Rock Well today announces its intention to apply for the admission of its Common Shares to the Official List of the Financial Services Authority and to trading on the Main Market of the London Stock Exchange and to proceed with an offer (the “Offer”) of Common Shares to certain institutional and other investors (the “IPO”).
Rock Well is a North American-based oil development and production company that has developed a technique, known as the “Rock Well Technique” or “RWT”, to extract oil previously considered to be incapable of economic recovery and consequently believed to be stranded. The Company has been able to classify large volumes of stranded oil as reserves, significantly increasing the value of its portfolio. Rock Well's strategy for growth is to continue to acquire and develop its US onshore fields and grow its international subsidiaries.
RWT utilises well-established mining and drilling practices to tunnel beneath mature, depressurised, shallow oil reservoirs, and reservoirs where surface access is restricted, and drill a high number of closely-spaced up-ward sloping horizontal wells into the oil-bearing zone. The oil is extracted primarily through gravity drainage, collected in underground facilities and pumped to the surface. The move to underground production facilities minimises surface disturbance and allows Rock Well to reclaim land, leading to a positive environmental impact.
John Hoak, Chief Executive Officer, commented:
“We have spent many years developing the Rock Well Technique, gaining a first mover advantage and building a strong portfolio. Following the IPO, Rock Well will optimize the development of its existing assets, with over 320 million barrels of net Proved and Probable Reserves, and further grow its reserve base through acquisition. At a time of rising oil prices and concerns over energy security the Rock Well Technique helps address the oil and gas industry’s urgent need to replace reserves.
“The Group has a growing portfolio of long-duration assets located in a stable political environment with access to infrastructure and increasing demand for domestic supply. With our focus on low cost, non-conventional oil exploitation, Rock Well offers a clearly differentiated play compared to the London Main Market listed oil and gas peer group.”
KEY STRENGTHS
The Directors believe that the key strengths of the Group are:
Proven ability to convert stranded oil into Reserves
• Rock Well has acquired majority working interests in five oil properties in North America that it intends to develop using RWT. When acquired, these fields were estimated by the Group to contain less than 2 million barrels of net Proved and Probable Reserves, based on conventional recovery techniques
• Following application of RWT, Rock Well’s independent reservoir engineers have estimated that these fields contain 322.5 million barrels of net Proved and Probable Reserves
• The Group’s independent reservoir engineer has estimated a pre-tax net present value from the existing fields total net Proved and Probable Reserves of $3.735 billion, based on future cash flows of the Group discounted at 10 per cent.
• Increased recovery factors enabled by RWT
• Rock Well’s independent reservoir engineer estimates that the application of RWT to the Group’s existing assets will result in the recovery of an additional 21 per cent. to 43 per cent. of Original Oil in Place (“OOIP”)
Low finding, development and operating costs
• Rock Well’s existing RWT portfolio was acquired for a total cost of under $54.1 million
• The Group’s reserve weighted average finding and development cost, including cost of acquisition, is projected to be $4.47 per gross barrel
• Rock Well expects the operating costs relating to the Group’s current RWT assets to be as low as $3.55 per gross barrel on average for the first ten years of production
Low Technical Risk
• The execution of RWT relies on relatively limited technical requirements compared to other non-conventional recovery techniques such as extracting oil from oil sands or deep water drilling
• The core tunnelling and drilling techniques employed by Rock Well are well-established practices from the mining and oil industry
• First-mover advantage supporting barriers to entry
• Three years of operational experience, accumulating operational data, know-how, equipment base and multi-disciplinary technical team with complementary mining and oil skillsets. Rock Well currently employs over 270 employees.
• Over a twelve year period, Rock Well has gathered research and conducted preliminary analysis on approximately 14,000 fields worldwide, including over 6,000 in the United States which has yielded over 250 fields onshore in North America alone that the Directors believe are suitable for the application of RWT
Size and availability of target reserve base, with high scalability opportunities
• These 250+ fields are estimated by the Directors to contain over 36 billion barrels of oil potentially recoverable through the application of RWT
• Funds have been earmarked for the acquisition of majority working and net revenue interests in 11 specific fields identified as near-term targets
SUMMARY OF THE IPO AND STRATEGY
The IPO will comprise an offer of new and existing Common Shares of the Company to certain institutional and other investors in the United Kingdom and elsewhere.
The Group intends to use the net proceeds of the Offer primarily in the following ways:
• Funding net operational expenditure
• Funding capital expenditure for the continued development of the Group’s existing RWT projects
• Acquiring majority working and net revenue interests in additional North American oil fields suitable for the application of RWT
• Equipment and general corporate purposes
The Group has also established two wholly-owned subsidiaries, RWP ISP and RWP IH, to pursue an international joint venture and development strategy.
Numis Securities Limited is acting as Sponsor, Global Co-ordinator, and Joint Bookrunner alongside Merrill Lynch International, in relation to the IPO.