Ombrina Mare Insurance and disposal of Italian assets

Rockhopper Exploration has put in place an insurance policy to cover the event that the Italian Republic succeeds in its attempt to have the Rockhopper Ombrina Mare Arbitration Award annulled and has also signed a share purchase agreement ("SPA") with Zodiac Energy to exit its other Italian assets.

Ombrina Mare Insurance

Whilst both the Company and its advisors remain confident of its position it has decided, in line with normal market practice, that insuring to protect shareholders against loss resulting from an annulment of the Award to be the most prudent course of action.

The insurance policy will ensure 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 payment1 and the insurance payout shall entitle Rockhopper to a total no less than €31 million.

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

The total cost of the policy, including applicable taxes and underwriting fees, is €4 million. Following placing the policy, Rockhopper's cash balance will be approximately $24 million.

Italian Disposal

The SPA is for the sale of Rockhopper Civita Limited (a wholly owned subsidiary of Rockhopper Exploration Plc). Rockhopper Civita Limited holds all Rockhopper's Italian assets and liabilities with the exception of the Ombrina Mare Arbitration Award.

Under the terms of the SPA consideration, Rockhopper will pay Zodiac in two instalments, with a retained upside participation to Rockhopper in two undeveloped licences.

The first instalment of €3 million is payable to Zodiac on satisfaction of two precedent conditions ("Completion"), those being receipt of all necessary regulatory consents in Italy, as well as regulatory consents in the Falklands.

The second instalment of €2.5 million is payable to Zodiac on or after Completion, assuming the satisfaction of two additional conditions, those being successfully defending the Italian Republic's annulment application and receiving a minimum of €10 million from the Award monetisation (the Tranche 2 payment under the Award monetisation is €65 million, due on a successful defence of the annulment application, but can be reduced in the event of a partial annulment.

In addition, assuming the second instalment is payable, Rockhopper will retain a royalty on two assets within the Rockhopper Civita Limited portfolio, those being AC19 (a northern Adriatic licence with two gas discoveries and an additional adjacent prospect) and Serra San Bernado (which contains the Monte Grosso exploration prospect).

The royalties will take the form of either 10% of the revenues of the interests acquired by Zodiac or, should they realise value by on-selling the licences acquired, 25% of the gross proceeds received for the part sold.

The transaction is subject to both Italian and Falkland Island Government regulatory approval, the timing of which is uncertain but is anticipated within 12 months.

Following completion of the transaction, Rockhopper will have no remaining liabilities relating to its Italian licences, its P&A liability will have been reduced by some $15 million (unaudited as at 30 June 2024) and its annual cash burn reduced by approximately €500,000 - €750,000. In the year ended 31 December 2023, Rockhopper Civita contributed a $1.6 million loss to the Group.

Samuel Moody, CEO commented:
"The steps announced today provide us with further strategic and commercial clarity as we continue to focus on progressing the Sea Lion development. The combination of the insurance policy and transaction with Zodiac allows us to refocus the Company on Sea Lion by further reducing both short and long term costs, reducing risk, protecting our balance sheet whilst maintaining some potential upside in two Italian licences."

KeyFacts Energy: Rockhopper Exploration Italy country profile