Rockhopper Exploration to focus on Sea Lion financing in 2017

Rockhopper Exploration increased its output in 2016 as it continued to progress on developing Sea Lion, its main project offshore the Falkland Islands while increasing its footprint in the Mediterranean.

The outfit increased its economic production to 1,350 barrels of oil equivalent per day last year, the company said in a statement.

Together with cost savings achieved throughout the year that, the company said, would help secure the long-term sustainability of Rockhopper as it shifted its focus in 2017 to obtaining the necessary financing to progress with Sea Lion, alongside its partner Premier.

Management also expressed its ambition of continuing to grow in the Greater Mediterranean region following the purchase of the non-operated production and exploration assets of Beach Energy

In parallel, in 2016 it consolidated its North Falkland Basin acreage position via its merger with Falkland Oil&Gas.

Rockhopper also noted the improved business climate in the Falklands region following the election of the new Argentine president.

Cash operating costs in the Mediterranean were reduced to $14 per barrel of oil equivalent in 2016, while the 'break-even' price of oil for its project Sea Lion project, offshore Falklands, was put at $45 a barrel.

During the reporting period, Front End Engineering Design contracts for Phase 1 of Sea Lion were also awarded and an independent resource audit confirmed Sea Lion had 517mm barrels of gross (2C) oil resources.

At year-end, the firm's liquidity position stood at $81.0m (£64.8m) and the company was debt free.

Furthermore, existing production was expected to largely cover general and administrative costs going forward as the outfit continued to make progress on bringing its Sea Lion field online.

After period-end, Rockhopper also entered into arbitration with the Republic of Italy after the country's government decided not to award it a Production Concession for the Ombrina Mare field, which it believes puts Italy in breach of the Energy Charter Treaty.

"Based on legal and expert opinions, Rockhopper has been advised that it has strong prospects of recovering very significant monetary damages as a result of the Republic of Italy’s breaches of the ECT. Damages would be sought on the basis of lost profits," the company said in a statement on 23 March.

Non-recourse financing for the arbitration process was also obtained from a specialised funder.