Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and production company with key interests in the North Falkland Basin, has announced its results for the six months ended 30 June 2020.

Year to date highlights

Operational

• Detailed transaction terms agreed with Navitas Petroleum LP ("Navitas") to farm-in for a 30 per cent interest in the Sea Lion project
• Under the farm-in terms, Rockhopper's costs for the Phase 1 development (not met by external debt) are to be funded by Premier and Navitas from 1 January 2020 to Phase 1 Project Completion (estimated to occur 9-12 months after first oil)*
• In response to recent external events, cost reduction process initiated to scale-back headcount and activity at Sea Lion pending an improvement in the external macro environment
• A core team continues to progress a number of project, commercial and regulatory workstreams including development of Sea Lion's net zero emissions plan

Corporate and financial

• Disposal of Rockhopper Egypt Pty Limited completed in February 2020
• Proceeds of US$4.0 million realised from the sale of the Group's entire shareholding in United Oil & Gas plc in August 2020
• Initiatives implemented to further materially reduce corporate G&A costs - US$2.7 million (H1 2020): a further 30% cost reduction target has been set
• US$222.2 million one-off non-cash impairment, based on a decision, in line with the operator, to write off the historic exploration costs associated with the resources which will not be developed as part of the Sea Lion Phase 1 project
• Cash resources of US$13.4 million as at 1 September 2020 - Board expects the Company to be fully funded through to at least the end of 2022, assuming Sea Lion sanction occurs during that time

Outlook

• Completion of the Navitas farm-in - targeted late Q4 2020
• Outcome awaited in relation to Ombrina Mare arbitration - seeking significant monetary damages

Keith Lough, Chairman of Rockhopper, commented: 
"Notwithstanding the current market volatility, Sea Lion remains a world-class oil resource with the scale and potential to create huge value in the right oil price environment for Rockhopper and the Falklands as a whole.

The proposed farm-out to Navitas validates the highly attractive nature of the asset, enhances the prospects of securing the requisite senior debt to allow sanction (once market conditions improve) and at the same time ensures that Rockhopper is fully funded for all Sea Lion development costs through to project completion.

In these uncertain macroeconomic times, the Board has focused on those areas within our control. Recent initiatives by the Group include the disposal of our Egyptian business and the proposed Sea Lion farm-out to Navitas. These initiatives taken together have raised significant cash proceeds thereby strengthening the Group's balance sheet, materially reducing our exposure to future costs at Sea Lion and at the same time introducing a third party into the Sea Lion project to enhance the prospects of securing funding for the project. As a result, the Group expects to be fully funded through to at least the end of 2022, assuming Sea Lion sanction during that time."

* Excluding licence fees, taxes and project wind down costs

KeyFacts Energy: Rockhopper Exploration Falkland Islands country profile