Rocksource ASA – Q2 2010 financial results

Rocksource ASA had operating income of NOK 16.6 million in the second quarter of 2010, down from NOK 19.8 million in the previous quarter and down from NOK 22.6 million in corresponding quarter 2009.

EBITDA before exploration was minus NOK 7.2 million in the quarter, roughly in line with previous quarters. Significant exploration expenses in combination with a non-cash write-down of assets related to the company’s onshore business in the US of NOK 103.6 million resulted in a net loss in the quarter of NOK 136.9 million.

The major part of the NOK 91.1 million in exploration expenses in the quarter was related to the acquisition of seismic and electromagnetic (EM) data on the Norwegian Continental Shelf (NCS), in preparations for the upcoming drilling campaign and future licensing rounds. These expenses are refundable under the 78 per cent petroleum tax regime in Norway.

The company’s US onshore activity has in the past supported the development of the Rocksource offshore exploration portfolio. These producing assets are however now on a natural decline. Rocksource has evaluated a number of growth opportunities within the current field area to maintain and grow production in the short term. However none of these have shown the required potential for profits. Over the last couple of months a thorough technical and financial review of the producing assets onshore US has been undertaken to reassess the assets. As a result expected value potential has been lowered. Marginal profitability in further activities in current fields due to expected lower reservoir deliverability, and continued low gas prices resulted in a non-cash write-down in the second quarter of USD 16 million (NOK 103.6 million).

Rocksource’s total balance sheet as of 30 June 2010 was NOK 935.7 million compared to NOK 771.7 million at year-end 2009. The Group’s working capital at the end of the second quarter 2010 was NOK 243.4 million, up from NOK 79.1 million from the previous quarter and NOK 255.6 million at the end of the corresponding quarter 2009.

The equity at 30 June 2010 was NOK 443.4 million compared to NOK 380.5 million at the year-end 2009, giving an equity ratio of 47.4 per cent, down from 56.0 per cent at the end of the corresponding quarter 2009.

The main priority for Rocksource going forward is to continue to firm up exploration wells, prepare for drilling and execute the drilling campaign planned for 2011. The company has announced four firm wells for 2011 and will work to further increase the number of wells being drilled. The prospect portfolio is a result of a very selective approach over the last years, and as such provides a series of high value potential triggers over the next 12 months. Rocksource will continue to add to the prospect portfolio going forward, mainly through participation in licensing rounds on the NCS.

Please find the Q2 presentation here: http://www.rocksource.com/presentations/category157.html
The financial report for Q2 can be found here:http://www.rocksource.com/financial-reports/category159.html

Oslo, 24.8.2010
Rocksource ASA

Trygve Pedersen
CEO

+47 90 09 77 41