Member Info for cyan2

Good evening paul.

Thanks for posting details of your contact with PMO. Before the alteration of the SEALION development plan from 16 to 20 producing wells to improve the economics and reduce breakeven; PMO had a minimum 'go' price for POO; $55.
$55 would give PMO the minimum satisfactory level of profitability ; a decent margin.
Its what PMO and the financial decision makers think POO will be in 4 years; not today's price.

Thanks for the link to the details on the Chatham sands. I note that RKH also reinterpreted SHELL's results .
The representation of the location of "chatham" here below has a lot to desired and is rather different to the mapping in the CPR;
https://rockhopperexploration.co.uk/operations/falkland-islands/north-falkland-basin/

Good night all

The only thing UKEF needs to worry about is whether the project numbers stack up and their guarantees to suppliers and debt holders are very unlikely to be called upon.
Everyone has there own predictions for POO looking forward. For the partnership the key number is $55 ; that is the 'go' number for PMO that gives them their ideal minimum level of PROFITABLE production; a decent margin.

Its what everyone guesses the POO will be in 4 years; not today's virus affected price.

The January EDISON report has useful details and their own market assumptions;
hTTps://www.edisongroup.com/publication/sea-lion-funding-outlook-strengthened/25927/

"We assume FID will be taken in H220 and first oil for Sea Lion Phase 1 in mid-2024. We continue to base our valuation on a long-term oil price expectation of $70/bbl Brent from 2022 inflated at 2.5% onwards. "

"Financials

Rockhopper ended H119 with c $27m of cash on the balance sheet and no debt, in line with our estimates. With the disposal of Abu Sennan, our forecast Italian asset capex and SG&A are covered for the coming years at c $5.4m pa. As a consequence of the Navitas farm-in, Rockhopper is fully funded through to Sea Lion Phase 1 project completion given the newly agreed interest-free loan from Navitas and Premier. We are accounting for this partnership loan in the company’s balance sheet; however, we do not believe Rockhopper will need to access any additional funding for Sea Lion Phase 1 development. Funding for the project to the joint venture is expected to be split into vendor financing, export credit/bank finance and upstream partner equity."

A precise figure ahead of the year end accounts; must have come from RKH themselves; $27m in cash at 31.12.2019

Good morning LTT
The demise of US Shale has been predicted many times and yet, its still a major world producer.
However; its the enormous maturing debt over the next 3 years that MIGHT really impact the level of production.
The linked article with $90-$130 is , imo, overly 'optimistic' but well reasoned reading.

If we get anywhere near those prices the impact on SEALION earning potential would be spectacular to say the least !

Its all about what the partners think POO will be in 4 years; anything over $55 and we are good to go.

There are many opinions as to the future. Thanks to a GENL poster on ADVFN for this link;
Jan 30th 2020
hTTps://seekingalpha.com/article/4320190-abrupt-reversal-of-shale-oils-fortunes-points-to-radical-reset-of-oil-prices

"The same lonely analyst now says, at some point, probably within the next year, Brent will go up over $90 and stay there for a minimum of three years, and it could indeed spike to $130."

Ummmm. I would settle for $75 myself but...... who knows..predicting is a tricky old game.

Good evening falklandinvestor.

you wrote; "Cyan, you are not right about future exploration in the North Basin....stop posting
Twisted posts, cheers"

'Twisted'? I look at the evidence, the apparent lack of any appetite for further FI exploration. For those pumping ARG and spreading tales of a rig going to drill on Argos Rhea prospect have to ask them selves this; If Argos prospects are so great ; then why did Noble walk away from their deal with ARG? The other question is this; Why did major oil companies chose to buy into new Argentinian offshore licenses and not ARG's? One has to logically assess the current investment situation in the Falkland sector too. ARG's Rhea is a prospect; its not a proven discovery. BOR has a discovery; not fully appraised; and do not have a partner. RKH and PMO have a fully appraised large discovery where circa $1.1 BILLION has been spent to date . Its been 'oven ready' to go for years and for a long time PMO have been looking for a farmin partner. Eventually NAVITAS arrived on the scene; a very new company with limited cash resources of their own. Hopefully they will be able to raise funds and pay their way. Its just unfortunate we could not attract a major oil company with really deep pockets that would provide us with certainty . The last question those pumping ARG have to ask themselves is this; why would any one want to gamble $40 million on EXPLORATION drilling on ARG? If they did find something it would just be the beginning of a gigantic expenditure run; hundreds of millions to spend on appraisal. SEALION gobbled up over a billion dollars. Now , why would anyone chose to throw money at EXPLORATION on ARG when for a couple of hundred million they could snap up 30% of 'oven ready ' SEALION; ?
Who knows what the future holds; maybe the oil age will last longer than people predict.
Maybe after three phases of developments on RKH's license the partners will look for new prospects in the NFB. Maybe they will look at Rhea; maybe, but when? Ten years plus is not impossible imo. Ones things for sure; our current partnership does not have the spare resources now to throw at EXPLORATION drilling. The evidence to date does not suggest there is any outside interest and the clock is icking down to the EV age.

What's your take on the 975,000 late reported ARG sell?

Good afternoon pauldrayton.
I finally put NIGOIL on filter here and on ADVFN after his fantastic suggestion that, months ago he knew about the date that the NAVITAS farmin would be announced.
I am usually pretty restrained in my prose but I have formed the firm opinion that NIGOIL is a fantasist and his pumping of ARG's prospects is driven by his large share holding there.

Tend to agree with ralph that possible action on Rhea could be 10 years away or never.

Someone would have to spend about $40m on a drill gambling on a discovery. It does not stop there; that third party would have to be prepared to spend hundreds more millions on appraisal drilling IF they struck oil.
According to Navitas circa $1.1 billion has been spent on appraising SEALION to get it where it is today.
The evidence is clear; the really big money is not interested in FI exploration anymore.

Hi again Ralph, as I said its 'now' (next 12 months) or never, imo

Hi Godders99. We had to give up 25% because it became clear that PMO could not honour the original farmin deal which was very generous . PMO have financial issues and they are not flush with cash; so it was a necessity. There are powerful incentives for DURRANT to get SEALION into production. PMO can not, imo, afford to 'give up' on SEALION as the field has a value of circa $700m in their accounts. Also, an enormous amount has been spent already and the market would severely punish the share if they had to write down/off SEALION.
The flip side is that SEALION can be a big earner for the partners.
I do think that RKH management do really need to slash the $5.4 million they are spending on admin and no further bonuses should be paid until first oil; hopefully in 2024.

XEL went bust because they tried to force development without a farmin partner and got into debt issues and the bondholders called time. Their BENTLEY heavy oil field had/has commercial prospects and is now owned by others who hope to progress to development.
Not a similar situation to ours , imo.

Good morning ralph.
I think the chances of us losing the license at renewal is pretty remote. As evidence I look across to BOR who were extended and I see little hope for development. If the FIG took away the license when its up for renewal next year; what's their plan? There are not hoards of O & G companies showing interest is there.?
The situation is clear; its 'now' ( next 12 months) or never. Odds for development are looking good, imo.
The main doubts surround the finance.

As a footnote;
I see an RNS from my favourite O & G producer; GENL

hTTps://uk.advfn.com/stock-market/london/genel-energy-GENL/share-news/Genel-Energy-PLC-Directorate-Changes/81684788
Extracts;
"Genel Energy plc ('Genel' or 'the Company') is pleased to announce the
appointment of David McManus as Chairman with immediate effect."

"Previous directorships include Rockhopper Exploration plc and Northern
Drilling Limited. "
LTH's will remember McManus
If Navitas falls by the wayside is there an outside chance we could attract GENL ?.
That would be a result, imo.

Good morning Oktane
50,000 barrels sounds a lot but how long have they taken to extract them and at what cost?. If UKOG was making a decent profit on their volumes they would not have need to keep issuing lots more shares .
Broadford Bridge was supposed to be the HH look alike drill into the Kimmeridge . What happened?. The daily amounts produced from the HH Kimmeridge have been small. Continual stop and starts with very modest daily numbers.
SS talked of people being able to retire to the Bahamas on the back of the Kimmeridge dream. The numbers speak for themselves.
I am much more positive about the Portland

Why was my reasonable reply to Garynev taken down super fast? That is disturbing.
I will repost;

"Hi again Garynev.
There is potentially a viable conventional producing company based on The Portland. However its come at a huge cost and by the time a relatively modest amount of oil flows there will almost certainly be over 10 billion shares out there. Its not a ponzi scheme; its just a terrible investment.
The danger is SS will keep pouring cash into the Kimmeridge dream that, imo, on evidence to date is quite clearly over."

Good morning Garynev.
You wrote;
"UKOG doesnt have the money to fund its operating costs for even for this year."

UKOG can not pay its way ;
The RNS stated;
"Therefore, the Board seeks approval to increase its authority to allot and issue shares so that it can act swiftly to establish Production via an ability to fund the Company's Horse Hill FDP and to ensure that the Second Deferred Payment can be satisfied."

It does appear that UKOG can not pay its bills and DEFINITELY needs to issue a lot more shares to settle the deferred payment and develop the field.
I doubt they are going bankrupt because there are so many trapped investors who will keep buying more paper to keep the dreams alive.

The three RNS below with extracts shows the level of incompetence we have in management.

The key asset covering corporate costs had to be sold in a virtual panic because someone had not got a grip on the numbers; the bills coming down the line had insufficient provision so they fire-sold Egypt; no wonder UOG were so delighted.

2.4.19 RNS
"Our Greater Mediterranean portfolio continued to perform well with production growth in Egypt broadly offsetting declining production in Italy. Production during 2018 averaged 1.1 kboepd net to Rockhopper, with operating cash flows again covering the Group's G&A costs."

"Our Greater Mediterranean portfolio continues to provide the necessary operating cash flow to fund corporate costs while providing low-risk exploration upside opportunities. On a highly selective basis, the Company will seek to further expand the production base with the aim of generating additional free cash flow to invest in future exploration and value-accretive growth opportunities both in the Falklands and elsewhere."

,' the Company will seek to further expand the production base '

shows absolutely no insight as to the company's near term financial liabilities .

3.6.19 RNS
"The next well in the programme will be Al Jahraa Water Injector-1, followed by SW-ASH commitment exploration well."
"We are delighted to have drilled yet another highly successful well at Abu Sennan with multiple pay zones encountered across four reservoirs including the Bahariya and maintaining the momentum we enjoyed during 2018 where we were successful in three out of four wells."

Less than 6 weeks later , before we had the drill result; our management sold the family silver AND as part of the deal designated 1.1.19 as the 'effective' date so UOG get all the revenues from then. What a mess.

23.7.19 RNS
"Abu Sennan has been an excellent asset for Rockhopper, but with activity ramping up during 2019 ahead of the formal loan application for the senior debt element of our core Sea Lion development, we have decided this is the moment to sell at a point where we can crystallise real value."

Translated; we messed up; have had no proper handle on the impending SEALION expenditure and had to sell in a hurry because we are so cash weak.

While shareholders have seen their asset value decline at a dismaying rate managements remuneration went UP and bonuses were awarded; how can that be right?

The 'good' news is PMO have done the honourable thing and given us the carry from 1.1.2020 to 1.3.2020. The implication is clear; RKH could no longer afford to pay its share of the SEALION bills PMO were presenting.

So, thanks to PMO and NAVITAS ,who are supplying interest free loans to first oil ,it appears RKH are odds on for staggering over the finish line and achieving positive cash flows IF PMO & NAVITAS can finance and get us to FID and beyond.

Our SP reflects the reality of our position. With first oil the new reality will be a very substantially higher share price and I could accept payment of bonuses again.

Our management must take some responsibility for the share price. Read back less than a year to the results RNS;

2 April 19 RNS results to 31.12.18
Extracts;

"Our Greater Mediterranean portfolio continues to provide the necessary operating cash flow to fund corporate costs while providing low-risk exploration upside opportunities. On a highly selective basis, the Company will seek to further expand the production base with the aim of generating additional free cash flow to invest in future exploration and value-accretive growth opportunities both in the Falklands and elsewhere."

The Egyptian assets were really important for the company's accounts; yet in the same RNS they warned;

"Under the base case forecast and the downside scenarios run, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of the 2018 financial statements. However, beyond the 12 month going concern assessment depending on the timing of sanction for the Sea Lion development, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements.Potential mitigating actions could include non-core asset disposals, collection of arbitration award proceeds, deferral of expenditure or raising additional equity."

", the Group may have insufficient funds to meet its forecast cash requirements.Potential mitigating actions could include non-core asset disposals"

Since the April 19 RNS RKH management found it a necessity to sell the Egyptian assets and we have lost the " necessary operating cash flow to fund corporate costs"

The numbers tell the story; the situation was serious with no end in sight; hence why there WERE big sellers here and our low SP.
Its managements responsibility to manage costs yet every report I read has so many pages about remuneration and awarding of bonuses.

The share price has been driven lower by those that read all the documents and understood that we were running out of money and sold out because they lost confidence in managements ability to deliver. Excessive management remuneration and awarding bonuses for effective failure is part of the problem.

I expect the remuneration committee will be sitting about now ahead of the next annual report in March or April. I do not expect to see MOODY and MacDONALD being awarded bonuses for last years performance.

The amount of pain RKH shareholders have suffered; the crashing of our share price and the having to give up 25% of our asset value in SEALION (40% interest dropped to 30%) and the fire-sale of the Egyptian assets does not make me sympathetic to the awarding of bonuses to MOODY and MACDONALD this year.
Just look at the soft targets they have for fat bonuses;

"The Committee has agreed the following objectives for the financial year ending 31 December 2019:
> Preservation of the Company’s cash position and strengthening of the Company’s balance sheet
> Portfolio management including mergers, asset acquisitions and disposals to strengthen the Company’s balance sheet"

Well; they disposed of Egypt; big bonus time I guess. Just look at our cash pile now.

I hold a lot of these shares and I am entitled to question managements performance and remuneration; its shareholders cash; its our cash.

Something to look out for ; an enormous bonus on 'sanction',

"A one off special bonus of between 100% and 200% of salary will be payable at project sanction with the exact quantum of this bonus at the Committee's discretion."

p.47
hTTps://rockhopperexploration.co.uk/wp-content/uploads/2019/04/RKH-Annual-Report-2018.pdf

This needs to be changed to 'first oil' imo. We can not pay early giant bonuses with our cash situation being as it is.
Front loading bonuses before delivery is wrong.; When the oil flows and NOT before.

Good morning fecm.
The Egyptian disposal sale timing is of little significance now as PMO are carrying us to the end of February and then we have interest free loans to first oil .
After reviewing recent well results I suspect there are some who would like the deal to fall through and we RETAIN those assets.
Problem is we really need the cash to see us to first oil in 2024 as our management are spending $5.4 m per year on administration; TOO MUCH.
A decent arbitration award would have negated the necessity of the sale; its just unfortunate that the result of that has not come sooner.
An interesting scenario is the arbitration award comes through next week at $50 m and the Egyptian sale falls though; but how likely is it that UOG shareholders reject the deal? No chance, imo

Good morning psyche8
You wrote ; "Does anyone think we could get FID as soon as we get UKEF approval, whilst sanction would be some time off"

I copied and paste these definitions of Sanction and FID;
" Project Sanction means the final approval by the Proponents to fund the engineering, procurement and construction of the subsea template and associated subsea facilities to be installed in connection with the development of the Unit as described in the Development Plan."

"In the energy project context, FID stands for “Final Investment Decision”. ... It's when the project execution phase begins and the big money starts being spent on project construction (i.e. often when an EPC contractor gets to work).3 Mar 2016"

We are some way from FID according to NAVITAS own published documents I re-post a section I put up here previously.

I translated from Hebrew a PDF form Navitas dated 7th January;

"2.1.3 Signature Deadline - The Parties will act to sign the Transaction Agreements by February 28, 2020, or Until a later date to be agreed by the parties."
Only once that's signed off will the FIG be sent the proposed new partnership terms.

The FIG have to approve the new arrangements. What will they make of them?
Our RNS of the same date gives us an estimation of how long FIG approval may take;

"Finalisation of a Sale and Purchase Agreement is expected during Q1 2020 ("SPA Signing") with completion subject to satisfaction of certain conditions including regulatory approval, expected in Q2 2020 ("Farm-in Completion")"

So its April to end of June before we may get FIG approval.
Its only at that point, I think its fair to say, would NAVITAS start to fund raise.
The Navitas document has these useful comments;
"? Final Investment Decision (FID) for 1 Phase Development - in accordance with information provided to Partnership by Existing partners, such a final investment decision is expected to be made by the end of 2020.
This is after the financing outline for the development of this phase has been completed."

"? Production start - according to information provided to the partnership by existing partners, start of production
The oil asset is expected during 2024."