RE: RRE think IOG at risk of default5 Mar 2019 12:16
RockRose believes that any Possible Offer would be compelling for IOG shareholders as:
· It would allow shareholders to realise an immediate cash upside on their shareholdings at a significant premium to the current market price
· Any Possible Offer would be wholly funded out of RockRose's existing cash resources
· RockRose considers that it would be challenging for IOG to independently fund the field development capital expenditure of c.£450 million without an industry partner in light of its current market capitalisation - particularly in the current equity market conditions
· Any Possible Offer removes the risk for IOG shareholders of a protracted or unsuccessful farm-out process
· Even in the event of a successful farm-out, RockRose considers it likely that significant funding and dilution risk would remain for IOG shareholders as they sought to fund their remaining share of the assets
· RockRose also expects that it is likely that IOG would have to give up operatorship of the assets as part of any farm-out process thus leaving it with a non-operating minority interest
· RockRose considers it unlikely that cashflows for IOG's shareholders would flow from the assets until 3-4 years from the completion of any farm-out and as a likely non-operational minority interest holder, any such timetable would be largely outside of the control of IOG. As such, RockRose believes that the market would allocate a small percentage of the underlying value of the fields unless and until commercial development is achieved
· In addition, public sources suggest that certain amounts of IOG's debt owed to London Oil and Gas Ltd. ("LO&G") may become payable shortly which RockRose believes would require IOG to secure additional funding to avoid the risk of default
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