Member Info for longtermthinker

I have just read Mexico has approved Zama to go ahead, but can't help wondering why Sea Lion was dropped for this!

Harbour will pay $0.5B for approx 22k barrels a day when Zama reaches peak production in 2029/30. This is of course if there are no delays from Pemex, which going by their track record it highly unlikely.

When you consider Harbour would have had 40% of Sea Lion with 30% Navitas and 30% RKH, they would have had 32k barrel per day with the new project plan and it would have cost them approx $0.5B to first oil, and if you look at the new possible timeline of first oil in 2027, that's a good 2/3 years sooner than Zama.

With the above in mind, with Navitas ready to accept 30% on a more expensive project (from the PMO days), it stands to reason that another player is highly likely to join the project. Probably taking 30%, cannot imagine Navitas giving up 35% and operator status as is would be like musical chairs for the FIG and would look not look good IMHO.

LTT

Thanks Mogger,

it reads that although the UKGov is no supporting oil development via UKEF in the FI, they are also not hindering it either,

"The UK Government regularly discusses development of a Falkland Islands hydrocarbons industry with the Falkland Islands Government and is working with the Falkland Islanders to ensure they can access UK expertise."

I wonder what they have been talking about, as Ian Ramsey would no doubt have the connections and access to UK expertise through his years in the industry.

LTT

Hi Ovets, I totally agree, I recently attended a talk by the curator of The Museum of Failure, which along with German spray on condoms and fat free Pringle’s that gave you explosive diarrhea ( which was rephrased as Anal Leakage ) they had some Bic Pens that were branded as Her, pens for women, which were pink, had glitter and where twice as expensive as general pens. The curator brought up an interesting point (which is the point of this off topic post) why did nobody speak up about such a bad idea? In a huge organization such as Bic, where the idea would have past through many research groups to get the market, why did nobody say anything. The issue is fear of standing out, going against the consensus, being ridiculed for not being onboard. What sort of environment would that be like to work in! No physiological safety.

So conspiracy maybe, but most likely stupidity.

LTT

Yes, hopefully RKH lawyers have been busy making a list and checking it twice! I mean, let’s face it, they have had since August when RKH won to get started on it, after all their dealings with ROI they must have been pretty sure they would try for the annulment so no excuses.

With a bit of luck they will have some big price tag items that would cause maximum embarrassment/inconvenience to ROI. Maybe take a leaf out if Cairns book didn’t someone say they went after diplomats properties?

Fingers crossed. Surely the arbitrators must look on Italy in a bad light after all the stunts they have pulled, plus more recently,

“ Italy has refused to comply with the Panels instructions. ”

They should pull the Stay and the requirement to put the assets in a Bank, they should let RKH lawyers go for it and let ROI stress about recovering anything they MIGHT be owed! IMHO

LTT

So we go back to the dark ages, literally if we relay on wind and solar after cancelling all new exploration in the NS whilst China and India grow unrestrained! Then when the lights are flickering because of the push for electric cars have caused the national grid to collapse, we start importing expensive energy from overseas to take up the slack.

You couldn’t make it up! Oil and gas from the NS can help with the transition and keep the lights on while we do it, no need for knee jerk reactions, just to win votes. We went down that rabbit hole a few years ago and look where we have ended up! Do we really want to make the same mistake!

LTT

Good evening SpaceHoppa,

Yes it’s interesting that Navitas have mentioned bringing someone in prior to FID, Sam had said it wouldn’t happen until post FID. Of course things change and maybe Navitas has tested the water, passing the hat around and come up a little short and thus to get the funds in, they need another player with cash to get the ball rolling so to speak. To be honest I always thought a 3rd party would be involved, not many oil companies would take on the risk of 65% even of a sure thing, as we all are well aware it’s so easy to grasp defeat from the jaws of success, just as Desire, Fogl, Argos and PMO to name but a few!

Like you I gave an ISA full of RKH that can happily sit until first oil. Let’s face it, OM, FID, will start the share price rise, but when RKH is getting 28k barrels a day @ $70+, 365 days a year, well we can all do the maths, but let’s just imagine what the share price could be when the dividend is around the current share price!

Happy bank holidays everyone.

LTT

Hi Space,

well we will defiantly hear prior to the AGM that's for sure, even taking into account the 30 working days and then adding on the 10 days for Italy to respond. I cannot imagine the talks if any have been had would have gone the wire of 30days, they would either have agreed, which means we should get news sooner or they haven't and ROI are already in their 10 days window in which to make comment.

Either way there is plenty to be positive about, either ROI have agreed with RKH on a bank where seized assets will sit once the Stay is lifted, so RKH lawyers get started OR ROI have spit the dummy and RKH has still suggested a bank where seized assets will be placed until the annulment proceeding are completed. Which sort of begs the question, why they had to ask ROI to be involved in the process in the first place, unless of course they wanted give the ROI the chance to pony up the cash to put in the bank so they wouldn't suffer the embarrassment of having assets seized!

Still it would be great to hear that ROI has deposited 260+m Euros in a bank account so once the annulment is complete it is just a bank transfer away from RKH account. Then it will be happy days, being able to fund our share of pre-FID costs thus negating the need to pay 8% interest during the next 3 years of development.

Get a partner in too and what happens to the share price then? I wonder if Ithaca Energy will come onboard, surely they are being hit by the EPL like Harbour. I know they are focused on the UK, but with Hunt saying he stepped up the plate giving households energy bill relief and will do it again if necessary, how can that be good for investment in the UK energy sector, plus the spectre of Labour getting in and taking the EPL further doesn't bode well. Could Harbour come back to the fold? Unlikely I know, but with them pinning their hopes on Mexico and Zama, yet Pemex who are operator are struggling with overruns on their Mega Oil Refinery, that has got to effect where funds are allocated going forward!

Linda we regret not keeping Sea Lion I am sure.

LTT

The bottom line is you can’t, maybe if they drill and had a discovery they could get bought out by a bigger player, then you would get a percentage depending on what percentage of JHI you own OR they could re-list in the future but that is way, way down the line I’m afraid. Drilling in the North Falklands basin most likely won’t happen till 2026 or later. Possibly something could come of their acreage off Guyana but they are waiting for other players to drill to ride on their coat tails. IMHO Story of Falkland’s Oil exploration all over, always waiting on someone else!

Good luck whatever you decide to do.

LTT

DEM, Thenorseman, totally agreed, they are lining up for a partner and have someone in mind no doubt. Say they were to let someone in to take 30%, someone with deep pockets that would be $400m they wouldn’t have to find, what cost to farm in to 30% of the whole acreage? $100m ? $200m? Or maybe some funding at 0% as Navitas has done for RKH, say offering to fund 50% of development costs at 0% in return for their 30% of SL and the surrounding acreage!

I am sure those clever people at Navitas will come up with something. So FID 2024, that means a partner comes in this year! Nice.

LTT

Hi PortStanley, I was thinking the same, we are a couple of weeks away from an OM update that says that RKH and ROI have agreed a bank with whom they will deposit cash/assets OR ROI won't play ball and RKH has selected an a bank where it will deposit seized assets until the outcome in 1stQ 2024! Surely that would affect the share price to the positive as it removes most of the risk of getting paid once the decision has been made.

There were many on here saying "We might have won the case but how do we get the cash?" then, "We may win the annulment but then it will take years of court cases trying the seize assets!". This would put that argument to bed.

Unsure if the committees statement in the RNS meant 30 working days or just 30 days i.e. one month. The reason I mention it in because normally they would state working days as previously, but in this instance they said 30 days, as they did when they gave a break in the interest on the 190m, they said 4 months, not XX amount of working days. So we could in theory hear something as early as next week.

LTT

Hi Portstanley,

Sorry if I got it wrong, I thought I’d read or heard somewhere that FID had offered to pay towards defence from oil revenues. Maybe I’m mistaken.

So we are maybe in the hands of the Home Secretary!!!!! Gosh may the Lord help us! 😉

LTT

Thanks Mogger, DEM,

My only concern is that UKGov involvement will delay things as they couldn’t organise a drinks party in a brewery IMHO and are most likely to either kick the can down the road or just steer clear in the anti fossil fuel environment.

Do UKGov have any say in whether FIG can go ahead with oil development or not? Surely FIG offer to share costs with UKGov for its defence would convince them to sign off on things.

Regards

LTT

Maybe they are wanting some sort of insurance or backing but cannot see this Government or the next for that matter offering it. Oil is well off its highs and yet the Gov hasn’t done anything about the EPL that is killing the NS and causing companies to think hard about further investment or to invest elsewhere.

Labour wants even higher rates with no tax breaks on drilling so how can the current government even consider looking at any support for the Falklands! Also even if the current Gov offered to underwrite it, Labour would just rip up and agreement later. Very shortsighted if you ask me, but it would be political suicide to touch it with a barge pole!

LTT

Hi Croft,

I'd like to think after they have done the development drilling on Sea Lion they would drill a few exploration/appraisals on Isobel and Elaine to firm up a development plan going forward, particular when Isobel and Elaine could be another Sea Lion or bigger. With regards to FID on nearby targets for tying into the SL development, I presume they will need an FID on further drilling and tie-backs (think about the current situation in the NS with FID getting knocked back or not happening due to the EPL), but it would be a no brainer to sign off on things as the infrastructure is close at hand, it's not like a full blown new development.

In the recent RKH presentation they talk about drilling a further 5 wells post first oil about 42months later, I imagine this is to offset natural decline to add to production as the they are saying a plateau production of 80K with a peak of 100k, so they will have to get an FPSO that is more than capable of managing those kind of numbers. I believe Thenorseman found a possible candidate that could manage that sort of production.

If you look at the link below;

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

It's actually the 7th Jan 2020 presentation showing how PMO/Navitas/RKH were going to develop Sea Lion. (If covid hadn't come along what might have been!). On page 11 it has a graph showing phased development. I haven't compared it to the latest RKH presentation but there are similarities to the specs and plan that's for sure. This is why Navitas are motoring along, the lions share of the work has been done, Ian Ramsey will be just fine tuning with his team, confirming rates with suppliers and then depending on where Navitas are with getting the cash, getting ready to green light the project.

Hope that helps, hopefully someone with more knowledge that I can fill in the gaps as to what's involved as per your question.

LTT

Hi CitizenTS, yes it appears to be so,

"2: that Rockhopper shall, within 30 days of the date of the decision, apprise the Committee of arrangements agreed with Italy for the mitigation of the risk of non-recoupment or that negotiations have failed and, in the latter event, propose concrete arrangements in accordance with the decision for the mitigation of the risk of non-recoupment."

So reading it again, it seems that the Committee are asking ROI and RKH to come to an arrangement and if they cannot, then RKH has to say how they will ring fence the assets that RKH lawyers will go after so they cannot touch the money/assets until the annulment outcome 1st Q 2024. Presumably in an escrow account of RKH choosing and in a jurastdiction that is preferable to RKH and their lawyers.

Then the Stay will be lifted and RKH lawyers can start going after ROI property or assets where they see fit. No doubt they will have a list of low hanging fruit and easy pickings they can start with.

It should all start to get interesting from the middle/end of June.

LTT

Sorry just posted my school boy error, exchanging £1 = €1 which it obviously does not, so it's more like 22p per share, but you get the drift.

LTT

Whilst we are in this limbo of waiting for the next step with OM, will they or won’t they set up an Escrow account to shelter seized assets from the clutches of RKH’s Board or will they not be able to agree and thus RKH and their lawyers are unleashed. Also while we wait for further news from Navitas who are no doubt beavering away lining up the ducks ready for FID (Fingers crossed).

I thought I would hypothesize as to where the share price COULD be by the end of March 2024, which lets face it, is not that far off once the AGM is out of the way at the end of June! So part one is if we presume that we win the OM annulment and the assets/cash is sat in escrow and therefore it’s a simple case of withdrawing the full €265m (which would be €247m asked for in August 2022, plus approx €18m accrued this past year at €1.5m per month). If we say we keep 75% of that we would have €198m. Of course there will be tax to pay no doubt, but for this exercise let’s say we are €150m clear. Now that’s 25p per share in cash.

So what value do we add on for Sea Lion and the surrounding acreage? At the moment almost nothing. Our current market cap is £77m and I would attribute at least 50% of that to the pending OM result, so that would be 25p + 6.5p = 31.5p per share. I have to say that’s a pretty good share price to have after being out in the wilderness for pasted 3 year where we haven’t seen a share price much above 16p.

But what of Navitas, are they going to keep quiet until 1st Q 2024 and then say FID is done? Would that be worth double the 6.5p I added earlier for announcing FID? So we get to 38p per share, Once the rig is on its way to drill development wells, what would that add to the share price?

It’s all guesswork, sentiment at this current time says Sea Lion is unlikely to happen, that the OM award is going to get annulled or it will get halved or quartered. However if Navitas announce funding is underway; a rig contract is booked, the chances of this going ahead look up dramatically.

I won’t go into the numbers of what we could be worth at first oil, but if we make it to that point as shareholders still with our 35% intact and €150m to pay our share of Pre-FID costs and a good chunk of our Post-FID costs, then £1+ could easily be surpassed. That's a heck of a return from today's share price. IMHO. Good luck to us all.

Regards LTT

Thanks Auson, I'd forgotten about that Environmental Impact PDF, just shows the extensive work PMO actually did and hence why Navitas are able to steam ahead with things. They basically have all the information they need to press the FID Go button. I wonder if any of the quotes PMO got in pre Covid are still valid? Sure Ian Ramsey is on the case as we speak. I don't think he gave up his 17 year career at Murphy Oil to be sat on his hands!

LTT

hi arp1, i agree with most of your points, however i don't think (just my opinion) that the stay will stay, the wording in the rns seems to point to the stay being removed either way, the only difference being if the roi and rkh agree on an escrow with an international bank (outside of italy), then any assets seized will be ring fenced in that account. this is so rkh can't spend anything until the annulment in ruled on, as the concern was, a small company like rkh might seize assets, liquidate them into cash and then sam and the board go on a ****** to vegas and blow the lot! thus roi might have difficulty recovering the amount, if any, that was annulled.

;-)

so, imho the ball is in roi court, they can agree to the escrow and have assets seized, but safe, or they can protest, stamp their feet and spit the dummy and have assets seized and rkh can start spending.

also with regards to the 33p per share, we would be due a bit less that that as i think sam said on a $100m win we would owe roughly 35% to the funders, so we would keep approx $165m give or take, still an impressive sum indeed, far more than the $45m i had hoped for as a good outcome.

regards

ltt

Hi Buffit, your guess is as good as mine I’m afraid. Common sense dictates that should ROI not agree on an Escrow account to put assets, then the Stay would be lifted (although it seems it will be lifted either way, just at the whether RKH can get their hands on the cash now or after the result on the annulment in 2024).

So if the Stay is lifted in 30 days plus 10 because ROI won’t play ball , then RKH lawyers can start taking assets. Surely this would mean RKH market cap would increase by the assets acquired, particularly if not held in escrow.

But then when has common sense prevailed in the stock market! All you have to do is look at Harbour for that, is Linda kicking herself having walked away from Sea Lion, if she isn’t now, she possibly will be if Sea Lion starts producing in 2026 as Navitas are suggesting.

LTT