Member Info for cyan2

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)

The half years results are an awful read. Our gas assets are a ticking time bomb;

"Following the sale of the Company's interests in Egypt (completed February 2020), the Group's sole source of revenue is from the production and sale of limited volumes of natural gas in Italy."

For the period ended 30 June 2021, the Group reported revenues of US$0.3 million and loss after tax of US$3.3 million.

"...the Company is considering options to exit its legacy gas interests in Italy."

The two fields have a total of $13.561m in decommissioning liability 's.

You could not give them away. In 2017 Northern petroleum were going to take CIVITA off our hands for a payment FROM RKH of $1.6m
The decommissioning liability could become a live issue in 2022 based on NOP's CEO's statement as to the remaining 'life' of this tiny production.

Comments from an interview with NOP ceo BEFORE the deal collapsed are relevant. See here;
hTTps://www.youtube.com/watch?v=ziQ1BecDWyA

The important bit was that he thought there was "Five or so" years production left.
He was speaking in mid 2017; by implication decommissioning could become an issue from mid 2022 onward.

How on Earth can Rkh get rid of CIVITA without incurring giant costs?.

The other Italian production is from the offshore Guendalina gas field in which RKH have a 20% interest which is in rapid decline. It has next to no value, imo ,as there is similar decom liability as in CIVITA.

We can but hope we will win a very favourable award.

The critical issue is RKH dire cash position;
"Cash resources of US$7.1 million as at 30 June 2021
During H1 2021, the Group received and subsequently paid a significantly larger than expected tax liability of US$1.4 million associated with the 2015/16 Falklands drilling campaign. Limited further costs related to the period prior to 1 January 2020 are expected."

Worse than I predicted down to another FIG tax bill and there's another to follow; good grief.
It looks like the FIG as as bad as PMO for dropping late bills on Rkh , bleeding the company dry.
How did they come up with all these extra bills. ?
PMO bled us for $19.3m in 2019 and added a surprise EXTRA $10m bill on top. That needs explaining to me. Pre-development costs in 2017 were $6.7m. Who was managing the costs?

Even if we have 'won' the OM case , I expect the Italians to resist payment with EU support. We will have to chase the money in the USA.

I am convinced that MOODY and co will go for an early equity fund raise while OM decision is still awaited; dangling the carrot of a BIG award to attract more cash.

Here is some light reading for you;

DECISION ON THE INTRA-EU JURISDICTIONAL OBJECTION dated 26th June 2019

hTTps://www.italaw.com/sites/default/files/case-documents/italaw10646_0.pdf

Page 37 onwards explains the ICSD decision made then .

Good afternoon fuddstone;

You wrote ; "Looks like Italy lost rightly so."

I would like to think that but......

We can not simply ignore the implications of what RKH have RNS'd

It appears to ME that the ICSD had completed their works BUT went out of their way to delay an award (means a decision yay or nay) until the European court decision,; why would they do that?

hTTps://www.euractiv.com/section/energy/news/energy-charter-treaty-cannot-be-used-in-intra-eu-disputes-rules-top-court/

That the Italians submitted the ruling and that the ICSD has agreed to accept it into the process is concerning.

There are two ways to look at this news;

First; The ICSD have considered jurisdiction in the past BUT were waiting for the EU judgement and the Italians playing the card in order to definitively rule; the international treaty can not be trumped by arbitrary EU law.

second view; The ICSD were waiting for the EU judgement expecting that it could be used successfully to scupper Rockhopper's case.

The ICSD have given our lawyers VERY little time to respond. Suggests to me the ICSD have pretty much made up their minds .

If we do not get an award in our favour Rkh will have to equity fund raise next year.

Good afternoon Godders99

The sale of RKH , as it stands, is unlikely imo. This is just about the worst time to sell. There is no certain route agreed to oil extraction. No-one is going to offer a premium on the off chance RKH will receive a large OM award. We might get nothing.
RKH has a small amount of cash which is dwarfed by future decommissioning liabilities.

Been plenty of opportunity for someone to previously approach RKH and make an offer. I am unaware of any such approach. Has anyone else heard of one?

If RKH was sold now it would be at a distressed price.

Now, IF, RKH has banked a large OM award and a guaranteed route to oil development had been settled; then , just then, MIGHT someone make an offer.

The question is ; just how many companies are there looking to buy an AIM oiler?

Good morning pauldrayton.

PMO had been shaving costs for some time and had a development plan costing $1.5 Billion targeting 220 million barrels.

It was when they started looking for financial support that they received advice to improve field economics by adding four more producing wells in the south to increase phase 1 target to 250 million barrels.

I suspect that advice came from UKEF; I may be completely wrong . We do know that potential UKEF support was vital to PMO.

We were getting so close to the trigger being pulled when we had the oil price slump and PMO's debt issues led to the falling of PMO into HBR's hands. That's the sad history. I am heartened that Navitas then saw value when POO was $60-$65 .

POO is much improved and Navitas are still talking about Sea Lion. Not to say that they might still find financing too challenging and have to walk. Lots of risk here.

If Navitas stick around I suspect they will take HBR's 60% for next to nothing; maybe milestone payments from production.

The writing has been on the wall regarding HBR's exit so we can only hope that our board have been "advancing" a plan B with Navitas that will not involve huge delays fruitlessly looking for another partner.

We need the cash from a OM award to avoid an equity fund raise in perhaps 12 months.

If RKH and Navitas intended to pursue the $1.8Billion 29 well phase 1 plan it seems certain that we would need another partner with all the time and difficulties that would entail and with no certainties that anyone would want to come on aboard.

I note LOUGH's line , "..advancing plans for an alternative, lower cost, development of Sea Lion"

That would obviously be smaller in scale.
Is it possible that RKH and Navitas could proceed alone without another partner?

The plan for phase 1 had 29 wells and a cost of $1.8 billion.

Is it possible that Navitas could become the operator in an initial development half the size?

MOODY highlighted how Navitas raised $900m for Shenandoah.

First issue is to shuffle HBR out the door with the minimum of fuss ensuring that the eye watering amounts of cash RKH paid to PMO result in the hand over of the predevelopment works done to date.

RKH's annual spending on predevelopment costs was $6.7m in 2017, $11m in 2018 and an eye watering $19.3m with an extra strange $10m bill on top!

Not holding out any hope of a refund.

So what sort of development plans are Navitas and RKH "advancing" now and are they going it alone or going to try and attract a third partner.?

The Navitas interest in Sea Lion is crucial and, in my opinion now vital to any chance for Sea Lions development.

The original proposed Navitas farmin was when POO was at least $15 LOWER than it is today.
On the face of it, their investment case has only gotten stronger.
As discussed, its all but certain that the chance of UKEF support departed months ago and Navitas must have recognised that yet they are still apparently interested.

I do not see any chance of Navitas buying RKH. Look how they got hold of Shenandoah; picked it up from a chapter 11 bankruptcy for an amazing $1.8 MILLION USD.

If we look at the Shenandoah deal which RKH made reference to; we will note that the support of additional partners was necessary. The really difficult work now begins. Can RKH and Navitas attract other companies interest?

Its not going to be a quick job.

Navitas acquired Shenandoah for only $1.8 million from a bankrupt company

hTTps://www.bizjournals.com/houston/news/2018/04/10/bankrupt-houston-oil-explorer-accepts-578m-in-bids.html

"Navitas won Cobalt's Shenandoah assets for $1.8 million "

Have a read here;

hTTps://middleeast.in-24.com/News/194649.html

Navitas got the cash to develop Shenandoah;

Note the coincidental numbers; project cost $1.8 Billion and 80,000 barrels a day; same as for SL. The breakeven number I do question; too good to be true ?