Q4 2008 PRESENTATION – SOLID FINANCIAL POSITION AND SUCCESSFUL PORTFOLIO DEVELOPMENT

Rocksource’s fourth quarter 2008 results and preliminary results for 2008

The fourth quarter 2008 was again a solid one for Rocksource, where the cash flow was positive in the quarter, giving a record high cash balance at the year-end of NOK 269.4m. In addition the Group has an unutilised bank loan facility of NOK 205.0m available. Successful awards in the APA 2008 round on NCS with two new operated licenses, as well as four new licenses awarded in the 25th licensing round on the UKCS, demonstrate that Rocksource is now regarded as a competent and competitive operator.

Please find attached the financial report for the fourth quarter 2008.

FINANCIAL HIGHLIGHTS
All figures in million NOK (m)

Total turnover in the fourth quarter was NOK 57.4m, compared to NOK 33.3m in the same quarter 2007 and NOK 79.9m previous quarter. The decline of NOK 22.5m from previous quarter was mainly due to a substantial drop in oil and gas prices. The total turnover in 2008 was NOK 287.2m, compared to NOK 66.7m in 2007, a fourfold increase.

Net loss for the quarter was NOK 6.9m, giving a net profit for 2008 of NOK 60.9m, a substantial improvement from negative NOK 45.4m in 2007.

The exploration costs are on level with previous quarters, resulting in external exploration costs of NOK 42.0m. The cost was mainly driven by considerable work in preparation for the 20th round on the NCS and a CSEM acquisition campaign on the AGC Profond PSC in West Africa. In addition there has also been acquisition of seismic data on the Eiktyrne prospect in license PL 480. Total exploration costs, including internal cost, was NOK 65.0m in the fourth quarter.

EBITDA in the quarter was negative NOK 33.2m showing that the revenue from the production covered all operational costs and part of the exploration costs. The EBITDA is expected to fluctuate with production, oil and gas prices, as well as exploration activity levels. EBITDA for full year was NOK 14.6m, compared to negative NOK 175.0m in 2007.

Income tax relates to the tax refund on NCS exploration. The income tax in fourth quarter was NOK 41.2m, down from NOK 76.5m in the same quarter last year. The income tax for 2008 was NOK 130.2m, down from NOK 182.8m in 2007. The income tax mostly related to the acquisition of seismic data and the CSEM processing undertaken, as well as considerable work in preparations for the 20th licensing round on the NCS. The processing of CSEM surveys has been undertaken in the 100% owned subsidiary Rocksource Geotech AS. Rocksource ASA has a unique access to the subsidiary’s proprietary software and processing skills, which are vital to the Group’s exploration programme.

The Group’s working capital at the end of the quarter was NOK 235.1m, down NOK 3.9m from the previous quarter. The equity was NOK 485.7m, up from NOK 467.7m previous quarter, giving the Group an equity ratio of 54.6%, up from 52.8% previous quarter, mostly as a result of paying down on the credit facility.

The Group had a positive cash impact of NOK 58.0m in the quarter. This includes NOK 45.0m drawdown on the new NOK 250.0m bank loan facility. NOK 205.0m is still available to finance exploration on NCS. In addition, NOK 100.0m of the old bank loan facility of NOK 150.0m was paid back when the tax refund of NOK 166.2m, excluding interest, was received in December. Investments in the well program in the US subsidiaries in fourth quarter were NOK 53.1m. Cash balance at the end of the quarter was NOK 269.4m. This is the strongest cash position in the Group’s history. There has been no cash impact or result effect from operations in India.

OPERATIONAL SUMMARY

Licensing rounds
In the APA 2008 Round on NCS, results announced late December, Rocksource was awarded both priority blocks with high equity and operatorship. These awards demonstrate that Rocksource is now regarded as a competent and competitive operator. License PL 506S is located in the Norwegian North Sea, east of the Grane and Jotun Fields. Rocksource holds 50% and operatorship, with Discover Petroleum and Petoro as partners. PL 515 is located east of the Norne Field. Rocksource holds 60% and operatorship, with partners Lotos Exploration & Production and Skagen44.

In the UK 25th round Rocksource was awarded four new licenses. These licenses have been awarded without well commitments, but give the Group excellent opportunities to high-grade prospectivity using CSEM technology and make drilling decisions based on this. Rocksource has 20% equity in Block 3/22 and 3/26 located in the Northern North Sea. Blocks 210/1&2 located in the Erlend basin, North of Shetland, were awarded as a promote license 100% to Rocksource. The fourth award, Block 211/27d, is located south of license P1067 (which includes the Mulle discovery) and was awarded to the P1067 partnership (Rocksource 10%).

Applications for the 20th round were submitted on 7 November 2008 and are expected to be announced in Q2 2009. Rocksource has prepared for this round by acquiring CSEM surveys over a number of prospects prior to selecting the blocks for application. All of the applied blocks have CSEM positive prospects and therefore have a high chance of containing commercial quantities of oil or gas.

Exploration
The major activity in the fourth quarter was preparation for applications in the 20th licensing round and APA 2008 on NCS. In addition, CSEM acquisition on the AGC Profond PSC started in December, and there has been acquisition of seismic data on the Eiktyrne prospect PL 480 in the quarter.

Farm-in India
Earlier in 2008 Rocksource farmed into CY-DWN-2001/1, partnering with ONGC, Oil India and Petrobras. The first two exploration wells of a three well work program commitment were completed without encountering movable hydrocarbons. However, the wells were drilled on locations that did not test the CSEM anomaly considered to be the primary prospectivity on the block. This means that the initial CSEM prospectivity of the block remains intact. Rocksource has evaluated the new well data from the first well, CY-DWN 1, and remains optimistic that there is a low risk CSEM positive prospect, containing considerable volumetric potential, which is yet to be tested by drilling. The company is working with the partners to best target the third well to complete the First Phase Work Programme.
A meeting is scheduled in the partnership for 5 March to sanction the third well and agree the costs for the first two wells. Until governmental approval is obtained, no drilling cost is expensed or any liability related to the two wells drilled will be reflected on the balance sheet.

West Africa
In West Africa, CSEM acquisition on the AGC Profond PSC started in December 2008 with results expected later in 2009. The surveys tested four large structural prospects with potential in excess of 1 billion boe, gross unrisked resources.

Onshore Production
The average production in the quarter was 2,233 barrels of oil equivalents per day (boepd), giving average production for 2008 of 2,355 boepd which compares to 656 boepd in 2007 and the 2008 target of 2,350 boepd.

The first production well in the 2008 campaign started to deliver gas for sale late November and continues to produce at the expected level. The second well was drilled in December, but not completed by end 2008. One exploration well was drilled on a new structure in December and the first production test has been completed. Preliminary result has been in the lower end of expectations. The second exploration well, drilled on a separate structure, reached target depth in February 2009.

Both exploration wells are on new structures and will have to be completed, with processing facilities installed and tied in to the gas delivery network, before the wells can start to produce for sales.

Due to low gas prices, additional wells must be drilled before new facilities are economically viable. Rocksource will start planning for such new facilities based on the test results from the wells and development of the gas prices in 2009.

OUTLOOK

The positive financial results from 2008, which has seen a significant improvement over the last years, are very pleasing given that Rocksource primarily is an exploration company. The development results have resulted in a very healthy balance sheet for the Rocksource group. The Group will continuously monitor the macroeconomic fundaments before taking on additional material commitments.

The Group has low firm capital commitments and current cash position, available NCS loan facility and cash flow covers all commitments. This means that Rocksource has financial and commercial flexibility to continue to grow the company without seeking capital through share issues in the current market.

Rocksource believes that the exploration portfolio that has been established so far will give the company opportunities to drill exploration wells over the next two years of a unique quality. License awards in the 20th round will add further CSEM positive drillable prospects to the portfolio and further add attractive upside to the company’s future outlook.

US activities will remain cash positive at current price levels. We expect an average of 1,700 boepd for 2009 from the existing Drews Landing and New Ace fields. Rocksource is currently evaluating development options for the two explorations wells together with acquisition opportunities to secure further production growth.
Growth options could add an additional 1,000 boepd. The target of increasing production to 5,000 boepd by end 2010 remains, but may be changed if prices do not improve.

In 2007 the Rocksource stock was one of the highest gaining stocks of the E&P companies listed on the Oslo Stock Exchange. In 2008 and in this current financial turbulent market the share price has unfortunately seen a significant drop, and the share price currently trades at levels not seen since the company was established in 2004. In the meantime the company has significantly grown its business with an exciting portfolio that we believe can deliver some very high quality wells in the next years. It is our opinion that this build-up is not reflected at current share price levels, and we believe that the different segments of the business have a significant value potential.

We will continue to focus on the long term development of the company, and will seek to grow the different business areas by seeking partner structures directly into the assets and activities. Growth will be focused on partnering options for further onshore US developments, offshore exploration options, and technology development.



Oslo, 26.2.2009
Rocksource ASA


Trygve Pedersen
CEO

+47 90 09 77 41

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