Sea Lion & Other Corporate Updates
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
|
Licence
|
Rockhopper 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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