A new thought/dimension2 Nov 2022 14:13
Good morning.
I have held Rockhopper shares since 2012 and, like many of you, have been seriously disappointed with the company's actions and performance to date. I would like to add one more consideration not previously examined here concerning the world economic environment facing our investment.
North America holds combined proven fossil fuel reserves greater than the rest of the world combined (including the middle east, Russia and Venezuela). Because, prior to 2016, US oil production was minimal due to unfavorable governmental regulation of the industry, the US was a major consumer, rather than a producer and exporter, of energy.
The 2016 election of Donald Trump altered this calculus dramatically, flooding the world oil market with new US production and depressing substantially world oil prices. Trump's 2020 removal restored the US position as a consumer of energy, and the traditionally high world oil price.
Recent US political developments suggest strongly that the Trump movement is resurgent, with its congressional candidates likely to sweep next week's elections. Trump himself has all but declared that he will be the Republican candidate in 2024 and, if current trends hold, he will likely prevail. Should these prospects come to pass, in 2024 Trump will, unlike his firsts term, hold a sizeable congressional majority favoring US energy production. Such an outcome will all but assure extinction, for the foreseeable future, of world oil prices sufficient to warrant FID development (i.e. >$50.00/bbl). Because of this, it is imperative that Navitas and RKH accomplish first oil no later than the coming 12-18 months lest the entire Falklands oil project be rendered, once again, unprofitable for years.
Based on this, Navitas has every incentive to complete the FI project quickly. Its efficient disposition of administrative precursors (lease extension, FIG approvals, etc.) suggests that it appreciates this urgency, and its history of overcoming production obstacles in challenging environments confirms its capability to accomplish the required expedited production schedule. For all of these reasons, I remain optimistic with regard to our investment.
Finally, I would like to suggest, respectfully, that we recall our original purpose in investing in RKH: to pump oil. While the RoI matter is both interesting and disappointing, it was never the basis of our investment decision. That award is an ancillary matter bearing the prospect of a modest bonus to the real returns to which we all still aspire. For this reason, I hope that we can resume more discussion on production and operations.
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