Rose Petroleum CEO Matt Idiens (MI) talks to Upcoming Drills (UD)

UD:  Our last interview was in April this year and there have been a number of positive developments at Rose Petroleum since then.  Would you like to summarise them?

MI:  We have interpreted the 3D data and completed an updated Competent Persons Report which was very positive even though it only covered part of our acreage.  We have assembled a high quality operations team who have been working on well design and costing and we have started the permitting process for the first wells. We acquired additional acreage within the 3D shoot and are on track to commence drilling in 2018.

UD:  Can we clarify the financial situation first? Obviously, funding will be required for the drilling programme and you are currently concluding that, but can you confirm that the US$1,965,000 cash as of 30 June will provide you with sufficient working capital through 2018?

MI:  Cash conservation remains a priority and we are very comfortable with the working capital position, but our focus now is on the drilling programme and how we fund that, with an industry partner, service provider or through the market itself.

UD:  The interim results announcement mentioned a new well, the 22-1.  Which do you expect to drill first, this or the already announced GVU 29-1?  There also is a third obligation well mentioned, the State 16-2L.  Can you tell us something about this one too and how the wells differ?

MI:  Based on the results of the 3D seismic survey and the CPR report, we are very encouraged about the prospects for all three of these wells.  The drilling team have pulled together a well design and costing plan and one of the benefits of having high quality 3D seismic data is that we know that we do not need to do a vertical pilot well and can got straight into horizontal drilling which will result in a big saving.

UD:  The Competent Person’s Report by Gaffney Cline & Associates on the acreage covered by the completed 3D seismic acquisition (approximately 17,250 acres of the total circa. 80,000 acres held) and focused solely on the single Cane Creek reservoir (Clastic 21) of the multiple prospective reservoirs within the Paradox Formation has now determined gross contingent resources (2C) of 15.61 million barrels of oil and 31.23 billion cubic feet of gas with a NPV net to Rose of $122.4 million.  What sort of further resource numbers might there be in both the additional reservoirs and across the additional acreage?

MI:  Of course we would have to carry out further seismic work to give a conclusive answer, but based on the 3D seismic done so far we are very optimistic about the prospects for the total acreage.  The 3D work we did was the highest quality by anyone in the basin and we are the first to have mapped the shallower clastics, which has given us a much better insight into the basin’s potential.  The survey of just a small part of our acreage identified numerous drilling targets and based on that we can say that we have every confidence of the future potential of the additional acreage.

UD:  You stated that given the potential of the new acreage, you have been working with the BLM to include this new acreage within the Gunnison Valley Unit.  Could you explain the significance of that?

MI:  When we carried out the 3D seismic shoot we covered unleased acreage which included three wells so that we could have the well data to compare with the seismic data.  This was part of acreage that came up for auction in March and we successfully acquired and added to the portfolio.  By including it in the Gunnison Valley Unit it would allow us to drill horizontally across lease boundaries without any issues. That will give us greater flexibility as we plan our drilling programme.

UD:  You also mentioned the more proactive approach of the BLM towards land usage under the new political administration.  Whatever one’s views regarding current US politics, do you believe the new administration is good for business, particularly the oil and gas industry?

MI:  We have seen a noticeable change in the speed at which the BLM processes applications under the new administration which reduces the costs involved and also takes away a big element of uncertainty for exploration companies.  The other side of the equation is that when the BLM grants permission to drill, companies are under an obligation to work within the deadlines set.  We believe that this benefits the oil and gas exploration sector and ultimately the US economy, so from our industry perspective we think the administration has had a positive impact.

UD:  There appears to be a huge disconnect between the company’s current market capitalisation of around £3.8 million and the NPV assessed by Gaffney Cline & Associates of $122.4 million.  How do you see that gap closing?

MI:  We believe that our current market value does not reflect the prospects for the company and the shares are cheap, but we think the company is heading in the right direction and that the bigger oil industry picture is favourable.  We recognise that investors want to see results and that the share price has been dampened down by the possibility of dilution through fund raising.  But we are on the right track, with the high quality seismic results, a very positive CPR report and an experienced team with a proven track record in the Paradox Basin.  We are confident about financing our first well, with an industry partner, a service provider or the market, and this will be the next big step in our transition from being an exploration company to a production company.  The oil price is strong and is likely to go even higher, given global demand and geo-political conditions, which is a good environment for us to be operating in.

UD:  Cantor Fitzgerald already have set a target price of 9p per share.  How soon might it be possible to get there?

MI:  That really is for the market to decide, but we agree that our shares are too cheap and we are working extremely hard to show the true value of the company, its assets and its future.

UD:  You also noted that Rose has been approached by a number of third parties about potential partnering and investment opportunities in the region.  While it is appreciated that Paradox is the absolute priority, can you tell us something about the sort of deals that are being proposed?

MI:  Our main focus is on Paradox, particularly in the coming weeks and months as we go through the process of drilling applications and preparing to drill our first well.  US oil and gas is a very exciting and active industry and we are proud to be part of it.  If the right opportunities came along, particularly in producing or near-producing assets, that could add value to our portfolio then we would examine them carefully, but I don’t have anything to concrete to tell you at the moment.

UD:  Thank you.  To finish would you like to add any further comments which you believe might be of interest to investors?

MI:  This is a very exciting time for Rose Petroleum.  A lot of intense work has gone into getting us this far, including the seismic shoots, assembling a strong team and going through the regulatory processes.  We expect to drill our first well later in 2018 and I look forward to telling shareholders that we have made the transition from explorer to producer.

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