First Quarter 2007 presentation

To view the presentation for 1st quarter please use this link.
The financial report can be found following this link.

Rocksource’s growth strategy requires a solid financial base, and during the 1st quarter and the beginning of the 2nd quarter the Group completed the next step in optimizing the capital structure to secure an optimal fit between the operational and financial strategy. In March the Group secured a bank loan facility of NOK 150 million related to exploration on the Norwegian Continental Shelf (NCS), and completed an equity issue of NOK 78 million. In April the Group issued NOK 200 million in a 5 year Senior secured Bond Loan. Rocksource will continuously evaluate its capital structure with the aim of having a good mix of equity and debt capital, and with the concluded financial activities we are positioned to grow the Group according to plan.

Revenue from the oil and gas production totalled NOK 5.3 million in the 1st quarter, compared to NOK 2.2 million 1st quarter last year. The production in the 1st quarter was 84.7 million cubic feet of gas, considerably up from 1st quarter 2006 of 31.3 million cubic feet of gas. The production of oil condensate was 3,293 barrels in the quarter, up from 1,089 barrels same quarter last year. The average production in 1st quarter was 193 barrels of oil equivalents per day (boepd), up 123 boepd from same period last year. The average production in March was 420 boepd as a result of the Morian 4 well being brought into production in late February. With the current drilling campaign Rocksource is on track to achieve its goals of a production of 1,000 boepd within the end of 2007 and 2,000 boepd within the end of 2008.

The total revenue for the 1st quarter amounted to NOK 4.0 million, compared to NOK 3.0 million 1st quarter last year. The revenue was negatively affected by a reversal of accrued revenue of NOK 1.3 million included in Q4 2006 from the Colombian seismic project.

The Group’s operating expenses in 1st quarter of NOK 31.8 million is down from 1st quarter last year mainly due to reduction in expensed exploration costs. The payroll cost and other operating costs show the dedication to build a capable organisation, totalling around 40 people. Costs related to the option program was NOK 3.6 million, of which NOK 0.5 million had a cash effect.

Exploration costs relating to the NCS totalled NOK 5.2 million, of which 78% - equal to NOK 4.1 million - have been booked as a taxable income in 1st quarter.

Following the success in the drilling campaign after the acquisition of Sandhawk Energy LLC (Sandhawk) in fourth quarter 2006, a success bonus of USD 1.0 million will be paid to the former owners of Sandhawk following a sustained production in excess of 500 boepd from one of the two Morian areas. This success bonus has in 1st quarter been allocated to the purchase price of Sandhawk.

The periodic result for the 1st quarter was a loss of NOK -26.4 million, compared to a loss same quarter last year of NOK -38.9 million. This gives a basic and diluted earnings per share of NOK -0.050.

The Group had a cash flow of NOK 16.0 million in 1st quarter (NOK -49.4 million for 1st quarter 2006). Investing activities, most relating to the US assets, accounted for NOK -37.9 million. The net capital increase from the equity issue amounted to NOK 74.0 million. The Group’s cash balance at the end of the quarter was NOK 121.8 million.

The Group ’s working capital at the end of this quarter is NOK 135.6 million (NOK 115.6 million in 4th quarter 2006) and the equity equalled NOK 387.0 million, up NOK 52.6 from 334.5 in 4th quarter 2006, giving the Group an equity ratio of 92.4% up from 91.9% at year end. The Group had no long term interest-bearing liabilities on the balance sheet at 31 March as there has been no withdrawal from the NOK 150 million credit facility, and the NOK 200 million bond followed after the end of the 1st quarter.

Oslo, 9.5.2007
Rocksource ASA

Trygve Pedersen
CEO

+47 90 09 77 41

Published: 09.05.2007