Rocksource Benefits from Higher Production, Prices in Q1
Rocksource Group benefited from higher production as well as increasing oil and gas prices in the first quarter of 2008. All the wells drilled onshore US have been hooked up to production and is generating a substantial cash flow for the Group. As a result the net profit for the Group was positive in the quarter. Rocksource is maturing its role as a pre-qualified operator on the NCS with its first operated license awarded in January. Preparation for the 20th licensing round on the NCS as well as the APA 2008 round has also been key activities for the Group in the quarter. The Group is preparing for access to international exploration opportunities.
Higher production and increasing prices fuels top line:
The turnover in the first quarter is the highest recorded, and reflects further production increases on the back of the well program onshore US. The increase in oil and gas prices more than made up for the negative impact from negative exchange effects from a weakening US dollar. A total of NOK 59.9m was generated in turnover, compared to NOK 4.0m in Q1 2007, and an 80% increase from NOK 33.3 in Q4 2007.
The exploration activities remains at the same level as previous quarter, resulting in external exploration costs of NOK 23.0m, up from NOK 4.7m in Q1 2007. Focus remains on preparation for the 20th licensing round and APA 2008 on the NCS, as well as maturing owned licenses. In parallel a number of opportunities for inorganic access to high impact exploration opportunities are continuously being evaluated. Total exploration cost, including internal costs was NOK 27.2m in the first quarter.
EBITDA in the quarter was NOK 17.0m showing that the revenue from the production covered all operational costs in the quarter and provides a comfortable cash flow for the Group. This is a considerable improvement from previous quarters, but going forward the EBITDA will continue to fluctuate with production, oil and gas prices, as well as exploration activity levels.
Income tax relates to the tax refund on NCS exploration. The income tax in Q1 this year was NOK 21.4m, down from NOK 76.5m in Q4 last year. The income tax was mostly related to acquisition of seismic data and the EM processing undertaken, as well as a continued focus on NCS due to APA 2008 and 20th Round preparation. The processing of EM surveys has been undertaken in the 100% owned subsidiary Rocksource Geotech AS. Rocksource ASA has a unique access to the subsidiary's proprietary software and processing skills, which are vital to the Group's exploration program.
The net profit for the quarter was NOK 3.5m. With the continuous build-up of onshore production the cash generation will cover the running cost of the Group and will also contribute towards financing our offshore exploration activities.
The Group had a positive cash impact of NOK 68.4m in the quarter. This includes NOK 100.0m related to the drawdown of the exploration credit facility. Investments in the well program in the US subsidiaries totaled NOK 23.0m. Cash balance at the end of the quarter was NOK 155.4m.
The Group's working capital at the end of the quarter is NOK 204.0m, down NOK 9.5m from previous quarter. The equity was NOK 392.8m, up NOK 6.5m from previous quarter, giving the Group an equity ratio of 52.0%, down from 58.9% previous quarter, mostly as a result of the drawdown of the credit facility.