Rock Energy Inc.

Rock Energy Inc.

November 05, 2007 08:00 ET

Rock Energy Announces New Royalty Changes Have Negligible Impact on Existing Reserves, Estimates Net Asset Value at $4.40 Per Share

CALGARY, ALBERTA--(Marketwire - Nov. 5, 2007) - Rock Energy Inc. (TSX:RE) ("Rock") has assessed the impact of the conventional oil and gas royalty changes announced by the Government of Alberta on October 25, 2007 and determined they have negligible impact on the company's reserve value or estimated 2009 corporate royalty rate.

Management has updated our December 31, 2006 and July 1, 2007 Greenbank reserve reports from GLJ Petroleum Consultants Ltd. ("GLJ") for production and activities since the date of those reports and applied GLJ's October 1, 2007 price forecast. The updated reports were then run against the existing royalty regime and the new royalty regime announced October 25, 2007.

The results of our analysis indicate that the value of reserves increase 1% if the royalty changes announced become effective January 1, 2009 versus the existing royalty regime. The new royalty regime is sensitive to both productivity rate per well and commodity prices and the positive result occurs due to the company's heavy oil base (which has a lower reference price than light oil), the production profile of some of our gas wells, our freehold production base (particularly at Medicine River), and lower gas prices contained in the GLJ October 1, 2007 price forecast. The resulting royalty rate in 2009 for the company increased by less than 1% across various reserve classifications. The actual royalty rate in 2009 will ultimately be determined by actual prices and results of activities. Rock is involved in several high impact gas plays that would attract a higher royalty rate but also qualify for the proposed deep gas royalty program, and if successful could affect this analysis. We are currently reviewing our capital program and determining the impact the new royalty regime will have on our current inventory of prospects and future drilling plans.

Management estimates net asset value of Rock at September 30, 2007 to be $4.40 per basic share. This value is based on reserves under the new royalty regime and using GLJ's October 1, 2007 price forecast indicated above, net undeveloped land base of 65,000 acres valued at $200 per acre (which is below our cost base) less negative working capital of $26.2 million (which includes the Greenbank debt). We have not included any value for seismic data in this evaluation.


This press release contains forward-looking statements that involve known and unknown risks, uncertainties, assumptions and other factors, some of which are beyond Rock's control, that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Rock believes that the expectations reflected in those forward-looking statements are reasonable at the time made but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of such information, as the case may be, and may be superseded by subsequent events. Rock does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable securities law.

Contact Information

  • Rock Energy Inc.
    Allen Bey
    President & CEO
    (403) 218-4380
    Rock Energy Inc.
    Peter D. Scott
    Vice President, Finance & CFO
    (403) 218-4380