(Alliance News) - Rockhopper Exploration PLC share rose sharply on Wednesday following the announcement that Navitas Petroleum LP will replace Harbour Energy PLC as its partner on the Sea Lion oil project in the Falkland Islands.
Shares in Rockhopper were up 20% at 6.26 pence on Wednesday in London, while shares in Harbour were down 2.3% at 420.44 pence.
Rockhopper, a Salisbury, Wiltshire-based oil and gas explorer said it now has a 35% stake in the Falkland Islands project. In January Rockhopper had a 30% stake.
Navitas said it has increased its stake to 65% from 30% and will replace Harbour Energy as the operator. Harbour Energy divested its licence interests following its decision to exit the Falklands, it formerly held a 40% operating stake in the project.
Rockhopper and Navitas will develop and agree a technical and financing plan to enable the development of the project to achieve first oil at a lower cost.
Further, Rockhopper said that its share of Sea Lion costs, up to a final investment decision, would be funded through a loan from Navitas with interest charged at 8% per year.
In the event of a positive final investment decision, Navitas will then provide an interest free loan to Rockhopper to fund two-thirds of Rockhopper's share of development costs. Funds drawn under the loans will be repaid from 85% of Rockhopper's working interest share of free cash flow.
If a final investment decision has not occurred within five years of completion of the proposed transaction, Rockhopper can elect to remove Navitas from the Falkland Islands petroleum licences by repaying the loan.
Rockhopper said the transaction will provide "greater alignment and simplified commercial arrangements" across the joint venture and will help to provide a "clean" exit for Harbour from the Falklands.
Chief Executive Samuel Moody said: "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. 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.
"This transaction will ensure we have material funding while increasing our retained working interest compared to the previously announced partnership structure with Premier Oil PLC 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."
By Heather Rydings; heatherrydings@alliancenews.com
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Rockhopper (RKH)
Harbour Energy (HBR)