RockRose Energy; uplift to reserves and extension to field life

Rockrose Energy (RRE.L, Market Cap £81m, 645p, 3.1% of JIC Portfolio and 0.0% of JIC Top 10)

Update on activity and resources.

Conclusion: Today‚Äôs news is huge and should have a significant positive impact on the share price. The only thing that might dampen that slightly is that one is invested in RockRose in anticipation of this type of news! Why is it so important? First, a big increase in reserves increases the value of the company; second, an increase in production increases cash flow and last but most importantly, an extension to the life of a field pushes out the date of decommissioning, meaning that cash ‚Äúrestricted‚ÄĚ i.e. held in reserve for the cost of decommissioning, can be moved to non-restricted. That leaves more cash for acquisitions, dividends or another buy-back. I recently suggested the shares were worth closer to 1000p based on forecast cash flows. I have seen suggestions that today‚Äôs news is worth up to 500p per share. This is why I am invested in Serica Energy and RockRose. Very Happy Holder!

Main points:

  • It says that production life at Ross & Blake has been extended from 2024 to at least 2029. This gives incremental net 2P reserves of 4.2 mmboe (million barrels of oil equivalent).
  • As at 31stJanuary 2P reserves in aggregate stood at 35.9 mmboe, up 9.4mmboe from previous updates.
  • The Group has an estimated 15.0mmboe of 2C (contingent) reserves giving a total 2p and 2C reserves of 50.9mmboe.
  • There is other positive news on development of the Tain field, maintenance at Hanze Field and its participation in a drilling program in the Dutch North Sea.
Full release HERE

RockRose Executive Chairman, Andrew Austin said:
“The extension of field life at Ross and Blake, supporting the Tain development, further grows the Group’s 2P reserve base, demonstrating the impact of our continued investment in organic growth. As a result, the Company today holds 2P+2C of at least 50.9million barrels of oil equivalent in the portfolio.

In addition, the programme of infill drilling in the Netherlands has already yielded positive results and lengthens our production profile. The development of Arran remains on track with capex commitments being funded entirely from cashflow.  

The life of the majority of our assets continues to be extended, however we are successfully and efficiently progressing active decommissioning programmes where necessary in conjunction with our partners. Overall, we remain focussed on continuing to invest in our portfolio to extend field life where possible and to explore options for further value accretive acquisitions.”

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