Rocksource Secures Bank Loan Facility for NCS Exploration

Rocksource ASA said that it has finalized a NOK 150-million bank loan facility with DnBNOR Bank. The loan facility will help Rocksource cover costs related to exploration on the Norwegian Continental Shelf (NCS).

The tax regime in Norway is very beneficial for exploration companies like Rocksource, where the tax value of the exploration costs are refunded in cash. Because tax refunds are paid to the company the following year, the loan facility reduces Rocksource's capital requirement when exploring on the NCS and allows for a very efficient use of the company's financial resources.

The NCS is one of the main focus areas for Rocksource. On Jan. 30, 2007, Rocksource was awarded a 35% interest in the North Sea block 31/8 south of the Troll Field, the company's first priority block in the APA 2006 round. The other licensees in the block are E.ON Ruhrgas Norge AS (50% and operator) and Aker Exploration ASA (15%). Rocksource has another joint license application from the APA 2006 still under consideration by the Norwegian Ministry of Petroleum and Energy.

As part of its increased exploration focus on the NCS, Rocksource has already acquired several EM lines. The loan facility will allow the company to step up its exploration activities even further, including a thorough preparation for the upcoming TFO round in 2007 and the 20th Round in 2008.

The loan facility with DnBNOR allows Rocksource to expand its activity level and to increase the exploration efforts towards the coming rounds. The loan finances a major part of the planned exploration program and allows the company to buy and acquire data that will enable it to fully leverage its exploration technology and position itself for the upcoming rounds.

To increase the exploration activity on the NCS, the Norwegian Government implemented new tax rules in 2005, whereby exploration costs on the NCS can be refunded by 78%, limited to the company's net taxable loss for the financial year. The tax refund is being repaid in December the following year based on the tax return and the Oil Taxation Office assessment of the return.

From 2007 the tax refund can be pledged, but the tax law change needs further refinement to represent a fully perfected security for lenders. It is expected that necessary clarification will be provided by the authorities, latest in connection with the revised national budget.

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