Malcy’s Blog: Flash blog: Rockhopper

A flash blog today as I’m in London on ODI business…

Rockhopper Exploration

Rockhopper has announced the publication of an independent resource evaluation conducted by Netherland, Sewell & Associates, Inc. (“NSAI”) on behalf of Rockhopper.

Key information:

–      Unrisked gross contingent resources 2C 917 mmbbls

o  321 mmbbls net to Rockhopper

–      Unrisked gross contingent resources development pending 2C 727 mmbbls

o  255 mmbbls net to Rockhopper

–      Value of the Rockhopper net 2C 255mmbbls 35% working interest in Sea Lion is US$1.8bn

o  net of royalties and taxes at an oil price of US$70 Brent

Rockhopper holds a 35% working interest in Sea Lion and associated NFB licences and benefits from various loans from Navitas Petroleum (“Navitas”) in relation to the development, which have been detailed in previous announcements.

Highlights of NSAI independent resource evaluation (oil only):

*Totals may not sum precisely due to rounding adjustments

*Totals may not sum precisely due to rounding adjustments

The development scenario assumed in the report underlying the NPV calculation aligns with the previously disclosed multi-phase 2 FPSO scheme comprising the Northern Development Area phases 1, 2 & 3 along with the Central Development Area phases 1 & 2.

Navitas continues to estimate Capex to first oil on phase 1 of cUS$1.4 bn and in this regard has entered into a number of agreements including an MOU for a FPSO which is currently operating in UK offshore waters, along with various contracts for critical path long lead items including provision of subsea equipment and flexible flowlines.

Additional notes

In a change to previous naming conventions, the entirety of the oil deposits in licences PL032 and PL004 are now referred to as Sea Lion.  Previously, Rockhopper had referred to Sea Lion separately from the Isobel / Elaine accumulation; that is no longer the case.

The difference of 3 mmbbls between the 2C development pending 727 mmbbls contained in the Rockhopper NSAI report and the 2C development pending 730 mmbbls in the Navitas NSAI report is a result of running the reports at different oil price decks resulting in a small change to the economic cut off for the field.  All of the underlying data and other assumptions are consistent.

NSAI have also provided estimates of gross and working interest of i) Contingent Gas Resources, and ii) Prospective Oil and Gas Resources however the Company has not reproduced them in this summary as there is no plan for their development in place. NSAI’s report also includes economic analysis with a low and high oil price sensitivity.

A full copy of the report will be available later today on the Rockhopper’s website: https://rockhopperexploration.co.uk/

Sam Moody, Chief Executive Officer of Rockhopper, commented:

“We are delighted that NSAI have been able to confirm the best estimate potential value of Rockhopper’s 35% working interest in Sea Lion is US$1.8bn net of taxes at an oil price of US$70. 

“We continue to work with the Operator to unlock this potential value for all stakeholders.”

This is a really good analysis from NSAI and gives Sea Lion another strong push in the right direction. The best news is that a great deal of the 2c resource number moves to 3P on FID for the project. Navitas have been very positive lately and the FID sounds imminent so more good news. 

Navitas has signed an MOU with an FPSO currently in UKCS waters and rumoured to the the Aoka Mizu currently at Lancaster which we know all about. And Navitas have the mammoth Shenandoah field in the Gulf of Mexico due to come onstream ‘mid 2025’. This will give huge funding to Navitas ahead of Sea Lion and of course Rockhopper benefits directly.

Unsuccessful Arbitration Annulment Outcome

The insurance policy ensures that, in the event that the Italian Republic succeeds in having the entire Award annulled or in the event of partial annulment, the combination of the Tranche 2 payment and the insurance payout shall entitle Rockhopper to a total no less than €31 million.

The policy was placed via an FCA-registered specialist insurance brokerage. The policy was underwritten by a specialist underwriting agency and subscribed to by a number of A-rated insurance carriers and syndicates.

Sam Moody, Chief Executive Officer of Rockhopper Exploration, commented:

“Obviously we are disappointed with this outcome.  Having already received the Tranche 1 monetisation payment our balance sheet remains robust and we intend to claim under the insurance policy.  With a lead lending bank appointed, we now move to finalising the funding for Sea Lion FID which has the potential to unlock very significant value as confirmed in our recently published resource evaluation.”