August, Chinguetti-4-2, the first well in a multi-well 2002 drilling programme offshore Mauritania, was drilling ahead in 12¼ hole at 1,896 metres

· Site preparations continue for the next exploration well in Mongolia, East Tsagaan Els-1, which is expected to start drilling in late August

· The 421 sq km 3D seismic survey, offshore China, is 25% complete

· Gas production from the Saltfleetby Gas Field, onshore UK, has resumed following the rebound of UK gas prices after the Interconnector Pipeline, which connects the UK to Europe, recommenced operations following a temporary closure during July

· Following a work-over of Keddington-1, the well was brought on to production on 15 July, since when it has produced approximately 700 barrels of oil. Currently it is producing at approximately 30 BOPD

· The Commonwealth-Western Australia Joint Authority has formally awarded the two new exploration blocks in the offshore Perth Basin which it had recently offered to joint ventures in which ROC is, or will become, Operator. The blocks have been formally designated as WA-325-P and WA-327-P.

1. EXPLORATION

1.1 DRILLING

1.1.1 PSC Area B, Offshore Mauritania (ROC: 2.4%)

As of 7 August 2002, Chinguetti-4-2, the first well to be drilled on the Chinguetti structure since the Chinguetti Oil Field was discovered in 2001, was drilling ahead in 12¼ hole at 1,896 metres.

The well, which is testing the previously undrilled northern side of the Chinguetti structure, is approximately 2.5 km to the north of the discovery well (see Attachment 1). As such, Chinguetti-4-2 is considered to be a significant step out exploration well which will improve the understanding of the commercial potential of the Chinguetti area.

As previously announced by the operator, Woodside Mauritania Pty Limited, the Chinguetti-4-2 well will be followed either by an appraisal well, elsewhere on the Chinguetti structure, or by an exploration well on the Banda Prospect, depending upon the results obtained from the currently drilling well. The last well in the current three or four well drilling programme will be an exploration well on the Thon Prospect.

1.1.2 East Gobi Basin, Mongolia (ROC: 50% and carried)

Dongsheng Jinggong Petroleum Development Group Co Limited, which is paying 100% of the cost of the current Mongolian exploration drilling program, is preparing the site for the East Tsagaan Els-1 exploration well, the second and last well in the current programme. The site is expected to be completed by late August 2002.

1.2 SEISMIC

1.2.1 Block 22/12 Beibu Gulf, Offshore China (ROC: 25% and Operator)

The 421 sq km 3D seismic survey, which started recording on 28 July 2002, has acquired approximately 25% of the programme. The survey covers both exploration leads and existing discoveries and is expected to provide the basis for the drilling of one or more wells during 2003.

1.2.2 Onshore UK (ROC: 100% and Operator)

Processing of the extensive onshore UK 3D seismic data, acquired earlier this year, is continuing and delivery of final processed data is expected by late October 2002. It is anticipated that the interpretation of this information will lay the foundation for ROC’s multi-well exploration drilling programme in the UK, which is due to commence in early 2003.

The 10 km Old Hills 2D Seismic Survey in PEDL003, which commenced on 6 August 2002, is expected to be completed in the next two or three days. The survey will acquire in-fill seismic designed to firm-up a prospect for possible drilling in 2003.

2. PRODUCTION

2.1 ONSHORE UK

2.1.1 Saltfleetby Gas Field (ROC: 100% and Operator)

Gas production recommenced at approximately 30 MMSCF/D from the Saltfleetby Gas Field on 1 August following the removal of the mechanical constraints which had affected the Interconnector Pipeline linking the UK to Europe during July. Following the resumption of gas flow through the pipeline, UK summer spot gas prices rebounded to approximately 12 pence/therm ($3.80/MCF at current exchange rates).

2.1.2 Keddington Oil Field (ROC: 100% and Operator)

Following a workover, Keddington-1 came back on to production on 15 July 2002, since when it has produced a total of 700 barrels of oil. Currently, the well is producing at a rate of around 30 BOPD.

3. NEW VENTURES

3.1 Offshore Northern Perth Basin (ROC: 55% and Operator)


The Commonwealth-Western Australia Joint Authority has formally awarded to joint ventures in which ROC is, or will become, Operator, the two new exploration areas in the offshore Northern Perth Basin referred to in ROC’s release to ASX dated 25 June 2002. The new areas are formally designated WA-325-P and WA-327-P. ROC is currently in discussions with seismic contractors with a view to acquiring seismic in one or both of these areas in the near future.

Robert Gerrard
General Counsel & Company Secretary
E-mail: rgerrard@rocoil.com.au

Return to ROC's ASX Releases main page