28th Sep 2015 08:11
LONDON (Alliance News) - Rose Petroleum PLC Monday reported a significantly wider pretax loss in the first half of 2015 due to impairments, higher costs and a drop in revenue and said it continues to try to take advantage of the oil price downturn by looking for further oil and gas assets in the US.
Rose shares were down 8.7% to 0.169 pence per share on Monday morning.
The US-focused oil and gas company, which also has some mining operations, reported a USD6.5 million pretax loss in the first six months of 2015, substantially wider than the USD1.5 million loss reported a year earlier, as revenue dropped to USD1.2 million from USD2.3 million.
Revenue for the period was generated primarily from the company's gold mining and milling operations in Mexico. The reduction in revenues was mostly the result of the cessation of activities at a number of the gold projects during 2014 and the gradual start-up of the Mina Charay mine during 2015.
The wider loss was mainly caused by a USD2.3 million impairment of its US copper assets, compared to no such impairment a year ago, and by Rose's operating and administrative costs rising to USD2.6 million from USD1.4 million. Share-based payments also increased to USD967,000 from USD145,000.
Rose's oil and gas division is the company's primary focus, but its mining assets in the US and Mexico are allowing the company to diversify whilst oil prices are low.
"The company's oil and gas division and mining division are run and operated on a stand-alone basis. The board believes that this will enable it to divest the mining assets at the appropriate time, should suitable opportunities arise, as they continue to focus on Rose's oil and gas assets," it said.
The prime focus during the period for the oil and gas division has been the Uinta Basin, specifically, the Mancos Formation. Rose is confident that it can begin selling oil and gas from the area after completing just one successful well due to the excellent infrastructure nearby.
However, the company needs to secure the necessary permitting for the area, and then it will need to find funding in order to begin a drilling programme. Rose said it is currently in talks with a number of third parties in respect of the funding for the Mancos drill programme.
The company's mid-stream gathering and processing facilities, acquired under the Cisco Dome acquisition in 2014, remain suspended due to current gas prices as the company undertakes a detailed review of operations. Those facilities also are located in the Mancos area. Rose said the outage does not have a "material financial impact" on the business.
"The board continues to assess opportunities to introduce productive assets to Rose's portfolio. The board believes the current environment provides an opportunity to acquire high quality assets with stable income which are non-core to other companies," said Rose.
"The team has identified key target basins and are reviewing opportunities in the Marcellus, DJ Basin, Eagle Ford, and Permian. The DJ Basin is our prime focus, where our team has significant operational knowledge and experience," it added.
Its mining division manages the producing Mina Charay gold and silver mine and a copper and molybdenum exploration portfolio in Mexico, alongside copper and uranium exploration projects in the US.
In the half, Mina Charay produced 1,128 ounces of gold and 8,670 ounces of silver, with the average grade coming in at 5.89 grammes of gold per tonne and 63.5 grammes of silver per tonne. However, the company said gold recovery of 71% and silver recovery of 50.6% was below expectations.
"Unfortunately, operational efforts have been overshadowed by the continued decline in metals prices. Gold reached a high for the period of USD1,302 per ounce in January and as of June 30 was USD1,172 per ounce and post-period has hovered around USD1,100 per ounce. This, combined with the low recoveries, has put a strain on the operation," said the company.
"Against the challenging gold price and operational backdrop, the company is keeping the performance of Mina Charay under continual review," Rose added.
Rose said it is expecting to secure the required drilling permits for its copper and molybdenum portfolio in Mexico in the second half of 2015. It is simply maintaining its copper exploration assets in the US whilst it looks for a partner to fund exploration.
Rose is in the process of selling its US uranium assets, and its remaining portfolio is on care and maintenance. Rose said it is continuing to source potential buyers for the uranium assets.
"Shareholder returns remain the board's principal objective and we believe that with active stewardship, we can not only preserve our assets in the current market conditions, but also take advantage of opportunities within the sector as they arise," said the company.
By Joshua Warner; [email protected]; @JoshAlliance
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