Member Info for cyan2

The positives are we have a huge fully appraised asset that is, in effect, ready to develop.

We have a new partner , Navitas , who have shown themselves keen and committed to SL development. I do not think they will walk. My initial concerns about their financial strength have receded with their proven ability to attract finance and develop expeditiously Shenndoah ; a large offshore field.

The other big positive is the OM award. 190 million Euros plus interest; must worth about 225 now with compounding interest .

Great.

However; I have learned over the years that everything with Rkh has taken longer and cost more than I had calculated .
I was pretty disappointed reading this paragraph;

"The third-party funding agreement does not cover any costs arising past the date of the Award (23 August 2022). Having anticipated Italy might attempt to annul the Award, Rockhoppper has a non-binding offer in place to fund both fighting the annulment and enforcing the Award if required. The Company will now consider this along with other funding possibilities. A separate success fee of approximately GBP3 million is due to the Company's legal representatives on establishing liability and an award requiring Italy to pay over EUR25 million in damages. This amount is not covered by either funding agreement. Given Italy's request for annulment, the Company is in productive discussions with its legal representatives as regards to this payment."

I am not convinced that the deal with out litigators was was as good as it should have been .We shareholders SHOULD have been made aware of the high £3m GBP success fee with that low $25m award threshold. Its not satisfactory that this payment IS clearly immediately liable to settlement. We should not be in the position where have to rely on goodwill for this payment to be deferred which will likely require an amount of compounding interest.
Although the following scenario may seem highly unlikely now; it appears we have ended up in the position of POSSIBLY losing the case after an annulment ; getting no award; but owing £3m regardless.
In the hopefully unlikely scenario of having the case annulled and the whole process restarts , it will require a whole new funding arrangement.
I am surprised ( putting it mildly) that award enforcement costs were not part of the 'no win no fee' deal.

The annulment request needs to be expeditiously rejected. A possible 18-24 months timescale is a ridiculous .

Good evening pauldrayton

You wrote; "....the higher the award, the more they would try to prevent having to pay it."

I agree, and I fear we will have to chase assets after the likely dismissing the the annulment request, which could be time consuming, and whose costs are not covered by our agreement with Harbour, which I find odd.

You also wrote; "The placing was done earlier in the year to see them through the next couple of years and by that stage there should be a definitive outcome anyway."

The challenge Rkh has is paying its way until revenues arrive from SL.

The final results RNS dated 30th may 2022 had this line;

"...the target is to reach FID in 2023 or 2024 and to then have formal project sanction as early in 2024 as possible."

It may take 3 or 4 years after that before production revenues arrive.

We may have around $10m cash now and our company expects basic costs of $4 m pa going forward.
As Malcy indicated; Rkh will have to open the cheque book next year for SL costs. How much will we need.?
.

I think MOODY had hoped the Italians would pay up any award promptly;

"It ought to be the case that Italy will pay in fairly short order...."

13mins 50 secs in this 30.09.21 presentation;

hTTps://secure.emincote.com/client/rockhopper/retail-investor-presentation/index.html

RNS 31st October extract'

'Request by Italy for Annulment of ICSID Award'

"Based on legal advice we believe annulment proceedings are likely to take approximately 18 to 24 months, "
Would have been nice but a potential 18 -24 months considering the annulment application is most unwelcome.

Good morning buzzthomas

You wrote; "I would say Israel Delek over GENEL."

I agree. Delek is the most likely 'possible' with all the history and connections.

If I was Navitas I might be tempted to make a cheeky paper offer for Rkh. I think it more likely than not that a third partner will be brought in and Delek is the most likely.

Here is another thought;

Will the SL project need a third partner? This has not been decided yet by Rkh and Navitas.

In todays Genel RNS update I noted this comment from Paul Weir, Chief Executive of Genel :

"we remain on track to generate around USD250 million of free cash flow this year, building towards a significant cash balance of over USD500 million by the end of the year. We are focused on putting this cash to work to purchase new assets, grow the business, and increase shareholder returns"

Just how many company's are buying new oil assets these days?

I have previously suggested that Genel ( I hold) might be one company who may be a possible for investing in Sea lion.

Its worth noting the history of the company chairman.

David McManus is chairman of GENEL (GENL)

"David retired as a Non-Executive Director from the Board of Rockhopper Exploration plc in May 2019, where he served as Chairman from 2016 to 2019."

The decommissioning of the dock has been mentioned today.

Its hoped we can upgrade and use;

30th may 2022 final results RNS Extract;

"Falkland Island infrastructure decommissioning costs currently estimated at US$4.0million (Group's net share),.."

".. in managements view it is probable that the facilities will require decommissioning in the future, all be it that currently our expectation is that following appropriate upgrades they will be able to be utilised as part of the Sea Lion development."

Total decommissioning provision is;

$ 18,197

subtract the $4m and the remainder is the Italian junks liabilities.

Regarding the gas 'assets ' arguments, I reproduce what Rkh published;

15h June 2022 RNS;
extract;

"...the Company holds legacy interests in various Italian licences following its acquisition of Mediterranean Oil and Gas plc in 2014. Many of these interests will require abandonment at some point in the future. As disclosed in the Company's 2021 Annual Report, the total estimated cost of the eventual field abandonment and site restoration was US$14.2 million. Currently no material costs in relation to these activities are envisaged before the end of 2024. To the extent that activities are planned before the end of 2024 they can be funded from existing resources."

RKH tried to offload the CIVITAS 'assets' to Northern Petroleum (NOP) several years ago in a deal that would have required RKH to PAY NOP $1.6m because of the decommissioning liability.

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.

I believe, from memory, that the decommissioning liability numbers are pretty much 50/50 between CIVITA and the offshore Guendalina gas field in which RKH have a 20% interest.

I have some old Guendalina production numbers ;
Production is declining.

2017 production averaging approximately 290 boepd net to Rockhopper.
2018 production 180 boepd
RKH September 2019 presentation stated "Net production: 140 boepd (last 12 months)"
RKH also stated " Efforts continue to manage decline and reduce opex"

On these ' assets' it appears the Rkh website has not been updated for years.

It does appear that the gas assets are somewhat of a liability if you read the RKH half year results published 29th September 2022 show these assets, as a whole, are losing money ;

Revenues of $500K but sales cost was $ 800k in the 6 month period.

Malcy commented at some length yesterday in his blog.
I will not reveal all his text here which has his usual positive spin. Seek it out and give him your clicks.

I will quote a few lines though; .....".sometime next year there will be action on Sea Lion which will involve RKH getting out the cheque book." How much ?

Malcy mentioned the possibility of selling all or part of the award , "....the company could pass over all or part of the ‘win’ in return for an immediate payment, a solution which has some appeal but may be overly punishing"

He thinks there maybe a higher risk alternative.

"I would probably take the higher risk play by separately funding the early development and play hard ball with the Italian Government and also not to sell the win in the market."

Is he thinking secured bonds? That was the what XEL tried.

Interesting commentary from Malcy BUT he failed to mention the liabilities that will likely need to be settled before the Italians open their chequebook.

I think forcing the Italians to pay MIGHT take years (hope I am wrong) and the costs pursing payment though the courts is surprisingly not covered in our no win no fee agreement with Harbour.

Malcy concluded his piece ;

"I can see why the shares have fallen so much today I think the fall is a buying opportunity not to be missed. "

Good afternoon nicktheglobe

You wrote; "RKH is looking ripe for a takeover on the cheap."

It looks very likely Rkh will have to surrender its independence . Doubt there will be a bidding war. Only realistic hope is a paper offer from Navitas , imo.

Hello again HappyInvestor100

you wrote;

"They have $10m cash balance, which is probably more than enough for a few years of G&A. The $3m fee will need to be addressed."

The success fee is £3m GBP

Note this line in the results;

" ..recurring expenditure is currently expected to be around US$4.0 million per year."

Rkh have not got the cash to last a few years unfortunately.

Good morning Godders99

Shareholders have not been given the full picture for years. There are some serious cases where management have not been fully up front . Notably regarding the reasoning behind the sale of our useful Egyptian assets. MONSTOUSLY huge bills from PMO were the reason BUT our management were not frank at the time about the TRUE reasoning. It took a couple of years before MOODY finally fessed up the company HAD to sell to avoid a fund raising then.

Now we are really weak financially again with an immediate call on £3m BEFORE any award proceeds are received. Who knew that was possible?
How long will it take to receive anything with annulment proceedings that may take 2 more years? I doubt the Italians will rush to pay up for quite sometime after that.

In two years we are looking at those huge decommissioning liabilities and how to pay?.

Always thought it concerning that MacDonald walked leaving 6p options behind but retaining 1p options. That was a red flag for me; very concerning. Now we see the fuller picture and Rkh's likely need to refinance again and his possible reasoning is clearer to me .
I did not participate in the last fund raising.

Good morning Happyinvestor100

Relying on our funders good will regarding the £3m we NOW owe them is not ideal.

"A separate success fee of approximately GBP3 million is due to the Company's legal representatives on establishing liability and an award requiring Italy to pay over EUR25 million in damages. This amount is not covered by either funding agreement. Given Italy's request for annulment, the Company is in productive discussions with its legal representatives as regards to this payment."

Let's hope they are charitable .

That £3m should have been highlighted in the placing RNS

Rkh's cash position is really weak and remember the liabilities coming down the line as mentioned in the 15h June 2022 RNS;

"...the Company holds legacy interests in various Italian licences following its acquisition of Mediterranean Oil and Gas plc in 2014. Many of these interests will require abandonment at some point in the future. As disclosed in the Company's 2021 Annual Report, the total estimated cost of the eventual field abandonment and site restoration was US$14.2 million. Currently no material costs in relation to these activities are envisaged before the end of 2024. To the extent that activities are planned before the end of 2024 they can be funded from existing resources."

Good morning SpaceHoppa you wrote:
"Cyan, No win, No fee.
They did win, hence a fee."

I understand the concept of no win no fee. Trouble is this success fee requires payment before any award MIGHT be received. Does not require Rkh receiving the actual cash ward in the bank.

Ultimate fee, if we get paid; will be tens of millions.

15 June 2022 RNS extracts
"The proceeds from the proposed Placing and Subscription are expected to provide the Company with sufficient working capital to the end of June 2023. Any additional proceeds from the Open Offer would provide working capital beyond this period depending on the amount raised."

Future funding is an even more serious issue now.

" All of the Company's costs associated with the arbitration to date have been funded on a non-recourse ('no win-no fee') basis from a specialist arbitration funder. Should damages be awarded, the funder will receive a proportion of the damages based on funds spent and the size of any award. "

Where did Rkh management spell out the £3m success fee?

Also; the costs of pursing payment SHOULD have been included in the the 'no win, no fee' agreement .

Am not impressed .

Typo in my last;

Full field development was stated by UKOG at £50 Million.

Sorry about that.

Mirasol wrote;

" " Loxley asset potential value of $1bln "

:))))))))))))))))))))))))))

Only requires £2 mm for a well - which they haven;t got..."

Its a lot more than £2m.

I listened to the evidence given at the the Loxley enquiry. UKOG stated the Loxley drill would cost £7m. IF successful full field development would cost £59m.

The RNS properly records the current situation regarding the FIG tax liability at £59.6m

I am still of the opinion that this tax bill relates to the benefit from huge carries that Rkh never actually received and as such the "irrecoverable" clause has effect. It follows that the liability should disappear.

Although the RNS does not highlight this possibility , MOODY did state that he thought it may disappear in a presentation last year.

IMO; You can not tax any entity on a benefit that they did NOT actually receive.

MOODY obviously thinks the same as he stated in the linked presentation. from 9 mins 47 secs

hTTps://secure.emincote.com/client/rockhopper/retail-investor-presentation/index.html

Good morning p777 you wrote;

'Cash burn down to 1.5mn full year at current run rate is positive ..'

The RNS has this line;
".. relatively stable G&A cost of US$1.5 million in H1 2022.." Six months

Suggests $3m per annum.

However the RNS has this later line ;

" ..recurring expenditure is currently expected to be around US$4.0 million per year."

Good morning Sienna39 you wrote lines which included this;

"But with today's oil prices and profit after $42 per barrel that's $50 profit on 120.000 barrels that's $6.000.000 35% is $2.100.000...wow"

That 120,000 figure was inserted by MOODY in the RNS;

"Sea Lion alone is capable of producing at over 120,000 barrels of oil per day with significant upside."

We need to look at what production we can actually look forward too and not a theoretical best case.

While it is factually accurate; 120,000 barrels a day IS possible. It must be explained to potential new investors that this number was the planned, years ago, target by PMO with a huge TWO phase development .

In their last plans PMO estimated the cost of just the single phase 1 would cost $1.8 billion

We have to remember that Premier worked hard on reducing field development costs and they had proposed a £1.5 billion project with 16 producing wells and a circa $45 breakeven. However, after consultations with likely supporters of finance ( maybe UKEF) they were advised to improve the field economics by adding 4 producing wells and thus bringing breakeven down to circa $40 per barrel.

This raised the recoverable volumes from 220 to 250 million barrels by the addition of 4 more producer wells .
If you read this presentation page11 here;
hTTps://rockhopperexploration.co.uk/wp-content/uploads/2020/01/Investor-Presentation-Navitas-HoT-7-Jan-2020v3-1.pdf
You will note these numbers for phase 1; "? Commercialising 250 mmbbls gross
? ~80 kbopd gross plateau production"
There is a useful chart that shows what could be produced with a 2nd phase.

So , circa 80,000 ; maybe even 85,000 barrels a day could be possible with a projected cost of $1.8 BILLION.

However; RKH have made it clear that Navitas and RKH are looking at a smaller , cheaper field development. Logic suggests production volumes would be lower.

We have to wait and see what the development plan will actually look like and whether they decide that a third partner will be invited to assist with costs.

Nice to put 120,000 barrels into the RNS but, the likely production volumes will be lower than 80-85,000 barrels that could be produced in the previously planned $1.8 billion project with 20 producing wells.

We can but hope that a later additional phase will later, also be financed to achieve numbers approaching 120,000 .

Have been trying to engage in a sensible discussion on ADVFN BB regarding the deferred tax liability; oh dear.

I repost some of my remarks here;

The deferred tax liability is one for the lawyers IF the FIG insist they are owed £59.6m.
This paragraph is clear imo

"The tax liability may be revised downward if the Falkland Islands' Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier is utilised to fund exploration activities in the Falklands or (ii) any element of the Development Carry from Premier becomes "irrecoverable". "

Rkh have already paid tax on benefits they received and used the provision section I quoted to get the sum DOWN from £64.4 m to £59.6m.

As RKH did not benefit from all the huge carries it should follow that those elements of the carries are "irrecoverable"

You can not tax any entity on a benefit that they did NOT actually receive.

MOODY obviously thinks the same as he stated in the linked presentation. from 9 mins 47 secs

hTTps://secure.emincote.com/client/rockhopper/retail-investor-presentation/index.html

Sanderson is the master of selling 'transformational' projects . Over £54 million in last 5 years and he has achieved what?

There are a few serious red flags now. From past experience, when UKOG go quiet its previously been found that they are hiding bad news. For me the last RNS 'updating' HH was revealing in what it did NOT say; no production numbers. I was expecting UKOG to big up the first flush after the well was left standing so long; but NOTHING. How many tankers have been seen recently?
The other warnings are; nothing on a Turkish visit. No photos of a site visit glad handing their partners AME. The other is the dire finances. A rushed placing and the warning of another very soon. Sandersons mismanagement has been epic. He has now placed Loxley in the pending/may never happen box and has committed UKOG to ridiculous spending on a long term gas storage project that is many years from a possible completion and whose economic case is opaque. As for Turkey; a farce; dsrilling 5th rate propects no-one else wanted to pay for in a an area that has produced tiny volumes. Messed up first efforts now needs a shed load of cash chasing dribbles or nothing of value at all. The never ending dream chase; the pot of gold at the end of the rainbow. Does not matter to sanderson if UKOG never arrives; its the travelling ; keeping the 'show' on the road printing cash with ever increasing paper issues that matters; keeping the salary rolling in knowing UKOG has a desperate trapped shareholder base who he thinks he can rely on to double down in a vain hope Sanderson can salavage something from this car wreck.
There is only one person who will eventually be able to retire to the Bahamas.