Rockhopper agrees Harbour exit, Navitas farm-in

Rockhopper Exploration announced on Wednesday that it has signed detailed heads of terms with Harbour Energy and Navitas Petroleum for Harbour to exit the Falklands, and for Navitas to farm-in.

The AIM-traded firm said the proposed transaction remained subject to definitive documentation, and completion subject to regulatory approval.

It said Harbour would divest its licence interests in the Falkland Islands, and Rockhopper and Navitas would seek to align working interests across all of their Falkland Islands petroleum licences, with Rockhopper at 35% and Navitas 65%, subject to the necessary consents.

Rockhopper and Navitas would 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, with Navitas to provide loan funding to Rockhopper.

The company said its share of Sea Lion costs from transaction completion up to final investment decision would be funded through a loan from Navitas, with interest charged at 8% per annum.

In the event of a positive final investment decision, Navitas would then provide an interest-free loan to Rockhopper to fund two-thirds of Rockhopper's share of development costs.

Funds drawn under the loans would be repaid from 85% of Rockhopper's working interest share of free cash flow.

In the event that a final investment decision was not made within five years of the transaction completing, Rockhopper could choose to remove Navitas from the Falkland Islands petroleum licences by repaying the pre-final investment decision loan.

Rockhopper said the benefits of the proposed transaction would be greater alignment and simplified commercial arrangements across the joint venture, with the company retaining a higher working interest in the Sea Lion project than under the previous Premier-Navitas transaction announced in January 2020.

It said the proposals continued to materially satisfy Rockhopper's proportion of both pre- and post- final investment decision costs for Sea Lion, adding that it would have access to Navitas' expertise in executing and financing large scale oil field developments.

The proposal would also result in a “clean exit” for Harbour, and had the optionality for a temporary dock facility, with scope to upgrade for Sea Lion development or future decommissioning.

“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,” said chief executive officer Samuel Moody.

“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.”

Moody said the transaction would ensure the company had material funding, while increasing its 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.”

At 1221 GMT, shares in Rockhopper Exploration were up 22.5% at 6.37p.