Rose Petroleum PLC (LON:ROSE) Chief Financial Officer Chris Eadie caught up with DirectorsTalk for an exclusive interview to discuss what they’re currently seeing in the market, their strategic review, cost saving and de-risking strategy and what this means for Rose going forward
Q1: Now Chris, we’ve seen an update this morning, can you talk us through what you’re currently seeing in the market?
A1: I think we’re currently seeing very challenging market conditions and we see a fairly challenging outlook. As a Board, I don’t think we see any catalyst in the near or medium term that is likely to project oil out of the current pricing range that it’s in and as a result, we obviously not in the strong oil price environment of 2014/2015 when we entered into the agreements on the current oil acreage and that’s what’s prompted the action and the announcement that you see today.
Q2: What were the findings of your strategic review?
A2: It was a compense exercise and we looked at all the assets and all of the cost base of the group and overall conclusion was that as a Board we need to right-size Rose Petroleum, not only so it can it survive in the very challenging current market conditions and also so it’s positioned so that when the recovery comes, or eventually comes, that’s it’s well positioned to take advantage of that. So I think the findings were one that we have to make very aggressive cost cutting and ration capital correctly across the asset base. We also took the conclusion that the acreage in the US is extremely large, 260,000 acres and it was important that we concentrated on those perspective parts of that asset portfolio and retain that, as I say when the market recovers we’re positioned to take advantage of that.
Q3: So are you going to be implementing your strategy of cost saving and de-risking?
A3: We’re currently a long way into our cost cutting programme, we announced back in our Interims down at the end of 2015 that we’d taken steps to aggressively reduce costs, that has continued. We have reduced staff numbers, we’ve reduced costs across the board, directors have obviously taken reductions, we’ve closed offices and we are literally looking at every cost line and seeing that we can preserve our cash in absolutely the best way we can. In terms of de-risking the portfolio, I think what we’re doing there is focussing on the Paradox acreage from an oil and gas perspective and we are de-risking that by focussing on the Paradox because the consultants Ryder Scott concluded that the Paradox has the best chance of success so what we’re doing is focussing on the acreage with the best chance of success so when the recovery comes we can take advantage of that.
Q4: So what do you think this means for Rose Petroleum going forward?
A4: We feel, as a Board, Rose is now very well positioned for the future, we’re focussing on the Paradox with its very large resources of 1.1 billion barrels of oil. We’ll be proceeding on the permitting, the 3D seismic to shoot that, and we’re also looking at the other aspects of our portfolio to see where we can add value to shareholders. We’re also looking at other projects outside of the group at the moment which have potential to add value.
