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LONDON (Alliance News) - Rockhopper Exploration PLC Thursday said it generated its maiden revenue in 2014 and said it is currently negotiating new commercial terms with FTSE-250 Premier Oil PLC concerning their joint venture in the Falkland Islands.
The oil and gas company released figures for the nine months ended December 31, as it moves its accounts to the calendar year from a financial year that previously ended on March 31, 2014.
For the nine month period, Rockhopper reported a pretax loss of USD7.6 million compared to a USD15.7 million loss for the twelve months ended March 31, 2014. The company generated maiden revenue in the nine month period of USD1.9 million.
Rockhopper recorded USD3.4 million in depreciation and impairment against its assets in the period, compared to nil in the 2014 financial year, but Rockhopper reduced administrative expenses to USD10.0 million from USD12.3 million and booked a foreign exchange gain of USD6.5 million compared to a USD2.6 million loss.
At the end of December, the company had a cash balance of USD200 million, and said it is "well positioned" to fund its share of expenditure on the North Falkland exploration campaign and the Sea Lion pre-sanction costs, which together are expected to total USD53 million during 2015. Rockhopper will also spend USD10 million in capital expenditure on its Mediterranean portfolio.
The Sea Lion project in the Falkland Islands is a joint venture with FTSE 250-listed Premier Oil PLC and Falkland Oil and Gas Ltd. Rockhopper said Thursday it has reach a preliminary agreement with Premier to amend the commercial arrangements of the project.
As a result, Premier will carry Rockhopper for Rockhopper's full USD48.0 million exploration cost share for the 2015 drilling campaign. Rockhopper said it will fund its own share of pre-sanction costs for the project, which is currently estimated at a total of USD100 million, of which USD40 million is net to Rockhopper.
Once the project reaches the development stage, Rockhopper will be able to utilise a USD337 million development carry for the initial phase, and a further USD337 million carry for the second phase, it said. Rockhopper said it is also talking about simplifying its existing standby finance arrangements to a "more traditional loan" of up to USD750 million from Premier.
Rockhopper said the amendments are subject to negotiation, but said based on Premier's cost estimates made in November, the total capital expenditure cost of Sea Lion will be around USD1.8 billion, of which USD720 million is net to Rockhopper.
"As such, Rockhopper remains fully funded through a combination of the USD337 million development carry and simplified USD750 million loan from Premier," it said.
In addition Thursday, Rockhopper, Falkland Oil and Gas, and Premier Oil said drilling of the Isobel deep well began on Wednesday. Premier Oil holds a 36% stake in the Isobel well, with Falkland Oil holding a 40% interest and Rockhopper a 24% stake.
In a separate statement Thursday, Rockhopper said it has agreed binding documentation with the Falkland Island government in relation to the tax arising from Rockhopper's farm-out to Premier Oil in 2012.
The tax settlement deed has confirmed that Rockhopper's outstanding tax liability stands at GBP64.4 million, or USD95.7 million, and states it must be paid once the first royalty payment from the Sea Lion project is made. Rockhopper said the first royalty payment is anticipated within the first six months of oil production at the project, due to begin in 2019, assuming the Sea Lion project is sanctioned in the middle of 2016 as planned.
However, Rockhopper said the Falkland Island government may reduce the tax liability if the exploration work is funded by Premier Oil's exploration carry, it said. Rockhopper said the USD48.0 million exploration carry from Premier in 2015 will reduce the tax liability by up to GBP4.7 million, or USD7.0 million.
"We are delighted to have reached this settlement with the Falkland Island government under which we now have much greater certainty both on the quantum and timing of the deferred tax liability," said Rockhopper Chief Executive Sam Moody.
Rockhopper shares were down 0.3% to 65.28 pence on Thursday morning whilst Premier Oil shares were down 0.7% to 148.30p. Falkland Oil shares were down 1.6% to 30.77p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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