"Compared to the corresponding period last year, Roc’s 1H2007 results represent a big step up,” chief executive John Doran said. “This achievement, however, should not be over-emphasised because it says more about where the Company was last year than where it is today.”

Despite production, revenue and trading profit all rising dramatically, Roc still made a net loss after income tax, albeit just $8.8 million, a $13.4 million improvement on the loss of $22.2 million in the previous corresponding period.

But Doran said this loss was due to various accounting vagaries and did not reflect the company’s true position.

“Exploration expenditure is accounted for under a ‘successful efforts’ accounting policy,” he said.

“This means that ROC is required to expense the four exploration wells it drilled during 1H2007, all of which discovered hydrocarbons, including the three which are regarded as being potentially commercial. Quite frankly, there are relatively few recent regional examples of Australian oil companies drilling discovery wells that would meet the ‘successful efforts’ definition as applied by ROC.”

In addition, Roc’s oil price hedge accounting treatment changed during the period, driven by the volatility in the differential between the Brent oil price and the underlying realised price of Roc’s sales.

“Consequently, it became inappropriate for Roc to hedge account under the technical requirements of the Australian accounting standards,” Doran said.

“This situation has impacted on the company’s Income Statement with a reported $16.5 million net hedging loss, despite the Company’s hedges providing a real cash flow benefit of $5 million during the period and remaining economically effective. The company’s hedging policy continues to be conservative with only about 16% of proved and probable reserves being hedged.”

According to Doran, the real value of the company was expressed in terms of its cash flow, asset value and exploration success: a 1H2007 $59 million cashflow from operating activities; a $45 million trading profit and three new exploration discoveries that merit further appraisal.

“On this basis, ROC has clearly had a reasonable six months," he said.

In the first half of this year, Roc produced 1.6 million barrels of oil equivalent (MMboe) from five fields, compared to 0.3MMboe from two fields in the corresponding period last year.

Net sales revenue was $100.8 million, up $83.2 million from $17.6 million. Trading profit was $45 million, up $40.9 million from $4.1 million profit. Cashflow from operating activities was $58.9 million, up $61.8 million from a negative $2.9 million cash flow in the first half of last year.

Earnings before interest, tax, depreciation, amortisation and exploration were $67.3 million, up $63.7 million from $3.6 million.

Per barrel production costs fell to $10.19/Boe ($16 million), an 11% improvement on $11.48/Boe.

The company’s exploration and appraisal expenditure for the half of $52.3 million was incurred mainly in relation to drilling four exploration wells, the pre-drill preparatory work, including rig mobilisation, for the Angolan drilling and seismic programs and the acquisition of potentially high-impact exploration acreage in offshore Madagascar, Roc said.

“Exploration drilling resulted in four discoveries from four wells, three of which are considered to have commercial potential: Frankland and Dunsborough, offshore Australia and Massambala, onshore Angola,” the company said.

“All of the $52.3 million in exploration costs has been expensed in accordance with Roc’s ‘successful efforts’ accounting policy because the three discoveries require appraisal work and therefore cannot presently be demonstrated to be commercial on a stand-alone basis.”

Development expenditure of $37 million reflected the completion and commissioning of the Enoch Oil and Gas Field and progress towards completion of the Blane Oil Field, both in the North Sea, as well as the start of work on the incremental development plan for the Zhao Dong C & D Oil Fields, Bohai Bay, offshore China.