ROC OIL COMPANY LIMITED
ABN 32 075 965 856

2008 Half Yearly Report and Results

25 AUG 08

ROC today releases its half year financial report and Appendix 4D for the period ended 30 June 2008. The key highlights for 1H08 are:

FINANCIALS

• Record sales revenue of US$179.8 million; up 121% from US$81.5 million in 1H07.

• Record oil prices with an average realised sales price of US$102.55/BBL (before hedging), a 6% discount to Brent.

• Strong net cash flow from operations of US$86.1 million; up 81% from US$47.7 million in 1H07 due to increased production and higher oil prices.

• Record half yearly trading profit of US$101.1 million; up 178% from US$36.4 million in 1H07.

• Net loss after income tax of US$120.7 million (1H07: loss US$7.1 million) after exploration expensed of US$65.3 million and a derivative loss of US$142.4 million (before tax), partially offset by a benefit of US$15.9 million (before tax) relating to the reversal of a prior year asset impairment.

• Normalised net loss after tax of US$13.3 million (1H07: loss of US$11.2 million) after excluding significant items relating to the unrealised derivative loss of $119.3 million (after tax) and the benefit of the asset impairment reversal of US$11.9 million (after tax).

• Amortisation expense of US$50.6 million (1H07: US$35.3 million); US$27.31/BOE (1H07 US$22.45/BOE).

• Gross debt at 30 June 2008 was US$133.4 million (31 December 2007: US$133.3 million), with cash of US$24.4 million (31 December 2007: US$41.4 million).

OPERATIONS

• Production of 1.9 MMBOE from six producing fields in Australia, Africa, China and UK; an increase of 18% compared to 1.6 MMBOE produced from five fields in 1H07.

• Exploration and appraisal expenditure of US$72.2 million (1H07: US$42.3 million) was incurred with the completion of drilling of six exploration and three appraisal wells and the completion of two 3D seismic acquisitions:

• Two exploration wells completed in Cabinda South Block, onshore Angola. The Coco-1 well resulted in a discovery that requires further evaluation;

• One exploration well in Mauritania, two exploration wells in Beibu Gulf, offshore China and one exploration well in the Perth Basin, offshore Western Australia were plugged and abandoned as dry holes;

• One appraisal well in Mauritania at Banda NW and two appraisal wells in Perth Basin, offshore Western Australia at Frankland-2 and Dunsborough-2; and

• Acquisition of 3D seismic in Block 1, offshore Mauritania and in WA-286-P, Perth Basin, offshore Western Australia.

• Development expenditure of US$30.6 million (1H07: US$30.0 million) was incurred for the period on the following:

• Progress on Zhao Dong C & D Oil Field Incremental Development Project and the C4 Oil Field development project in Bohai Bay, offshore China – with first oil planned for 4Q08;

• Completion of Blane Oil Field water injection well; and

• Chinguetti Oil Field well intervention work and commencement of C-19 infill well in Area B, offshore Mauritania.

• Progress was made on the Wei 6-12, Wei 6-12 South and Wei 12-8 West development project in Block 22/12, Beibu Gulf, offshore China. The Chinese Government has approved reserves and the final development decision is expected in 4Q08, offering near term development upside for shareholders.

CORPORATE ACTIVITY

• On 16 June 2008, ROC announced a proposed merger with Anzon Energy Limited (AEL) and a concurrent takeover of Anzon Australia Limited (AZA). The AEL Board unanimously recommended a merger of the companies by way of a Scheme of Arrangement under which ROC, if successful, will acquire a 53% controlling interest in AZA. The AZA takeover, if successful, will result in ROC acquiring the remaining 47% of shares in AZA.

• Subsequent to 30 June 2008, the AEL Scheme documentation was released to the ASX on 30 July 2008, the AZA Takeover Offer Bidder’s Statement was released to the ASX on 31 July 2008 and a Supplementary Bidder’s Statement was released on 7 August 2008 and was despatched to AZA shareholders on 13 August 2008. The AEL Scheme will be considered by AEL shareholders at a shareholders’ meeting to be held on 3 September 2008 and if approved by shareholders will be subject to the consideration of the Court on 5 September 2008.

Commenting on the 1H08 financial results, ROC’s Acting Chief Executive Officer, Bruce Clement, stated:

"The death of ROC’s founder and CEO, Dr John Doran, on 27 June was a major loss to both ROC and to the Australian oil industry as a whole. I want to acknowledge the enormous contribution that John made in establishing and building the Company to where it is today. He will be greatly missed by all within the ROC family.

ROC’s operational and financial results for the Half Year have been somewhat overshadowed by the decline in the Company’s share price since the announcement of the proposed Anzon takeover on 16 June. ROC’s Board and Management are committed to the takeover which, if successful, has the potential to transform the Company by creating a major mid cap Australian upstream oil and gas company with a strong asset base, 2P Reserves of 47 MMBOE and substantial financial capacity. If successful, ROC will more than double its 2P Reserves and increase its forecast production in 2010 to over 20,000 BOEPD. The takeover will immediately increase operating cash flow for the Company by up to 50% and expose ROC to significant upside reserves potential from the development of the Basker Manta Gummy Project in Bass Strait over the next 18 months.

What is difficult to understand is the market reaction to the transaction, which has seen ROC’s share price fall to $1.11, placing ROC’s enterprise value to cash flow multiple at close to 2.5, despite ROC’s expectation to maintain production in 2009 and 2010 at approximately 10,000 BOEPD and the current market for crude oil prices over the next few years.

Despite the headline loss after tax of US$120.7 million, ROC’s operating cash flow has been strong. On the back of meeting its operational goal of producing 10,000 BOEPD during the Period, the Company has delivered cash flow from operations of US$86.1 million, up 81% on the same period last year. The loss after tax, generated from a trading profit of US$101.1 million, was impacted by two significant items: an exploration expense of US$65.3 million and an unrealised derivative loss of US$119.3 million resulting from the increase in forward prices for crude oil from 31 December 2007 to 30 June 2008. The continuing impact of the volatility of oil prices on ROC’s financial results is highlighted by the fact that since the end of the Period, the reduction in oil prices to 22 August 2008, would have seen the unrealised derivative loss reduced by approximately US$53 million.

Operationally, the Company’s performance has continued strongly across its development and production assets. The development project in the Zhao Dong Block in Bohai Bay, offshore China, has progressed well and remains on schedule to deliver first oil from the C4 Oil Field in Q4 2008, while development drilling on the C&D Fields at Zhao Dong has seen gross production from the fields returned to 20,000 BOPD during June. The ROC operated Cliff Head Oil Field and the two non-operated North Sea fields, Blane and Enoch, all continue to produce at the upper end of expectation."

For further information see: Stock Exchange Release 25.08.08