Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and production company with key interests in the North Falkland Basin and the Greater Mediterranean region, is pleased to announce that it has completed the acquisition of Beach Petroleum (Egypt) Pty Limited (“Beach Egypt”), announced on 18 April 2016 (the “Acquisition”). Beach Egypt holds a 22% interest in the Abu Sennan concession and a 25% interest in the El Qa’a Plain concession.

Highlights

  • Cash consideration for the Acquisition of US$11.9 million based on a cash effective date of 1 January 2016. No share consideration
  • Average working interest production of approximately 1,100 barrels of oil equivalent per day (based on the 12 month period to 30 June 2016)
  • Recent activity on the Abu Sennan concession includes the successful Al Jahraa SE-1X oil exploration well which intersected 16.4 metres of net pay
    • The Al Jahraa SE-1X well has been cased and completed and is expected to be brought onto production imminently following signature of a new development lease
    • Initial estimates are that the well would add approximately 2 mmboe to the gross 2P reserves recoverable from the Abu Sennan concession
    • In order to complete drilling and fully evaluate the results of the Al Jahraa SE-1X well, an extension of the exploration concession has been granted to November 2016
  • In addition, the ASH‐1X ST2 side track oil development well is currently being drilled with the aim of improving productivity from the ASH field
  • Rockhopper management resource estimates, prior to the Al Jahraa SE-1X well, were 4.5 mmboe (2P plus 2C), giving an implied transaction multiple of US$2.7 per boe. Incorporating the preliminary 2P reserve estimates for the Al Jahraa SE-1X well would reduce the implied transaction multiple to US$2.4 per boe. Rockhopper will undertake its own reserve evaluation, incorporating the results of the Al Jahraa SE-1X well, following completion
  • The Acquisition, when combined with existing production in Italy, should raise the Company’s production to between 1,500 and 1,800 boepd during the remainder of 2016

The previously announced non-binding letter of intent with Dover Petroleum Corporation (“Dover”), an affiliate of an existing partner in Abu Sennan, for the sale by Rockhopper of a 5% interest in Abu Sennan (the “Proposed Dover Transaction”) has lapsed and as a result Rockhopper will retain the entire 22% interest in the Abu Sennan concession.

Separate to the Acquisition, Rockhopper is currently evaluating potential opportunities available through the 2016 Egypt exploration licensing round.

Sam Moody, CEO, commented:

“We are delighted to announce the completion of this strategically important acquisition which materially increases our exposure to low cost, cash generative production assets. Unit cash operating costs at Abu Sennan during H1 2016 were approximately $8 per barrel.

“With the recent exploration success at the Al Jahraa SE-1X well, combined with the increase in estimated 2P reserves, we are delighted to be retaining the entire 22% interest in Abu Sennan.

“In the Falklands, good progress continues to be made in capturing costs savings and reducing the project break-even oil price. We expect to see FEED activity ramp-up through the remainder of 2016.

“Following completion of the Acquisition our balance sheet remains strong and we retain our year end 2016 cash guidance of US$60 – 70 million*.”

* The year-end 2016 preliminary cash estimate is subject to the outcome of a number of material items including exploration drilling cost audits, disputes and insurance claims – the outcomes of which should be known during H2 2016.

Abu Sennan concession

The Abu Sennan concession is located in the Abu Gharadig basin in the Western Desert. The concession was signed in June 2007 with first commercial production achieved during 2012. Unit cash operating costs were approximately US$8 per barrel during H1 2016. The concession remains underexplored with significant exploration and appraisal upside providing opportunities for near-term production additions.

In July 2016, the Al Jahraa SE-1X oil exploration well, located approximately six kilometres southeast of the Al Jahraa-1 discovery well was drilled. The well reached total depth of 3,361 metres in the Bahariya Formation and will shortly be brought onto production. The well intersected 16.4 metres of net pay within the target Abu Roash ‘C’, ‘D’ and ‘E’ Members with additional pay in the secondary Upper Bahariya Formation target. Well results were above expectations.

ASH‐1X ST2 is a side-track of the ASH‐1X ST1 discovery well targeting previously encountered reservoirs in the Alam El‐ Bueib Formation in an up-dip location and aims to improve hydrocarbon productivity from the ASH Field. Sidetracking commenced on 28 July 2016 and is expected to complete during September.

The concession partners are Kuwait Energy (50% and operator) and Dover Investments (28%).

El Qa’a Plain concession

The El Qa’a Plain concession is located on the eastern shore of the Gulf of Suez and contains a number of oil leads identified on existing 2D seismic data. The concession was signed in January 2014. Approximately 470 sq km of 3D seismic plus 35 km of 2D seismic has recently been acquired and is currently being processed. The drilling of an exploration commitment well is planned in 2017. The concession partners are Dana Petroleum (37.5% and operator) and Petroceltic (37.5%).

Financial Information

The consideration for the Acquisition is US$11.9 million and was paid in cash to Beach Energy at completion (less a deposit previously paid to Beach Energy). The consideration was funded from the Company’s existing cash resources. Under the transaction terms, there is no share consideration and Beach Energy retained the economic benefit of the EGPC receivable balance as at 31 December 2015. The EGPC receivable balance as at 15 August 2016 is approximately US$10.1 million, of which US$2.7 million is for the benefit of Rockhopper with the balance for the benefit of Beach Energy.

A post completion working capital adjustment will be agreed shortly to take into account net cash flow attributable to the assets from the cash effective date of 1 January 2016.

For further information, please contact:

Rockhopper Exploration plc

Tel: (via Vigo Communications) – 020 7830 9700
Sam Moody – Chief Executive
Fiona MacAulay – Chief Operating Officer
Stewart MacDonald – Chief Financial Officer

Canaccord Genuity Limited (NOMAD and Joint Broker)

Tel: 020 7523 8000
Henry Fitzgerald-O’Connor

Liberum Capital (Joint Broker)

Tel: 020 3100 2227
Clayton Bush
Neil Elliot

Vigo Communications

Tel: 020 7830 9700
Patrick d’Ancona
Ben Simons

Further information

This announcement is for information only and is not intended to and does not constitute, or form part of any offer to sell or invitation to purchase or subscribe for any securities, or any solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise. This announcement does not constitute a prospectus or a prospectus equivalent document.

Note regarding Rockhopper oil and gas disclosure

This announcement has been approved by Rockhopper’s geological staff who include Fiona MacAulay (Chief Operating Officer), who is a Fellow of the Geological Society of London and a Member of 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. In compiling its resource estimates, Rockhopper has used the definitions and guidelines as set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers.

Glossary

2C – best estimate of contingent resources
2P – proven plus probable
boe – barrels of oil equivalent
boepd – barrels of oil equivalent per day
mmboe – million barrels of oil equivalent
net pay – the portion of reservoir containing hydrocarbons that through the placing of cut offs for certain properties such as porosity, water saturation and volume of shale determine the productive element of the reservoir

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (“MAR”).