ROC has been advised by the Operator of the third party owned Theddlethorpe Gas Processing Terminal that, due to mechanical failure, the Terminal's gas compression facility is inoperative. Consequently, production from the Saltfleetby Gas Field, onshore UK, has been constrained to natural flow at approximately 5 MMSCFD, a reduction of some 75%. The Operator of the Terminal is unable, at this early stage, to provide an accurate estimate of how long it will take to rectify the problem, though indications are that the gas compression facilities are unlikely to be re-commissioned until the second quarter of 2004.
Under the terms of ROC's Gas Sales Agreement with RWE Innogy plc, ROC has declared force majeure and volumes of gas delivered from Saltfleetby under this agreement have reduced accordingly.
In light of the mechanical problem at the Terminal it is important to note:
The reduction in production has not been caused by factors related to the operation of the Saltfleetby Gas Field;
ROC will not incur any commercial costs in relation to its Gas Sales Agreement with RWE Innogy plc;
Assuming two months of constrained gas production, ROC expects that its 2004 operating cash flow would be reduced by approximately A$5 million; and
The mechanical problem at the Terminal will not have any impact on the Saltfleetby Gas Field's gas and condensate reserves because production has not been lost, but rather has been effectively postponed by the period of the shut-down.
Commenting on the forced deferral of production, ROC's Chief Executive Officer, Dr John Doran, stated: "For investors who are holding or buying ROC shares for its 2004 earnings, this is plain bad news. For those who are holding or buying ROC shares for the 2004 exploration drilling programme and the medium and long term upside potential represented by the development of oilfields offshore Western Australia and Mauritania, this is an irritating piece of news that should not have any impact on their investment strategy."
Roc Oil owns a 100% interest in Saltfleetby Field.