TIDMRKH
RNS Number : 5028I
Rockhopper Exploration plc
19 April 2022
19 April 2022
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Sea Lion Update: Signature of Definitive Documentation
&
Other Corporate Updates
Rockhopper Exploration plc (AIM: RKH), the oil and gas
exploration and production company with key interests in the North
Falkland Basin, is pleased to announce that, further to the heads
of terms notified on 8 December 2021, Rockhopper, Harbour Energy
plc ("Harbour") and Navitas Petroleum LP ("Navitas") have signed
legally binding definitive documentation in relation to Harbour
exiting and Navitas entering the North Falkland Basin (the
"Transaction").
The Transaction remains subject to completion pending, inter
alia, regulatory approvals.
Highlights
-- Navitas will acquire Premier Oil Exploration and Production
Limited ("POEPL"), the Company in which Harbour holds all of its
Falkland Islands licences
-- Rockhopper and Navitas will seek to align working interests
across all their North Falkland Basin petroleum licences -
Rockhopper 35% / Navitas 65% - subject to all necessary
consents
-- Rockhopper and Navitas to jointly develop and agree a
technical and financing plan to enable the development of the Sea
Lion project to achieve first oil on a lower cost and expedited
basis post sanction
-- Navitas to provide loan funding to Rockhopper:
o The majority of Rockhopper's share of Sea Lion phase one
related costs from Transaction completion up to Final Investment
Decision ("FID") will be funded through a loan from Navitas with
interest charged at 8% per annum (the "Pre-FID Loan"). Certain
costs, such as licence costs, are excluded
o Subject to a positive FID, Navitas will provide an interest
free loan to Rockhopper to fund two-thirds of Rockhopper's share of
Sea Lion phase one development costs (for any costs not met by
third party debt financing). Certain costs, such as licence costs,
are excluded
o Funds drawn under the loans will be repaid from 85% of
Rockhopper's working interest share of free cash flow
-- In the event that material progress towards FID has not
occurred within five years of completion of the Transaction,
Rockhopper can elect to remove Navitas from the Falkland Islands
petroleum licences (should the licences still be in effect at that
time) by repaying the Pre-FID Loan. Should material progress have
been made, but FID not achieved, then the five year period can be
extended by 12 months and then a further six months if certain
project milestones have been achieved
Benefits of the Transaction
-- Greater alignment and simplified commercial arrangements across the joint venture
-- Rockhopper retains a higher working interest in the Sea Lion project than under the previous Premier-Navitas transaction announced in January 2020
-- The Transaction continues to materially satisfy Rockhopper's
proportion of both pre-FID and post-FID costs for Sea Lion
-- Introduction of a new and committed Operator for Sea Lion -
Sea Lion becomes Navitas' largest operated development asset
-- Access to Navitas' expertise in executing and financing large scale oil field developments
-- Clean exit for Harbour
-- Optionality for Temporary Dock Facility - scope to upgrade for Sea Lion development or future decommissioning
Forward plan for Sea Lion
-- Transaction completion is subject to receipt of various
agreements, consents and approvals by the Falkland Islands
Government ("FIG")
-- Technical work to commence by Rockhopper and Navitas jointly
in relation to a lower-cost, alternative development for Sea Lion
utilising the existing extensive design and engineering work
undertaken for the project in recent years
-- Navitas to become Operator at completion
-- Potential for an additional project partner dependent upon
funding requirements - to be defined through ongoing development
and financing processes - should an additional partner be required,
Rockhopper does not intend to reduce its working interest
-- Navitas committed to strengthen its offshore operating
capability with a focus on safe and efficient developments
Licence Ownership post Transaction completion
The table below shows the revised licence ownership post
completion of the Transaction:
North Falkland Basin
Licence Rockhopper Navitas as Operator
PL003 35% 65%
PL004 35% 65%
PL005 35% 65%
PL0032 35% 65%
PL0033 35% 65%
South Falkland Basin
Rockhopper
Licence as Operator
PL011 100%
PL012 100%
PL014 100%
Further details regarding the Transaction are provided in
Appendix 1
Other corporate updates
On 28 March 2022, the Company received the following update from
the Chairman of the Panel considering the Ombrina Mare
arbitration:
"The Tribunal anticipates that the proceedings will be closed in
the next few weeks."
The Company will update the market once it is informed that
proceedings are closed. Under the International Centre for
Settlement of Investment Disputes rules, the final decision should
then be rendered within a four month period, although there is the
potential for this to be extended to six months at the arbitrators'
request.
Rockhopper continues to believe it has strong prospects of
recovering very significant monetary damages - on the basis of lost
profits - as a result of the Republic of Italy's breaches of the
Energy Charter Treaty.
The Company also provides an update on the current cash balance
which, as at 31 March 2022, was US$3.9 million (unaudited). The
Company will require further funding for working capital and to
achieve Sea Lion FID.
Samuel Moody, CEO, commented:
"We are delighted to have signed definitive documentation to
bring Navitas into the North Falkland Basin. Subject to regulatory
consents, we believe this marks the start of a new exciting chapter
for the Falklands, and for the Sea Lion project in particular.
Navitas' US$1 billion Shenandoah financing in 2021 proved their
ability to fund challenging offshore oil and gas developments.
Given this, coupled with a more positive oil price environment, we
are very excited to have them as new partners and look forward to
pushing ahead with Sea Lion, a world class resource."
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive
Tel. +44 (0) 20 7390 0234 (via Vigo Consulting)
Canaccord Genuity Limited (NOMAD and Joint Broker)
Henry Fitzgerald-O'Connor/James Asensio
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons
Tel. +44 (0) 20 7390 0234
The information contained within this Announcement is deemed by
Rockhopper Exploration plc to constitute inside information as
stipulated under the Market Abuse Regulation (EU) No. 596/2014 as
it forms part of UK law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR").
Appendix
Further details of the Transaction
Navitas will buy all the shares in POEPL, an indirectly held
Harbour subsidiary, through which Harbour holds its rights in the
North Falkland Licences (being PL003, PL004, PL005, PL032, PL033)
(the "Licences"). Rockhopper will additionally transfer sufficient
interests in the Licences such that all those Licences will be held
65% Navitas and 35% Rockhopper, with Navitas as Operator. The
Transaction is subject to certain precedent conditions, the most
important of which are certain consents from FIG which include, but
are not limited to, a two year extension on the Licences being
acquired, Navitas being approved as an Operator and certain tax
clearances from FIG.
About Sea Lion and the North Falkland Basin
Rockhopper was admitted to AIM in 2005 with its principal asset
being prospective oil and gas acreage in the North Falkland Basin.
During 2010 - 2012, Rockhopper, as operator, successfully
evaluated, drilled and appraised its acreage culminating in the
discovery of Sea Lion and its satellite fields. Further exploration
drilling occurred during 2015 and 2016. Sea Lion and its satellite
fields are independently estimated to hold approximately 520 mmbbls
of 2C Contingent Resources.
Rockhopper's Board remain confident the Sea Lion project
benefits from robust economics (at $65/bbl Brent - NPV10@FID
$1.8bn; break-even $42/bbl; life of project free cash flow $4.2bn
with material upside at higher oil prices) and that it compares
favourably to other investment opportunities which may be available
in the current environment.
As disclosed in the Company's unaudited half-year results for
the six months to 30 June 2021, the loss for the period, related to
the Company's Falkland Islands interests, was US$270,000. Reported
Segmental Assets and Liabilities, related to the Company's Falkland
Islands interests, were US$244 million and US$80 million
respectively.
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END
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