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I do not see an equity fund raise until after the award is announced. When will that be?; maybe 3 months is my guess.
IF the ICSID announce we have won a substantial sum the I expect a fund raise shortly thereafter on the back of an elevated sp.
I do not expect the Italians to rush to write a cheque; BUT if they did, an issuance of equity might be avoided.
IF we lose; RKH are in a VERY bad place. Does not bare thinking about.
The dock issue was also covered in this presentation dated 30th September;
https://rockhopperexploration.co.uk/wp-content/uploads/2021/10/RKH-Retail-investor-presentation-September-2021-Final.pdf
Certain project wind down and decommissioning costs shared between Rockhopper and Harbour on a 40:60 basis
? The main item relates to a temporary dock facility in Stanley installed for the 2014 drilling campaign
? The exact cost and timing of this are yet to be determined
Good afternoon Marunam2
The possible large bill for decom of the dock was raised by Sam in his oral presentation. I previously read the March communication from Sam you reposted.
Maybe events have moved on and retaining the dock has become less likely after the FIG published their ambitious plans ;
hTTps://en.mercopress.com/2021/09/15/new-falklands-port-gets-green-light-to-proceed-as-part-of-ambitious-infrastructure-investment-program
(Merco press also have an article today on Rkh and Sealion that adds nothing new)
Thanks for the links and I note Harbours reassuring words on recovering awards. however; the first words are significant;
" Enforcement against a sovereign State is challenging..."
'Challenging' I think means , amongst other things ; time consuming . Time is not on our side. We really need to avoid a fund raise by issuance of more equity , if at all possible.
An early settlement on the award front might spare us dilution BUT I think we need to negotiate with the Italians an early payout , IF we have won, to that end. May require a bit of give on our part.
Good afternoon Nastynick
You wrote;
"What do we need the “cash now” for?
Surely we just need to keep the lights on?"
Rkh has just $7.1m cash at end of June. That means we may have just $6m NOW.
The very basic 'lights on' costs appear to be circa $4m p.a.
We have a year at most before we need a cash injection; might be much sooner as Sam alluded to a further FIG tax bill and a large decom, bill for the dock.
That's ignoring the ticking time bomb that is CIVITA where decom costs match or exceed what little cash we have left. That MIGHT go 'bang' in 2022. I really hope it can be put off longer.
Then we have the issue of running the business to first oil. My estimation of the most wildly optimistic time scale is 4 years if Navitas gets their skates on AND they carry us for all further SL predevelopment costs.
RKH needs a cash injection ; a big one , PDQ. Nothing less than $50m imo; I would be happier with $75m.
Good afternoon Surfit.
I doubt anyone would loan on the sole basis of an arbitration award. Could the 'debt' be sold on?; would entail a huge discount.
Best option by far is to agree a discounted settlement with the Italians after a 'win'.
Its even crossed my mind ; that , even at this very late hour, that the Italians might make a cheeky offer of cash to settle , before the award is made; before the ICSID actual determines the merits. and publishes their much awaited view.
That could be helpful to all .
Lets' play with the numbers. If our claim was for 275 million Euros PLUS interest and that equates to the elsewhere reported $325 Million USD then 50% would suggest a possible $162.5m USD .
Looks potentially transformational, BUT, the problem will be actually getting to the Italians to pay up and in a relatively prompt way.
RKh and our lawyers can not sit on their laurels IF we have won; they need to aggressively pursue payment.
To be frank; I would be VERY pleasantly surprised if we got paid in time to avoid a fund raise.
It might be a smarter move to pragmatically come to discounted terms with the Italians for an early settlement and avoid potentially years of other legal actions to seize assets..
They need to talk and be sensible.
I liked these comments in the Tethyan article I linked to;
"Conclusion
The High Court’s decision further evidences England’s reputation as an arbitration-friendly jurisdiction, whose courts are reluctant to interfere with arbitral awards or to indulge parties’ attempts to avoid and overturn adverse decisions of arbitral tribunals."
Our claim is for 275 million EUROS PLUS interest. Elsewhere reported as $325 m USD (pretty much the same total)
The case; Tethyan Copper Company Pty Limited v. Islamic Republic of ****stan, ICSID Case No. ARB/12/1 resulted in a gigantic award; $5.9 BILLION.
Some recent comment on proceedings there; hTTps://www.clearygottlieb.com/news-and-insights/publication-listing/corruption-defence-to-challenge-tribunals-jurisdiction-rejected
I tend to think that , if we win, we will win pretty big , with a significant lost profit element as in Tethyan case; fingers crossed!
"How much do Rockhopper need to be awarded.."
Rkh had decommissioning liabilities totalling $13.561 million .
BUT, it is uncertain when the liabilities will become issues.
I have posted before the comments made in 2017 that suggested there was 'five or so years' left if production at CIVITA.
Its possible that neither of our TWO tiny producing assets will require such large decom expense in 2022.
However ;the decom looks very likely to impact in the 4 years (my estimate) to first oil.
At the moment we appear to be spending circa $4 m per annum for basic functions.
The unknowns are the additional FIG tax bill mentioned in the results and the decom of the dock which Sam suggested was potentially significantly big.
I think that $50m ought to cover all costs until first oil IF we have a carry on further SL predevelopment costs.
Where would our share price be IF/when Navitas signals Sea Lion is definitely going ahead.?
IF RKH can put off gas asset issues and survive ( without a fund raise) until a SL project sanction; then any equity fund raise would be from a substantially higher SP ; thus limiting any dilution.
OM news will be first. Will our management want to rush a fund raise ; or await even more uplifting news from Navitas?
Loans and Bonds could become an option IF SL's development was 100% proceeding. Just wonder how supportive they may want to be.
We will have to see how Navitas plan to finance development and IF a third party joins. They have proved themselves on the finance front with their Shenandoah development.
I agree with the view ; Rkh is going to be worth anything between 0p and 50p , one day.
Good afternoon Godders99
You wrote; " It is an absolute certainty that we will need to raise funds via a huge equity dilution"
While its highly probable there will be a fund raise in 2022; I do not expect that to happen very soon. IF RKH wanted to fund raise via the issue of equity ; you would not want to do it where the share is today .
I am convinced that our management will await the result of an OM award which, IF in our favour will seriously lift the SP, imo.
A 50 million Euro award (after lawyers deductions) is worth circa 10p a share; could be larger. There is the question of payment collection. However; I am sure the SP would react rather positively lessening the impact of a fund raise via equity.
Although almost certain to be an equity fund raise there are other outside; more remote avenues. IF Navitas , or an additional partner wanted to pursue SL and the project is sanctioned by YE 2022 as Moody hopes; then loans may come into play from our partner/s to cover our admin.
If we had a certain route to SL's development could bonds come into play?
HUR managed to raise via bonds at 7.5%; very impressive.
Its all about OM award .
Many thanks to Paul Drayton for his research.
We were bled dry by PMO whose history shows now that their controls of project finance was very poor.
All this could have been avoided with a different structured farm-out that covered RKH for ALL predevelopment costs; even if it meant we had just 30% unencumbered instead of 40% and being at the mercy of PMO's financial 'skills'.
I am unhappy with the way pre development spending ballooned. In 2017 Sealion pre-development costs were $6.7m. In 2018 $11m. But in 2019 they leapt massively to $19.3m AND a nasty $10m EXTRA hill appeared in the accounts.
Looks like spending was out of control. PMO's handling of the costs looks woeful . The giant increase in expenditure caught me out as it had a huge impact on Rkh ability to last to any 1st oil AND necessitated the sale of our Egyptian assets.
I think there is a case for a forensic audit as there appears to be an arguable case PMO were over billing; costs should not have shot up like that.
The problem was that we only had TWO bids and both were asked ,and refused, a time clause.
That really does not leave much option; either sign a farm out with no time clause, OR just not farm out at all.
Its all history now and we are lucky to have Navitas apparently still 'keen' because without them we would be toast, imo.
I just do not see a queue of others waiting.
I think we have more than enough proven volumes in the NFB to last decades. With the vey fairest of winds we could not expect first oil in the NFB for 4 years. That means RKH needs a serious cash injection to last that long.
Lets assume Rkh can sort a deal where ALL SL costs are covered until first oil; just running the business as it now stands costs circa $4m per annum. Then we have the legacy gas assets with their looming decom / divestment costs and the dock issue.
Why do they need to pay through the nose to get rid of that .?. Surely that has useful purpose going forward?
These numbers highlight how important it is for us to receive a significant cash award.
As for the SFB; I think it will never be revisited. From memory I believe NFB drills in previous campaigns costs circa $50m BUT SFB were about $110 m a pop.
We have an abundance of shallower water , less gaseous reserves, in the NFB to see most of us into the grave.
PMO came up with many plans for development which seemed to get bigger and bigger as years went by but never got off the drawing board.
The last plan that just missed the boat, as we all know; involved 29 wells targeting 250 million barrels costing $1.8 Billion.
I think in the earlier days PMO had a smaller plan that had 14 wells targeting 160 million barrels.
How much would a well cost today.? As part of a series campaign ; my wild guess is $40 m each. Then of course there's lots of infrastructure issues and a FPSO. If we could target 160 m barrels for $900 to 1 billion; I think that's very attractive and doable IF Navitas stay on board.
I can not remember where I read it but; I recall it being published that these sort of cases cost as much as $8m to pursue. That's a a big sum to gamble on an 'iffy' case.
I hope we get the award out by Xmas.
Good afternoon longtermthinker.
Thank you for your detailed report which is somewhat uplifting.
The OM award is really tricky to judge. I note that triking had words with management;
and its also good afternoon to triking
triking wrote;
"..when I asked about the OM award yesterday I felt they were fairly confident of winning. But he did stress it will probably be rounded down."
I wonder if that is a reference to the opinion offered by some that RKH's award could be halved as they knowingly bought into a blighted asset.?
See this opinion here;
hTTp://arbitrationblog.kluwerarbitration.com/2018/01/27/rockhopper-vs-italy-weighing-legitimate-expectations-investors-due-diligence-ma-deals/
Note the dissenting ( no discount) view posted in the comments by Tony Silverman.
The comment you received triking does not sound like its referring to a pragmatic negotiation with Italy after an award in our favour resulting in agreed quick ,smaller payout.
It could be a market conditions adjustment as LTT 's report , imo, hints at? Correct me if I am wrong LTT.
The claim is for 275 Million Euros PLUS interest. Elsewhere published figure is $325 Million USD .
If we are VERY lucky we MIGHT get a nice Christmas award. Then the fun & games begins; getting hold of the ready cash.
Its nice to see Sam is optimistic about collecting a cash award.
Good evening Godders99
you wrote ".....we as shareholders are being wiped out"
I do not pull my punches and say it as I see it. There remains substantial risks here with Rkh on the hook for expenditure they have insufficient funds to cover UNLESS they receive a substantial injection of capital next year.
I note that MOODY has , today, conceded to an investor at the meeting that an equity fund raise was likely next year. I think that most have come to recognise that.
The OM award could still seriously help RKH's finances IF a cash award arrives relatively PDQ. I was dismayed at the late curve ball ; the Italians presenting the Court of Justice of the European Union decision.
A small positive I took from Sam's presentation was that the parties were given only limited time to present their argument and it was limited to 5 pages each. I got the impression; maybe wrong; that the tribunal might just be thinking we are going again over old ground previously argued out in Rockhopper's favour.
I do think that getting paid an award (IF we are declared winners) will be challenging. To get payment in a timely manner it might pay to negotiate a lesser settlement figure to avoid years of litigation trying to seize Italian assets and then liquidating them.
On balance; I think an equity fund raise will be necessitated because OM cash is unlikely to arrive quick ( again; IF we have won)