Member Info for cyan2

Good morning Yanbu-arabia
You wrote;
"it would make a helluva difference if FIG decided on reducing their take on Tax/Royalties "

Whether new interest could be attracted from other companies would depend on how generous the FIG might be.
They could structure an incentive to encourage development by, for example , giving a two year complete tax holiday from first oil ; that would be simplest, imo.

That would be most helpful. We have a new possible hurdle to get over after Boris announced plans to withdraw export finance support for over seas Oil & gas projects . Because of PMO's weak finances they were depending on UKEF support for SEALION development. A clear statement is needed as to whether the Falklands is excluded from the ban.

I should have added the last Edison report was dated 23rd April. On 15th May PMO RNS'd project suspension which has huge financial implications in the delay.;

"In the Falkland Islands, Premier has taken the decision to suspend Sea Lion Phase 1 to minimise ongoing spend in light of the current market conditions. Sea Lion Phase 1 is complete from a technical aspect and all of the work which has been done to date is being fully documented, such that the project can be reactivated once the macroeconomic outlook improves. A reduced team will continue to progress government, commercial and financing matters including the transaction documentation with Navitas who remain committed to farming in for a 30 per cent interest in the Sea Lion licences."

Hi Surfit .I note you lines;

".they are now scrapping the piggy bank and nothing will change untill Navitas come up with the cash. I think it is the right move.*
Nothing has changed financially from the last report correct?"

There has been a big change;

On 15th July PMO RNS'd with lines that indicated a $200m write off for drills on phases 2 & 3 . Only a phase 1 development left on the table now.

Navitas will not raise cash BEFORE the new deal is signed and approved by the FIG and thereafter only if they are certain SEALION will be developed.

The Edison reports was a useful aid for publicizing the company. If RKH are so strapped for cash that they need to save £49,500; it says something that we frankly all already knew; the cash position is weak and that the company will need a cash injection by spring 2022 at the very latest.

We HOPE that an arbitration award will be received well before then, but we can not count on anything.

The good news today is the recovery in POO to over $45

No more Edison reports

29th July 2020

"Edison Investment Research is terminating coverage on Avacta Group (AVCT), BCI Minerals (BCI), Destiny Pharma (DEST), Globalworth Real Estate Investments (GWI), Henderson Alternative Strategies Trust (HAST), Herantis Pharma (HRTIS), Jupiter Green Investment Trust (JGC) and Rockhopper Exploration (RKH). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website"

hTTps://*********************/companies/uk/oil-gas-e-ps/rockhopper-exploration-plc/research/edison/rockhopper-exploration-termination-of-coverage/3_27387xxx-e8c5-52f8-d175-c339d166aff9

The Edison reports were a useful source of data . Why have they stopped covering RKH? Rockhopper paid Edison £49,500 for their covering the company. A cost saving measure or were they worried that further analysis would highlight RKH difficult financial situation going forward and/or the lessening of SEALIONS development chances?

" Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant. "

So we can not rely on content as per in the January Edison report here;

hTTps://www.edisongroup.com/publication/sea-lion-funding-outlook-strengthened/25927/

or the last Edison report dated 23rd April 2020, here;

hTTps://www.edisongroup.com/publication/parties-committed-to-complete-sea-lion-deal/26659/

"This report has been commissioned by Rockhopper Exploration and prepared and issued by Edison, in consideration of a fee payable by Rockhopper Exploration. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. "

I agree; more progress on the legals and FIG consent could have been made. I think they were seriously considering ditching the SEALION project and paused, watching world developments. Thankfully they came to the conclusion that there will be a day for SEALION sometime in the future and want to remain in.

Do not underestimate NAVITAS ability to fund raise funds. View this from ;12.12.18

hTTps://en.globes.co.il/en/article-navitas-jumps-on-positive-shenandoah-report-1001264557

"Navitas jumps on positive Shenandoah report"
Shenandoah is a deep-water project; 1700 metres ; far deeper than SEALION.

"Navitas and the operator believe that commercial production in the project will commence in 2023. Navitas's share of the development costs will be $184 million."

(contracts for the 'trees' was announced in October 19)

"(Navitas's shares is 65 million barrels)"

"Navitas acquired rights in the Shenandoah discover in March for only $1.8 million in cooperation with two of its partners in the Buckskin project:"
"Navitas and its partners in Shenandoah took advantage of the bankruptcy proceedings of Cobalt International Energy to acquire the rights at a very low price, then filed a revised development plan for the reservoir."
Just $1.8 million ; impressive!

Now jump to this recent development;

July 28th 2020

https://seekingalpha.com/news/3595973-blackstone-to-boost-stake-in-gom-drilling-project-to-47-partner-says

"Navitas says the project is expected to generate $1.13B in cash flow for the company; production is forecast to begin in 2024."

Looks like NAVITAS are able to raise development cash and generate huge cash flows in due course.

Entirely fair to point out the dismal failure of PMO to sanction SEALION even in 2018 when Robin ROSE from PMO suggested it was targeted for that years end.
The whole problem has been PMO's financial woes and a overly generous farmin deal that PMO could not honour.
They have been looking for years for another partner and a chance to change the deal. The critical thing that has changed is the arrival of NAVITAS and the new terms. At the beginning of the year SEALION looked odds on. We all know what happened next. NAVITAS are the recent change that gave hope that SEALION could yet be developed.
The critical shorter term issue is indeed RKH dire finances as I have previously detailed. They have to receive a large arbitration award. Know the risks & DYOR

Good afternoon to Surfit.

Reference Apache possible takeover of PMO. I seem to recall that the rumour was put to both parties who would not comment; makes me think there may be something in the talk.

This article recently commented on Apache's poor results and a move away from Shale;

https://www.forbes.com/sites/scottcarpenter/2020/07/29/apache-reports-386-million-loss-renewed-international-focus/

Extract;
"U.S. shale oil and gas producer Apache APA +1.8% Corporation has turned its focus to international investments after reporting steep second-quarter losses stemming largely from its U.S. oil and gas business."

As regards Navitas; it was always going to be a big job raising finance for SEALION but they have to first wait for the legals and FIG agreements and then hope for a better economic environment. It took them a fair while to announce they were still up for the partnership. . I did think they would walk so it was a relief when they cleared up their position. They do have a record for raising funds so fingers crossed for the future.
I see POO is pretty good considering, so I am more hopeful for next year.

PMO seem to be getting on top of their financial issues and this extract from the 15th July update is good;

"As a result of the recent improvement in commodity prices together with the action taken by Premier during the first half of the year to reduce its 2020 expenditure, the Group now expects to be free cash flow positive (after interest) for full year 2020 based on the current forward curve."

Godders99 is absolutely right to be cautionary.. Personally, I give SEALION a one in three chance now... Things can change pretty fast in the world. It was in 2018 when Trump was moaning that POO was too high when it hit $80. The years average was $71. Not much of the worlds oil industry thrives with POO in the mid forty dollars. Hoping against hope for next year .

We have to hang on to whatever positives we can find in these recent developments.

PMO have had a torrid time with their own financial issues BUT it does appear that things are getting resolved.
A vaccine for Covid should arrive in 2021 and from there we will see a recovery in economies .

The price of POO is critical to PMO's and our future. Am pleased to see a significant recovery of POO in the worst economic environment in a lifetime.
With POO now circa $44 it is $4 ABOVE phase 1 break-even costs. HOWEVER; we really need to get to about $55 for our partners and financiers to feel comfortable with investing.

Am a little concerned about the reports of Apache looking to takeover PMO; not good imo.
I wonder if the write off came about as parties poured over the books for estimating what PMO's assets are really worth. Will Apache want to keep SEALION? I am a little bothered they won't want to keep it.
I think the FIG better wake up to the risks that the oil riches may never arrive; they had better sweeten the deal.

I think ARG and BOR are doomed . ARG has not even found anything ; they want a rich partner to explore; fat chance , imo.

Good afternoon Surfit

Yes, there is a lot of oil in the NFB . But we have to remember this ISOBEL was part of a possible phase 3 development..

Phase 1 has circa 250 million barrels; phase 2 is even better 270 million plus.

The bad news is that on 15th July 2020 PMO RNS'd with these lines included;

"Premier expects to write off c.$200 million of exploration expenditure relating to its acreage in the North Falklands basin which will not be developed as part of its Sea Lion Phase 1 project."

What are the chances that anything other than just phase 1 are going to be developed.?

Here is a link to details of the Navitas farmin before PMO signalled a partial retreat.

hTTsps://rockhopperexploration.co.uk/wp-content/uploads/2020/01/Investor-Presentation-Navitas-HoT-7-Jan-2020v3-1.pdf

Have to say that I thought we were completely doomed in March when everything started to go badly wrong . I was expecting Navitas to walk away as POO went into free-fall. Was surprised when they eventually signalled they were still up for SEALION development. Yes, we have had a sea of negativity but who would have thought POO would be as good as it is now when you consider the dire economic plight we are in. ?
Yes; we still need perhaps another $10 to give PMO the sort of profit margin they would like before a sanction but it gives a crumb of hope.
The $200 m write off is bad news but , if PMO have already deemed SEALION a no-goer why did they not just write the whole thing off NOW? Put us out of our misery.

If the world economy begins to seriously recover next year we could easily see $55 POO. Few oil companies are in a happy place with POO in the $40-$45 range . Only the most efficient cope . State players like the Saudis need much higher POO.
The time is right for our partners to lean on the FIG to reduce taxes. Also; think of the leverage we have with suppliers to the Sealion project ; a time to beat down costs.
In the shorter term its all about RKH and their poor finances. We need a decent arbitration award to give us time to a potential first oil. That's what worries me the most, in the shorter term.

Thanks for that rpoodle. The phase 1 development was increased by 4 wells, on advice, to improve field economics. That brought break even down to $40 but put up development costs to $1.8billion if memory serves me correct.

Good afternoon Godders99

Who is happy with a $200m write off? My posts certainly can not be considered that way. We have been left in doubt as to whether phase 2 will be developed; I would be happier if we received reassurance that phase 2 is still a possibility; Not happy that there has been a $200 m write off.

"Premier expects to write off c.$200 million of exploration expenditure relating to its acreage in the North Falklands basin which will not be developed as part of its Sea Lion Phase 1 project."

I would have been happier if the line finished "....... Sea Lion Phases 1 and 2 of the project"

Could be read that they only expect one phase...if we are lucky!

I tend to agree; DURRANT and ROSE have lost credibility with their SEALION sanction predictions.

The 15th July RNS from PMO had these two relevant extracts;

"As previously announced, at the end of the first quarter, Premier took the decision to suspend the operated Sea Lion Phase 1 project in the Falkland Islands until the macroeconomic outlook improves. In the meantime, a small core team is progressing the commercial and regulatory work streams, including the farm out to Navitas for a 30 per cent interest in the Sea Lion licences. Premier, Rockhopper and Navitas are finalising the farm out documentation, and discussions have commenced with the Falkland Islands Government to obtain approval for Navitas's entry onto the Sea Lion licences."

"Premier expects to write off c.$200 million of exploration expenditure relating to its acreage in the North Falklands basin which will not be developed as part of its Sea Lion Phase 1 project."

I think PMO are, at the very least, effectively writing off Isobel/Elaine. Surely, if they retained a realistic hope of a phase 3 ; there would have been no need to write off.

Phase 3 was intended to entail the development of the Isobel/Elaine fan complex in the south of PL004, subject to further appraisal drilling.

I wonder if this write off was precipitated as a result of a possible Apache takeover of PMO and the need to realistically review the numbers?

"Regarding oil in Falklands' waters the initiative is based on a 2015 criminal demand against companies operating in the area, which included impounding assets and locking up the heads of the companies if caught in Argentina.

Apparently the target is a consortium of companies in the process of contracting a semi submersible oil rig, operating to the north of the Falklands and which drilled at least six wells. The criminal demand was initiated against board members, managers and representatives from Rockhopper Exploration, Premier Oil, Falklands Oil & Gas Ltd, Noble Energy and Edison International SpA."

hTTps://en.mercopress.com/2020/08/07/argentina-prepares-strong-diplomatic-offensive-to-recover-falklands-sovereignty

What a strange story. Noble and Edison have already completely abandoned the Falklands and Falklands oil & Gas no longer exists!

The 9.7.20 RNS announced the Bb extension; again;

"West Sussex County Council's ("WSCC's") Planning Committee have approved, by a significant 10-1 majority vote, a 2 year planning permission extension to its Broadford Bridge-1/1z ("BB-1") Kimmeridge oil discovery, located in licence PEDL234 (UKOG 100%). The planning extension, which was recommended by WSCC's planning officer, will expire on 31 March 2022."

Will they ever return? At least this extension puts off the expensive site restoration costs.

"'RNS states that oil production can be achieved within months'

This is UKOG so that could be anything usually longer"

This 29.6.18 results RNS just goes to prove how UKOG have a record of failing to achieve their targets in a timely manner;
Extract
"Whilst the overall flow rates obtained from the well were to date sub-commercial, we are now actively pursuing a possible return to the site to drill and test a BB-1y sidetrack. An 18-month planning consent extension was submitted to West Sussex County Council on 14 June 2018 and, if granted, the extension to 31 March 2020, will provide sufficient time to enable a BB-1y sidetrack to be drilled and tested following completion of the next planned Kimmeridge exploration/Portland gas appraisal well in PEDL234."

So Loxley and BB should have been drilled by end of March 2020!

"Several new revenue streams being created this year" ?
I do not see where from; 'several'?

An appeal to overturn the Loxley decision needs to go UKOG's way . If UKOG win I can not see a revenue stream from there this year.

Turkey is a gamble ; a maybe

HorseHill rework is just an attempt to improve existing flows.

"This will be huge" Wasn't that said about Kimmeridge oil; Sanderson does not say much about that anymore; why not?

All the front end risk is with UKOG.
AME are the operator. If the first well is poor they could cancel the other drills.
In the UKOG RNS they had the line"...however UKOG understands that should any of the commitment wells not be drilled, a modest penalty of c. $30-50,000 is payable to the government."
Must have crossed their mind that the 5 drill campaign could end prematurely

Sanderson himself described the drilling as , "a roll of the dice". Place your bets

Good afternoon TrollHunter2
You wrote;
""UKOG is an ambitious oil & gas exploration company, striving to support the drive for increased energy security for the United Kingdom, having a wide range of assets in the south of England."

Nice description..... wide range of assets in the south of England."

So why isn't Sanderson preserving cash for developing those UK assets rather than taking such risks in Turkey?