TIDMRKH
RNS Number : 9149Y
Rockhopper Exploration plc
07 January 2020
7 January 2020
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Heads of Terms with Navitas Petroleum to farm-in to the Sea Lion
project and associated amendments to existing agreements with
Premier Oil
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 Rockhopper and Premier
Oil Exploration and Production Limited ("Premier") have signed a
detailed Heads of Terms with Navitas Petroleum LP ("Navitas") to
farm in for a 30 per cent interest in the Sea Lion project (the
"Transaction"). In addition, Rockhopper and Premier have agreed
certain amendments to their existing commercial arrangements.
Highlights
-- Working interests aligned across the Sea Lion licences PL032,
PL004b and PL004c: Premier 40% (Operator); Rockhopper 30%; Navitas
30%
-- Adds additional strength to the Sea Lion joint venture which
Rockhopper believes will increase the likelihood of a successful
senior debt project financing for the Sea Lion Phase 1
development
-- Rockhopper's costs for the Phase 1 development (not met by
senior debt) to be met by a combination of carry and loans from
Premier and Navitas from 1 January 2020 to Phase 1 Project
Completion (estimated to occur 9-12 months after first oil)
-- Greater alignment and simplified commercial arrangements across the joint venture
-- Rockhopper maintains material share of Phase 1 project NPV, a
significant 30% interest in Phase 2 Sea Lion development, and
additional upside from the Isobel-Elaine area (PL004a)
-- Contingent consideration payable to Rockhopper by Premier and
Navitas of up to US$48 million related to future phases of
development in the North Falkland Basin
-- Finalisation of a Sale and Purchase Agreement is expected
during Q1 2020 ("SPA Signing") with completion subject to
satisfaction of certain conditions including regulatory approval,
expected in Q2 2020 ("Farm-in Completion")
Samuel Moody, CEO of Rockhopper, commented:-
"This is a very important milestone both for the Sea Lion
project as a whole and Rockhopper itself. We will be delighted to
welcome Navitas to the Sea Lion project and regard their joining as
an important catalyst as well as industry endorsement of Sea Lion's
scale (independently audited 2C resources of c.520 mmbbls) and
potential (NPV10 at first oil c.$4bn**). Navitas add valuable
offshore experience from their Gulf of Mexico projects and hugely
successful prior personal involvement in Israel's offshore sector.
They also materially strengthen and enhance the prospects for a
successful project financing, as clearly demonstrated by their
success in funding other similar developments elsewhere in the
world and with proven access to capital markets.
"Furthermore, we are obviously very pleased to announce that all
of our project costs are being covered from the start of 2020 and
in the event of a successful sanction that they will continue to be
covered through to Phase 1 Project Completion (estimated 9 - 12
months after first oil) while maintaining a very material 30% stake
in the Sea Lion project along with additional upside in the PL004a
licence containing the Isobel discovery. This transaction will
therefore materially strengthen the Company financially.
"Discussions are continuing to progress with senior lenders
regarding project financing and should be positively supported by
the Transaction. We will update the market on the progress of those
discussions in due course.
"Our arrangements with Navitas are at a detailed non-binding
Heads of Terms stage and we look forward to working with them to
put in place formal binding documentation in the coming months. In
the intervening period, we are pleased that Premier has separately
agreed funding arrangements for all of Rockhopper's costs on Sea
Lion."
Details of the Heads of Terms
Working interests
Working interest in Sea Lion licences PL032, PL004b and PL004c
to be aligned: Premier 40% (Operator); Rockhopper 30%; Navitas
30%.
Phase 1 funding
The joint venture will continue to pursue a senior debt project
finance (or similar) to fund the Phase 1 development of Sea
Lion.
Existing funding arrangements between Rockhopper and Premier are
to be replaced such that Rockhopper is funded for all pre- and
post-sanction costs not met by senior debt by Premier and/or
Navitas through a combination of carry and loans.
Premier will carry all of Rockhopper's costs from 1 January 2020
to 1 March 2020 (being the effective date for the Transaction) and
on a bridging basis pending completion of the Transaction (the
"Carry").
Premier and Navitas will fund all of Rockhopper's project
development costs (excluding production area licence fees and
taxes) from 1 March 2020 to Phase 1 Project Completion (estimated
to occur 9-12 months after first oil) through an interest free loan
("Loan"). Funds drawn under the Loan will be repaid from 85% of
Rockhopper's working interest share of free cash flow.
An additional standby loan ("Standby Loan") will be available
from Premier to cover Rockhopper's share of production area licence
fees and any Capital Gains Tax liability. This new Standby Loan
will attract interest at a rate of 15% per annum and will be repaid
from Rockhopper's residual share of Phase 1 free cash flow.
Phase 2 consideration and funding
Existing funding arrangements between Rockhopper and Premier
will be replaced such that, subject to certain conditions,
Rockhopper will receive contingent payments of up to US$36 million
from Premier and Navitas' share of Phase 2 cash flows, linked to
the achievement of certain production and oil price milestones.
PL004a - Isobel Elaine
Rockhopper has granted Navitas and Premier an option to acquire
working interests in PL004a (30% and 4% respectively) to align
working interests across PL032 and PL004. The option must be
exercised by Navitas within 8 years of completion of the
Transaction, or the date of Phase 2 FID ("Financial Investment
Decision"). In the event the option is exercised and subject to
certain conditions, Rockhopper will receive contingent payments of
up to US$12 million from Navitas' and Premier's share of Phase 3
cash flows, linked to the achievement of certain production and oil
price milestones.
Area of Mutual Interest Agreement ("AMI")
It is intended that Navitas will become a party to the AMI
entered into between Rockhopper and Premier in 2012 in relation to
future joint exploration activities in the Falkland Islands
area.
Conditions and withdrawal right
Conditions to SPA Signing (target Q1 2020):
-- Completion of Navitas due diligence
-- Agreement of Definitive Transaction Documentation and
associated Phase 1 project documents (including but not limited to
Joint Operating Agreement, joint venture Financing Agreement, joint
venture Marketing Agreement, Decommissioning Security Agreement,
Field Security Agreement)
Conditions to closing of Transaction ("Farm-in Completion")
(target Q2 2020):
-- Falkland Islands Government approval for the transaction
Following Farm-in Completion, but prior to 1 April 2021, Navitas
can exercise a withdrawal right, subject to certain conditions
including in the event that Phase 1 FID has not occurred.
In the event that Navitas' board has failed to take a positive
Phase 1 FID by 1 April 2021, or otherwise fails to secure its share
of funding, Premier may elect to remove Navitas.
In the event that either Navitas elects to withdraw or Premier
elects to remove Navitas, Premier will have the option to step into
the Navitas arrangements, or, in the very unlikely event, implement
a wind down of the project which could ultimately result in
relinquishment of the acreage. In either event, Rockhopper is
liable for its share of project wind down costs with no funding
support from Premier and/or Navitas and if Premier does opt to wind
down the project then Rockhopper has the right to acquire Premier's
interest and become 100% working interest licence holder and
Operator of licences PL032, PL004a, b and c, subject to all
necessary regulatory approvals.
Notes:
Premier's obligation to fund Rockhopper prior to Farm-in
Completion, either through the carry or through the Loan
thereafter, is a legally binding obligation which will only
terminate in the event that (1) either Navitas elects to withdraw
or Premier elects to remove Navitas, and (2) Premier elects not to
step into the Navitas arrangements.
** Rockhopper management estimate, 100% of project, post
finance, post tax, $75 Brent at 2020 escalated at 2.5% p.a.
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive Officer
Stewart MacDonald - Chief Financial Officer
Tel. +44 (0) 20 7390 0234 (via Vigo Communications)
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 Communications
Patrick d'Ancona/Ben Simons
Tel. +44 (0) 20 7390 0234
About Navitas
Navitas Petroleum LP ("Navitas") is a publicly traded
(TASE:NVPT.L) North America focused oil and gas exploration and
production partnership.
Navitas has an established asset portfolio, including:
conventional onshore production (Neches field and Denbury assets
(latter closing in March 2020)), robust offshore production
(Buckskin project), development stage assets with a clear path to
first production (Shenandoah project) and high-impact exploration
prospects (Block 7, offshore Canada). Navitas has over 225 million
barrels of 2P/2C resources and an existing work programme in place
to increase production to over 40,000 bbls/d by 2023. Navitas' 2020
EBITDA is estimated to be in the region of $60 million and
projected to increase to approximately $540 million by 2024.
Navitas' Chairman is Mr Gideon Tadmor, one of the founders and
major drivers behind the success of the Eastern Mediterranean oil
and gas sector. As the CEO and Chairman of Delek Group's upstream
companies, Mr Tadmor led the efforts of world class discoveries
such as the 11 TCF Tamar field and the 22 TCF Leviathan field.
Note regarding Rockhopper oil and gas disclosure
This announcement has been approved by Rockhopper's geological
staff which includes Lucy Williams (Geoscience Manager) who is a
Chartered Geologist, a Fellow of the Geological Society of London
and a Member of both the Petroleum Exploration Society of Great
Britain and American Association of Petroleum Geologists, with over
25 years of experience in petroleum exploration and management and
who is the qualified person as defined in the Guidance Note for
Mining, Oil and Gas Companies issued by the London Stock Exchange
in respect of AIM companies.
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END
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