Rockhopper Exploration plc, the oil and gas exploration and production company with key interests in the North Falkland Basin, announces that Rockhopper and Premier Oil Exploration and Production Limited have signed a detailed Heads of Terms with Navitas Petroleum LP to farm in for a 30 per cent interest in the Sea Lion project. In addition, Rockhopper and Premier have agreed certain amendments to their existing commercial arrangements.

Sea Lion location (map source: KeyFacts Energy)

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."

Working interests

Working interest in Sea Lion licences PL032, PL004b and PL004c to be aligned: Premier 40% (Operator); Rockhopper 30%; Navitas 30%.

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.

Link to Falkland Islands country company profiles:   Rockhopper   l   Premier   l   Navigas