8 December 2021
Rockhopper Exploration plc
(“Rockhopper” or the “Company”)
Heads of Terms with Harbour to exit the Falklands and Navitas to farm-in
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, Harbour Energy plc (“Harbour”) and Navitas Petroleum LP (“Navitas”) have signed detailed heads of terms for Harbour to exit the Falklands and for Navitas to farm-in. The proposed transaction remains subject to definitive documentation and completion subject to, inter alia, regulatory approval.
· Harbour will divest its licence interests in the Falkland Islands, and Rockhopper and Navitas will seek to align working interests across all their Falkland Islands petroleum licences – Rockhopper 35%, Navitas 65%, subject to necessary consents
· Rockhopper and Navitas to jointly develop and agree a technical and financing plan to enable the development of the project to achieve first oil on a lower cost and expedited basis
· Navitas to provide loan funding to Rockhopper:
o Rockhopper’s share of Sea Lion 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”)
o In the event of a positive FID, Navitas will provide an interest free loan to Rockhopper to fund two-thirds of Rockhopper’s share of development costs (for any costs not met by third party debt financing)
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 FID has not occurred within five years of completion of the proposed 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
Benefits of the proposed 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 proposals continue to materially satisfy Rockhopper’s proportion of both pre-FID and post-FID costs for Sea Lion
· 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
· 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
· Finalisation of definitive documentation expected in Q1 2022 with completion subject to satisfaction of certain conditions including regulatory approval
· 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
o Should an additional partner be required, Rockhopper does not intend to reduce its working interest
· Navitas intends to strengthen its offshore operating capability with a focus on safe and efficient developments
Samuel Moody, CEO, commented:
“We are delighted to be able to announce what we believe is the start of a new chapter in the potential development of Sea Lion. The new Rockhopper-Navitas joint venture will be fully aligned and committed to bringing Sea Lion to production.
We at Rockhopper have huge historic and detailed technical knowledge of the asset and experience of operating in the Islands, while Navitas brings significant proven capital raising expertise and ability as well as development experience. This transaction will ensure we have material funding while increasing our retained working interest compared to the previously announced partnership structure with Premier and Navitas. The importance of Sea Lion in the Navitas portfolio is, in my mind, without question a further positive as we both seek to unlock its underlying value.
We look forward to entering into fully binding documentation in the first quarter of next year.”
Keith Lough, Chairman, commented:
“We look forward to welcoming Navitas to the Falklands and thank Harbour not only for coming to a clear decision on Sea Lion but for their work over the recent months in securing a deal which allows a clean exit for them and an exciting future for Sea Lion, Rockhopper and Navitas.”
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 mmbbl of 2C Contingent Resources.
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.
Sam Moody – Chief Executive
Stewart MacDonald – Chief Financial Officer>
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)
Tel. +44 (0) 20 7418 8900>
Patrick d’Ancona/Ben Simons
Tel. +44 (0) 20 7390 0234
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”).