Rockhopper has been operating offshore the Falkland Islands since 2004. We are a long-term partner of the Falklands and our aim has always been to support the rights of the Falkland Islanders to develop their natural resources for their own economic benefit.
Having completed the technical definition of the Sea Lion project, at the outset of 2020 the priorities for the year ahead included securing senior debt financing for the project, completing the farm down to Navitas Petroleum LP (“Navitas”) and submitting a Field Development Plan for the Sea Lion project to the Falkland Island Government (“FIG”).
However, in response to the unprecedented fall in the oil price experienced in March 2020, a decision was made in early April 2020 to reduce costs and scale-back headcount and activity on the project. Though the rest of the year, a reduced team continued to progress a number of regulatory and commercial workstreams, including the development of Sea Lion’s net zero emissions plan and finalising the terms of the Navitas farm-in.
The recently completed merger of Premier Oil plc (“Premier”) and Chrysaor Holdings Limited (“Chrysoar”) to create Harbour Energy plc (“Harbour”) results in a materially larger and financially strong operator of the Sea Lion project. Navitas has confirmed that it remains committed to the proposed farm-in. However, in order to enable the new management of Harbour to make a firm decision on the Sea Lion project, Rockhopper, Premier and Navitas agreed to extend the exclusivity period for the farm-in to 30 September 2021, While there can be no guarantee around Harbour’s future intensions for Sea Lion, Harbour has publicly stated a desire to pursue international growth with a preference for material operated positions and with capital allocated to those projects which best fits its investment strategy.
Rockhopper’s Board remain confident the Sea Lion project benefits from robust economics (at $65bbl 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 if compares favourably to other investment opportunities which may be available in the current environment.
In March 2021, the Company was please to announce that, following discussions between the joint venture partners, Harbour and FIG, FIG has agreed to extend each of the Group’s North Falkland Basis Petroleum Licences, including the Sea Lion Discovery Area, until 1 November 2022, with no additional licence commitments.