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roc deal flags basin shake-up

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    Roc deal flags Basin shake-up
    By Michael Weir

    ROC Oil has kicked off the first rationalisation of Perth Basin oil and gas interests with a $12.7 million deal to buy Arc Energy's stake in the Cliff Head oil discovery.

    Analysts said the deal had set the scene for further consolidation by establishing market values for the assets.

    The Perth Basin, centred on Dongara, north of Perth, is renowned for its scrappy permit ownership structures with more than 10 companies, including a string of juniors, involved in the various exploration permits.

    Analysts said that some smaller companies would be forced to sell and others would want a bigger slice of the action as recent discoveries moved to development.

    "I would not be surprised if there was other consolidation," Hartleys analyst Kevin Tomlinson said.

    "There has been a very high success rate in the Perth Basin and even with recent disappointments more than 50 million barrels of recoverable oil have been discovered in the past two years in a basin that was supposed to be just gas.

    "People are recognising it is still very early days and it's just scratching the surface."

    Sydney-based Roc, the operator of Cliff Head, has bought Arc's 7.5 per cent stake for $9 million in cash and staged payments of up to $3.75 million based on reserve levels.

    The deal, which values the 30 million-barrel offshore Cliff Head discovery at $169 million, or $5.60 a barrel, takes Roc's interest to 37.5 per cent.

    The other participants are AWE (27.5 per cent), Wandoo Petroleum Pty Ltd (25 per cent), NorWest Energy (5 per cent) and Voyager Energy (5 per cent).

    Recent drilling put recoverable reserves at Cliff Head at between 20 million and 30 million barrels from in-place reserves of 66 million to 99 million barrels.

    First oil is expected during 2005 at a probable production rate of 10,000 to 20,000 barrels per day.

    Arc Energy managing director Eric Streitberg said the deal allowed the company to focus on its onshore Perth Basin oil and gas assets.

    "It is onshore where we get the best bang for our buck," he said. "We control our own destiny, because we are the operator and we can get returns in months, not years."

    Roc managing director John Doran said the deal was positive for both companies.

    "Win-win is a grossly overused expression, but it is hard to think of a better way of describing this transaction," he said.

    "Roc gets to consolidate one of its core operated assets while Arc strengthens its balance sheet to better enable it to further develop its operated interests in the nearby onshore Perth Basin.

    "This acquisition is a good example of the sort of deal that can be done when two companies have a clear view of their strategic objectives, a realistic view of the potential value of the relevant asset and a constructive and open-minded view about sharing downside risk and upside potential."

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