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Rose Petroleum strengthens oil & gas team

Published: 17:22 03 Sep 2013 AEST

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Rose Petroleum (LON:ROSE) has reiterated its strategy of using cash flow from its metals production arm to build up its oil and gas interests.

As indicated by the change of name from Vane Minerals, the company intends to focus on unconventional oil and gas in Europe in future but its half-year results showed that its silver and gold operations in Mexico are holding their own, despite the well-publicised difficulties being experienced by precious metals miners.

The company's gold and silver operations enjoyed record production through the first half of 2013 with mill throughput at the San Dieguito de Arriba flotation mill totalling 17,788 tonnes, which was 18% above target.

Unfortunately, while it was a good period operationally for the Mexican unit, precious metals prices declined sharply. The average metal price received on sales of concentrates fell to US$1,438.94 per ounce for gold, from US$1,650 per ounce in the corresponding period of 2012, while for silver, the average price fell to US$23.98 an ounce from US31.04 per ounce the year before.

Not surprisingly, group revenue fell, declining 22.8% to £2.63mln from £3.40mln the year before. The company made a small loss before tax of £216,441 versus a profit the year before of £402,516.

Cash at the end of June stood at £305,851, down from £1.10mln a year earlier. Since the end of the reporting period, the company has raised £1.4mln through a share subscription to finance its change of direction.

One of the reasons Rose has changed tack has been the difficulty in raising finance for mining exploration projects; as such, and as previously announced, drilling on its copper assets has been suspended while the uranium exploration programme, other than at the Wate project in Arizona, has been placed on care and maintenance.

Rose is in discussions with several parties interested in either buying AVEN Associates, its wholly-owned subsidiary focused on copper, or working with Rose on developing AVEN’s projects.

Meanwhile, as previously revealed, the company is looking to sell its uranium assets, and disposal discussions are said to be at an advanced stage.

Looking to the future, the company is upbeat about the prospects for unconventional oil and gas in Europe, despite some unfavourable publicity for the sector.

“As with most emerging industries, the unconventional gas industry in Europe has been affected by negative press coverage and misconceptions of the processes involved in the extraction of the gas. Our team will be technically capable of clearly explaining the processes involved in our operations, and work with the local authorities and communities to better understand and promote this industry that we feel has the potential to revolutionise the European energy sector to the benefit of consumers,” said the company’s chief executive, Matthew Idiens.

It is the company’s belief that European governments will need to embrace the potential of unconventional oil and gas if their economies are to remain competitive with emerging nations, not to mention the USA, where gas prices are already 25% lower than they were two years ago.

The company has strengthened its oil and gas team with the appointment of Kelly Scott to the board of directors as technical director and the recruitment of Dr Fivos Spathopoulos as chief geologist.

Scott has over 40 years' experience in onshore and offshore drilling, construction and completion, and is credited with drilling the first horizontal shale gas wells within the European Union.

Dr Spathopoulos has more than 20 years' experience in conventional petroleum exploration, and been working as a shale-gas/shale-oil exploration geologist in Europe since 2007 where he studied the organic geochemistry, lithology and gas content of a large number of black shales in Europe.

Shares in Rose Petroleum were barely changed following the results.

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