Rocksource Offers Q1 Production Progress

Rocksource ASA announced that the April 2008 production from its US subsidiaries averaged 2,500 boepd (barrels of oil equivalent per day). This compares to an average production in 1st quarter 2008 of 2,150 boepd. The stated production numbers are based on metered daily production, and may thus differ slightly from the final production volumes that will be used for accounting purposes due to changes in stock volumes etc.

All wells drilled in the first and second drilling campaign have now been tied in to production. A total of 9 wells have been drilled in the fields, 8 of which are in Drews Landing. All wells have encountered multiple hydrocarbon reservoir zones which have confirmed the expected total proven reserves of 4.9 million barrels of oil equivalent as of 31 December 2007.

The last well to be tied in to production was delayed due to a more extensive completion than originally planned, but is currently producing from co-mingled zones at a constrained flow-rate as the re-completion was better than expected and in excess of the temporary tie-in available. The permanent tie-in is now under construction and is expected to be operational in late May.

Ability Drilling's first quarter was characterized by the delivery of the first land rig to Jordan, final preparation for entering the operational phase, as well as the additional ordering of 5 new land rigs in February. The first land rig was delivered to Jordan at the end of the first quarter 2008 and the rig will be in operation within May 2008.

As none of the rigs has entered the operational phase, no operating income has yet been recorded in the company. The company recorded an operating profit in the quarter of NOK -16.4 million, compared with NOK -4.7 million in the first quarter 2007. The increased operational expenses are mainly due to the gradual build-up of the organization as the company approaches the operational phase. The company has prepared the organization for a smooth start-up of operations, which has had the effect of relatively high operational expenses in both Q4 2007 and Q1 2008. Net profit was NOK -18.8 million in the quarter, compared with NOK -7.7 million in the corresponding quarter last year.

"We reached a milestone with the completion of the delivery of the first land rig to Jordan," says Hans Petter Eikeland, CEO of Ability Drilling. "We are now focused on getting the rig into safe and efficient operations, which will happen within this month. The current quarter will be the first quarter where we can record revenues.

"The market sentiment remains strong in Ability Drilling's core segments -- the land rig market in MENA (Middle East North Africa) and the geothermal drilling market in Central Europe. Eikeland, who has recently returned from a trip to the Middle East, elaborates: -- There is a great demand for land rigs in the MENA market, especially for the high end rigs which can perform advanced drilling. Our rigs match the customers' requirements -- and of course, North Sea technology has a high standing in this geographical area."

"We have overcome the initial delivery challenges and have reduced the risk for future delivery slippages, says Eikeland. "While maintaining the attention to delivery programs, we will now increase our focus on operational excellence, and make sure that the customers can enjoy the benefits of our technology and high-skilled personnel, Eikeland concludes.