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Energy Voice: RockRose Energy is eyeing up North Sea takeover opportunities with a large lens, according to consultancy Westwood Global Energy Group.

The firm’s £26.6m offer for Independent Oil and Gas (IOG) continues the North Sea spending spree for RockRose which is in a period of “substantial inorganic growth”.

Last week the firm signed a £107m deal to acquire Marathon Oil’s North Sea business, the latest of five deals in the last two years including acquisitions in the UK and Netherlands gas basin as well as Idemistu’s central North Sea assets.

The Marathon deal means RockRose is also taking on the decommissioning liability for the assets, which include the

Dave Moseley, analyst for north-west Europe at Westwood, said an IOG takeover would further boost production but also continue to raise the “looming burden” of shutting down assets.

He said: “Most recently, RockRose’s acquisition of Marathon’s assets brought with it expansion into the West of Shetlands and first operatorship in the UK. It also attempted to acquire interests in the Wytch Farm field in the English Channel, however this fell through due to pre-emption rights.

“What an acquisition of IOG would bring, however, is additional reserves under development, offering some balance to the current portfolio which is heavily weighted towards late life fields.

“Whilst, like many of the other more recent entrants in the North Sea, it will no doubt be successful in breathing new life into some of the older assets that have become non-core to the larger, well established players, there remains the looming burden of eventual decommissioning.

“The IOG portfolio therefore provides assets where this is at least some time away, with peak production of c. 25,000 boepd not expected by Westwood until 2023.”

From my post of 26th Feb:

LockerRoom - re: 'If they're saying mid-2019 for Harvey then I doubt it'll be April. That's a diplomatic way of saying early H2.'
Then, yes, I'd normally agree i.e. usually O&G co's miss their timelines so, if we are lucky, it could mean farm-out last week of June, and Harvey spud last week of September.
However 2 things + a good deal of optimism, make me think they may come much earlier:
a) we did have Ensco72 booked from straight after Colter drill - which will finish end of March - and they won't want this rig sitting idle (however, of course, plans for it may have changed, and too, maybe no one has bothered to inform us);
and b) from latest RNS 'in late 2018 management initiated a focused farm-out process with a carefully selected shortlist of motivated and well-funded potential farm-in partners.' From RNS of 8th Jan: ' Funding plans for the Core Project are advancing as detailed on 29 November 2018 with the objective of Final Investment Decision (FID) within Q1 2019. First Gas is planned to be delivered within 20 months of FID.' So, at 8th jan they could have told us about the farm-out process, but didn't.. Clearly they are much more confident of the direction of travel with the farm-out now than in January (though BUTD in his old guise would have said 'more desperate'!). This leads me to believe it is almost certain to happen, and therefore soon.....

Good to see you back, Aligator.
Spot on with that observation.
Clearly another offer on its way soon - at the moment RRE are just seeing what they can pick up cheap. Once the trader-selling stops, then RRE are likely to come back soon imo, perhaps even next week.
That's because I think the farm-out may come before the end of April - and that should push the share price up to a more realistic level determined by industry valuations. Whether RRE or another party wants to bid for us then, when more fairly valued, we'll have to wait and see.

By the way, I posted earlier (19th Feb) that Tulip oil in a similar situation managed to get to first gas in 12 months:

Energy-pedia news.
Netherlands: Tulip Oil announces start-up and commissioning of the Q10 offshore gas development
Extract: ...Just 12 months after taking FID on one of the most exciting projects in the Dutch sector, Tulip Oil has started up the Q10 gas field – making it one of the fastest developments from FID to first gas of its kind.... Throughout the process we benefitted from the support of our equity and bond investors as well as the full technical and financial backing of our JV partner, State-owned Energie Beheer Nederland B.V. (EBN).
We were aiming to be the benchmark to beat for finding and developing hydrocarbons in the future.'...

From my earlier post today:

I immediately see disparities:
IOG claim first gas in 20 months - RRE say 3-4 years
RRE claim £450m capital development expenditue - yesterday Malcy suggested $250m
Too, RRE offer until 2nd April. My view is farm-out likely before then.

From RNS at 16.30:
The announcement by RockRose contains a number of statements which the Board finds misleading and with which the Board does not agree.

'Andrew Austin fathered my child and I couldn't be happier.' - made me laugh, Longside.
At 20p he's certainly trying to bu gger IOG.

Yes, Mcsquares, RRE made their approach on 1st March. Farm-out process announced on 25th Feb - only 2 or 3 days in it. Looks like the 20p offer was really for the 'carcass' and just trying it on now to see what they can pick up early doors. Will have to come back much higher if they are serious imo.

bbtablet - yes, you get my thinking.

IOG are hugely undervalued (assets of £688m. market cap of £25m). The price fell from 30p+ to 20p when there was a delay in FID in November. The LOG loan story is largely a storm in a tea cup in my view - nonetheless, with bashers and shorters they managed to pull the price down to almost 10p!

RRE at £8 a share are also undervalued imo (although rising from £6 a share in the last month), and should rise somewhat when returning from suspension - £10?

Thus it would be a fair swap (IOG valued at 20p/25p a share, RRE valued at £8 a share) and to make an offer part cash / part share on that basis.

Offer is too low.
If RRE make a subsequent offer I would not object to half the amount being paid in RRE shares (valued at their current suspended price).

For anyone interested in still following this story (that gives the oil drilling industry a bad name):

Bournemouth Echo:4th March
Corallian oil rig risk 'extremely high', says Conor Burns

Extract: Corallian was originally allowed 38 days of exploratory drilling over the winter, ending on February 28. But the licence was extended to the end of March without any consultation with the public, MPs or councillors.

Does massive oil discovery in Poole Bay mean that Dorset could become the new Dallas?
In a letter to business secretary Greg Clark, Bournemouth West MP Conor Burns said that “while the risk of an oil spill may be considered low, the potential for environmental damage to Dorset’s unique Jurassic Coast and the 54 marine and coastal protected areas within 40km of the proposed location is, in my view, extremely high”.

He asked why Corallian was not required to postpone its drilling until next winter rather than being given an extension “as the spring marine breeding season approaches”.

Wildlife charity 'hasn't ruled out Poole Bay oil well link' after 'unusual' number of marine mammals wash up dead
He claimed an increase in the total number of drilling days from 38 to more than 50 was a “dereliction of duty” by the regulator OPRED.

And Save Our Shores Bournemouth:
SOS Save Our Shores
1 March at 09:16 ·
Breaking! Greenpeace UK have launched a campaign targeting the drilling in Poole Bay. This rig has become the national symbol of a failed UK energy policy in the face of a climate emergency. We can now put real pressure on the Secretary of State for Business & Energy to stop any further attempts to extract oil here or anywhere else.

IOG briefly mentioned on malcy on Vox Markets 39-41minutes.
He likes farm-out idea (instead of $250m fundraise at 100%) - suggests the change of direction is down to Fiona's introduction - by the timing, that would make sense. And, of course, he likes the assets - 'a very interesting development'.

Good luck, Aligator. We will miss your input. This discussion board is much the poorer for our loss of your experience and wisdom.
One reason I was attracted to this share was the quality of the posting on the discussion board (as with SAVP, EME, ECO) - it is one of my investment criteria - and it use to have a sensible 'long-term investor' discussion going on and not the quick-buck emphasis of the twitter-promoted trader share which has come about since the delay in FID and TW article. Hopefully you and GGITS will return when we achieve FID and give us your thoughtful analysis?
ATB

Good luck, GG - I really hope things pick up for you soon in all respects.
We'll miss your positive input and friendship here, but of course family is far more important than any of this. You'll have no regrets in life when you do your best for them.
Every best wish.
HS.

600T - Can think of no example that's not apple and pears. - Though Coro recently purchased 15% of the Duyung gas field for about $20m, I think I recall

But to give you some idea:

RNS 8th Jan: The Core Project with the addition of Harvey would potentially deliver a 77% IRR and a £688m³ post-tax NPV10 with a peak annual production rate of over 230 MMCF/d.

The project is due to deliver first gas in 20 months from FID. We have the pipeline, and much has been appraised. The Core Project with the addition of Harvey would potentially deliver a 77% IRR and a £688m³ post-tax NPV10 with a peak annual production rate of over 230 MMCF/d.

We own 100% of this, and the project has been far advanced - it is very different from farm-outs for exploration in countries with little infrastructure or gas market.

So if we farmed-out 30% of that, that would be worth £206m of assets, not far off producing income.

What would you as a business pay for that low-risk return (in competition with other major players)?
£50 m? £80m?

Our market cap is about £18m. So let's say they pay 3 times that = £54m.

Well 3 times our current share price of 14p = 42p + 14p = 56p.

Yes, very much a finger in the air job - but clearly we are undervalued currently.

Aligator, thoroughly agree with your views - AIM is a disgrace and a shambles for many investors.
However, have experienced this in many shares with good assets (EME, SAVP) which seems to attract the bashers - they don't bother to attack the rubbish, they want good assets on the cheap as eventually value will out and the share comes good.
Too, quite aware how useless the FCA are (Globo, for example).
I think the government itself need to take a hard look at how the LSE and the FCA fail to operate. And to do that we probably need to vote in a completely different set of MPs with different values.
It's a bad old world out there.

LockerRoom - re: 'If they're saying mid-2019 for Harvey then I doubt it'll be April. That's a diplomatic way of saying early H2.'
Then, yes, I'd normally agree i.e. usually O&G co's miss their timelines so, if we are lucky, it could mean farm-out last week of June, and Harvey spud last week of September.
However 2 things + a good deal of optimism, make me think they may come much earlier:
a) we did have Ensco72 booked from straight after Colter drill - which will finish end of March - and they won't want this rig sitting idle (however, of course, plans for it may have changed, and too, maybe no one has bothered to inform us);
and b) from latest RNS 'in late 2018 management initiated a focused farm-out process with a carefully selected shortlist of motivated and well-funded potential farm-in partners.' From RNS of 8th Jan: ' Funding plans for the Core Project are advancing as detailed on 29 November 2018 with the objective of Final Investment Decision (FID) within Q1 2019. First Gas is planned to be delivered within 20 months of FID.' So, at 8th jan they could have told us about the farm-out process, but didn't.. Clearly they are much more confident of the direction of travel with the farm-out now than in January (though BUTD in his old guise would have said 'more desperate'!). This leads me to believe it is almost certain to happen, and therefore soon.
c) However the statement that 'The Company continues to have positive discussions with LOG and fully expects them to continue to support the Company, including in respect of managing 2019 maturities, as it progresses towards FID.' suggests that, as maturities occur in June, if I recall correctly, then FID will be later than that?
4) No mention of purchase of Thames Facility at Bacton in latest RNS. With facilities survey done, I was expecting this to be concluded this week. Perhaps they are waiting for cash from farm-out first (perhaps sensible), or perhaps it is no longer for sale? Would be nice to know.
ATB

Two lines from RNS;

Farm-out: 'On success, this process could provide valuable funding optionality via a development carry which would significantly reduce the new capital required for its Core Project. Management expects to select a preferred partner in 1H 2019,'

Harvey: 'In the context of the wider funding process and availability of the selected rig, the well is now expected to spud in mid-2019.'

Note the word 'process' in each quote. Harvey will be part of the farm-out imo, as well as a lot else besides. The rig will be available by end of March probably, and thus funding will need to be sorted before then. So I would expect the farm-out to be announced in 3-4 weeks from now.

With farm-out and Harvey appraised, hopefully the share price might be a lot higher. And then presumably is the time to do the equity part of the Capital Markets solution for FID.

So Farm-out March.
Harvey appraised April.
FID completed May.

Interesting article:
Energy Mix Report :Oil firms in Nigeria waste gas worth 3,000MW of electricity – 24th feb.

Perhaps more gas business that will use our pipeline?

In the context of the wider funding process and availability of the selected rig, the well is now expected to spud in mid-2019.
Colter news today is there will be a side-track also, adding 2 weeks. They have extended permit to end of March (unbelievable extension was granted - cannot think they'll be able to stay beyond March - though knowing this duplicitous Government...!!!). This sorts out the rig for beginning of April.
But it also says 'in context of wider funding process', will spud in mid-2019. So they will have to get funding sorted before spud, then. The farm-out may well include participating (a free carry?) in drilling this well. Therefore, on this timing, I think we could expect a farm-out to be announced by the end of March, perhaps early April.

key phrase is 'funding optionality' - industrial (farm-out) + capital markets (debt/equity) now. So, this adds some certainty to the project getting financed through to first gas.