Rose Petroleum plc

Interim Report for six months to 30 June 2014

30-September-2014

Interim Report for six months to 30 June 2014

PERIOD HIGHLIGHTS
 
OIL & GAS 
  • Signed 230,000 gross acre farm-in located in the Paradox and Uinta Basins of Utah, U.S.A.
  • Formed two wholly owned U.S.A. subsidiaries; Rose Petroleum (US) LLC and Rose Petroleum (Utah) LLC
  • Raised £6.5m before costs to fund initial drill programme
  • Completed acquisition/application for 3 licences totalling 1.27m acres in Germany
  • Ryder Scott Company evaluated Prospective Resources in Utah
  • Unrisked Prospective (Recoverable) Hydrocarbon Resources on a Best Case (P50 equivalent) basis:
    • collective total Mancos Shale (Uinta Basin) and Paradox Formation (Paradox Basin) combined:
      • 1,452.86 MMBO (million barrels of oil) (1.45 billion barrels of oil)
      • 4,791.85 BCFG (billion cubic feet of gas) (4.79 trillion cubic feet of gas)
    • collective total Best Case (P50 equivalent) in the Paradox formation:
      • 966.37 MMBO (966 million barrels of oil)
      • 1,888.46 BCFG (1.88 trillion cubic feet of gas)
    • collective total Best Case (P50 equivalent) in the Mancos Shale:
      • 486.49 MMBO (486 million barrels of oil)
      • 2,903.39 BCFG (2.90 trillion cubic feet of gas)
  • Commenced evaluation of a potential strategic acquisition in the Uinta Basin 
 
MINING 
  • Gold/silver production and milling, Mexico 
  • Completion of Diablito and La Colorada Mines
  • Commenced operations at Maria Fernanda Mine (60:40 JV)
 
COPPER PORTFOLIO 
  • Joint venture agreement entered into with Lowell Copper Ltd on TC Project in State of New Mexico, U.S.A.
  • Discussions with potential partners underway in order to fund drilling on other projects
  • Property positions being maintained under care and maintenance
 
URANIUM PORTFOLIO 
  • Mineral lease application filed with State of Arizona on Wate project which contains NI 43-101 compliant inferred resource of 1.118m Ibs eU3O8 held jointly with Uranium One Americas continues in process
  • Uranium exploration programme on projects other than Wate continues on care and maintenance
 
POST PERIOD HIGHLIGHTS
 
OIL & GAS
  • Appointed John Blair (previously Head of New Ventures) to the Board of Directors of Rose Petroleum plc and as CEO of Rose Petroleum (US) LLC and Rose Petroleum (Utah) LLC
  • Opened and fully staffed office in Denver, CO U.S.A. with technical and operating team
  • The first of several planned 3D seismic acquisitions is underway
  • The initial Uinta well location has been finalised with a scheduled spud date in Q4 2014
  • A State Unit is being formed to unitise approximately 12,000 gross acres that were previously not within a Unit, either Federal or State.
  • Commencement of operations scheduled for the 16-42 Paradox well’s completion in Q4 2014
  • Continued due diligence on the strategic acquisition within our Mancos area of operations which, if the Board decides to proceed, is scheduled to close in Q4 2014
  • Acquired and analysed well core samples on the Weiden Licence in Germany

MINING

  • Joint venture and earn in option agreement signed with Minera Camargo S.A. de C.V. on 39.5 km² property hosting separate copper and molybdenum porphyry mineralisation as well as near-term production potential from high-grade gold/silver veins
  • Joint venture agreement signed with Minera Pafex S.A. de C.V. on Mina Charay property hosting drill-based resource of 29,000 ounces gold and 173,000 ounces silver in high-grade veins.
CHAIRMAN’S STATEMENT
 
I am pleased to report to our shareholders that the first half of 2014 has transformed your company across many fronts. We utilised a significant amount of the cash generated in Mexico in order to assist with the funding of the Company’s entrance into oil & gas, although this put short term pressure on the Mexico operations, the benefits have been clear to see and our recently announced projects in Mexico should resolve this short term issue.
 
We have also carried out a successful equity placing raising £6.5m before costs. The executive team led by Matthew Idiens and John Blair were delighted by the response they received during the fundraising presentations which shows the value that the market places on the oil & gas properties we have secured in Utah, U.S.A.
 
The new funds raised are being invested in the development of the Company’s Oil & Gas division. Our oil & gas interests now include our flagship 230,000 acre projects in the Paradox and Uinta Basins of Utah as well as our, now non-core, properties in Germany. In May, we announced that Ryder Scott Company had evaluated the Prospective Resources attributable to our Utah interests, the results of which are tabulated below in the Review of Operations. 
 
In order to give a project of this scale the best chance of success it is essential to build an experienced operations team. We have done this and I am pleased to welcome our new oil & gas team who have significant experience in US unconventional resources including operating in the Bakken, Marcellus, Niobrara and Arkansas-Fayetteville Shale. They are based at our new office in Denver which is the headquarters of the newly-formed subsidiary, Rose Petroleum (US) LLC. Full details of the appointees may be found in the Operations Review. The board has also been strengthened by the appointment of John Blair to the main board immediately after the period end. 
 
We have commenced operations in Utah, which includes a successful well integrity test, permitting the initial 3D seismic programme and finalising design for the completion of the Shut-in well in the Paradox basin. We also expect to spud our first well in the Uinta Basin targeting the Mancos Shale and also conventional liquids-rich gas reservoirs just below the Mancos shale, both in Q4 this year. Rose is continuing to evaluate a potential strategic acquisition for which the due diligence phase is underway. Full details will be announced in due course.
 
In Mexico we have now completed operations at the Diablito and La Colorada Mines and commenced mining at the Saltito Mine. Operations are now focused mainly on two additional properties; the profit share on the high grade Mina Charay Mine and a joint venture with Minera Camargo. The joint venture we have signed with Minera Camargo covers nearly 40 square kilometres and covers two separate “drill ready” porphyry copper and molybdenum anomalies. It also includes near-term potential for high-grade gold and silver production. At Mina Charay, a property we first explored some nine years ago and in respect of which we have now signed a joint venture agreement with Minera Pafex, we expect to source high-grade ore which we anticipate will contain 10g/T gold and 60g/T silver. The cash flow generated from the mining/milling operations in Mexico will be used towards the funding of the hard rock exploration programmes.
 
In the U.S.A. the Company’s AVEN subsidiary, focused on porphyry copper exploration, has also signed an option agreement with Lowell Copper on AVEN’s TC project located in New Mexico along the well-known Hillsboro-Chino-Tyrone-Lordsburg-Bisbee porphyry copper belt. Lowell has the right to an earn-in up to 70% by spending US$6.25m on the project. Additional property positions are also being maintained at several other south western U.S.A. locations. 
 
The Company’s uranium programme operates through its wholly owned subsidiary VANE Minerals (US) LLC. It consists of a 50:50 joint venture with Uranium One (U1) in northern Arizona.  The core of the joint venture is the Wate breccia pipe, which has a compliant resource of 1.118m lbs eU3O8. This enterprise is held in Wate Mining Company LLC under the equal ownership of VANE and U1. VANE and U1 have agreed to place the assets on a care and maintenance status and we are actively seeking to dispose of the uranium portfolio.
 
The next few months will be an exciting time for the Company as outlined below in the review of operations. We would like to thank our shareholders for their continuing support and our employees for their efforts and we look forward to updating you with our progress throughout the rest of the year.
 
Rt Hon Earl of Kilmorey PC
Chairman
 
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