Member Info for longtermthinker

To be honest I don't care how long it lasts, a £150m award after paying the funders would re-rate the company to roughly 33p per share, giving ZERO value to SL, the potential of the acreage and the signing of Navitas, thus taking care of all our pre FID cost. I will take half my cards off the table and leave the rest to ride on the spinning wheel of fate! although if Navitas signs up before then, giving a clear strategy of their way forward, AND the FIG have given some TAX breaks to the project, I might just be tempted to leave some more skin in the game!

If FIG give some ground to get this show on the road, then it's game on for sure.

LTT

o In the event of a positive FID, Navitas will provide an interest free loan to Rockhopper to fund two-thirds of Rockhopper's share of development costs (for any costs not met by third party debt financing).

I was under the impression that in my example $1B project, that would leave $350m for RKH's share, so one third of that would be $120m presuming they couldn't get any third party finance. So if they could get 3rd party finance for say $200m, then am I right in thinking RKH would be covered for 2 thirds of the remaining, which would be $100m funded by Navitas and $50m to be found by RKH?

Thanks in advance.

LTT

Hi CitizenTS, I cannot imagine RKH would have any trouble to get some sort of loan to cover their third of 35% of total costs which on say a $1B development would be about $120m. Now wishful thinking could give a $200m OM result, then after paying the funder we are in the clear, however even if we only get £30m in costs back, which would mean half for the funders, leaving us with $15m, it would keep the wolf from the door, then we are carried through to FID.

On a positive FID yes we would have to go cap in hand either for a loan or a share issue, but the share price would be a good bit higher than today if FID was done and the project was sanctioned. Plus we wouldn't have to give the £120m in one go, it would possibly be well down the line leaving us some breathing space. If the project had got FID and was going to project sanction with a share price of 55p, I'd be up for Moody raising cash by the issue of 300m shares giving share holders the options to get than at 50p, particularly if we still have our 35%, because once the oil starts to pump we would be awash with cash, thats for sure, and I'd much rather have a tasty DIV than paying back a loan with 85% of our production.

Anyway my current feeling is Sam went down to the the Falklands to discuss some incentives to get the ball rolling, he said as much in the MercoPress article;

"""Moody admitted that “it’s the financing that’s the key log jam with Sea Lion; and so I’ve come down to meet with the Government to try and see how we can help to facilitate that transaction going ahead.”""

As for dragging this out past March, again I cannot see it. Harbour want out, Navitas want in and RKH will want to keep the licences past November, AND more importantly want Navitas to take over pre-FID costs, so what reason is there to stretch this out any longer than necessary ? I can't think of any.

LTT

Maybe they were waiting for Italian President Sergio Mattarella to be sworn in, can't really issue a bill when you don't know who is in charge!

No excuse now I think, we should get to know sooner rather than later! We live in hope/a dream world! (delete where appropriate).

LTT

I was thinking the same LaticsRule, but we have to also consider, Sam and RKH haven't been able to converse with FIG on any issue since PMO, then Harbour took over. I know it's a bit of a cop out, but once PMO became operator, RKH had to take a back seat in all discussions.

Now Sam is back talking directly and face to face I might add, maybe the discussion has turned to tax and incentives to get the ball rolling. All Sam has to do is say, "Look, PMO were getting this almost over the line prior to covid with UKEF on board, but now that ship has sailed. Harbour have given up $100's Millions by walking away. So if you seriously want to get this project off the ground, then the ground has to shift in some way. Look at Guyana tax giveaways, they have been flexible to encourage development. We have an oven ready project ready to role, but the sticking point is finance, nobody wants to come all this way and invest Billons only for the price of oil to drop and profits disappear."

Ok maybe he wouldn't say that, but if it doesn't happen now it's never going to, all FIG have to do is offer something, like no royalty payments until the project is paid off, or a sliding scale on royalties that go up and down with the oil price, thus insulating against oil price volatility. There are a number of ways they could be fexlible to get the show on the road, the big question is how much do they want the development to go ahead?

LTT

Damned if he does damned if he doesn’t! I’m not sticking up for the man, but if he hadn’t said anything we’d all be moaning “Why no update?”, then he does do an RNS saying the deadline has being extended ( although to me it’s stayed the same! End of Q1) informing us in a round about way that Harbour are still fortunately picking up to tab until they have signed out and Navitas are signed in , and all looks set for signing by the end of March.

We can’t blame him for the market seeing it as a negative! We should be thankful to hear Navitas is still keen to be on board as oil hovers around $90 and looking set to stay there or at least in the $75-$85 range for some time into the foreseeable. It bodes well for getting this show on the road although not so fab for rig costs and securing an FPSO!

Let’s hope it’s onwards and upwards, Feb is a short month!

LTT

I suppose they could, but it would be a risk.

But what if RKH did a fund raise and got £5m to tide them over until OM result. It could take another 6 to 12 months to come through, so that's 6 to 12 months of waiting, and I can't see FIG extending the licence's past 1st Nov 2022 if Navitas are still not signed on the dotted line waiting for RKH to fail!

No, my money is on 1st Q Navitas signed on or sooner, there is not advantage to letting RKH fail, may as well keep them on the hook for their eventual share of development and further exploration of Isobel etc. Plus Sam will have cemented his relationship further with FIG having just flown down there for face to face meetings, in this Covid age of Zoom meetings. I would have thought he needn't have gone, he could have easily made excuses and nobody would have thought any less of him with all the hassle of travel; PCR tests, quarantine etc. But he went, so RKH must be seen in a good light and pushing to get the show on the road as far as the FIG goes.

LTT

I wouldn't read too much into the drop, the whole market is down with fears of Russia going in to Ukraine. Anyway this is RKH, 10% or 20% drop is neither here or there! If there was significant volumes traded today to take this down, with Sam due back in the office tomorrow then I would be more concerned as it might be a signal there was a stumbling block to the signing, such as Harbour won't agree to set aside funds for Dock Decomm. But this volume is just shaky hands letting go of a few, most likely those buyers who got in a 6 & 7p. IMHO

LTT

I emailed him a couple of weeks ago. He said he was down in the Falklands having various meetings. Not sure if he is still there or is back in the UK, but anyone who emailed him would have got a similar reply, I was just enquiring where we were at with with Harbour and Navitas, etc.

LTT

Hopefully Sam is dotting the "i" and crossing the "T" on the contract to get Harbour out and Navitas in as we speak, why else would he be in the Falklands having meetings. It's a heck of a trek just to say hello!

LTT

I have just been reading through some old RNS's and found this below;

"" In addition, the effective date of the farm-in proposed in the January Heads of Terms will now be amended from 1 March 2020 to the date on which the Falkland Islands Government approves Navitas becoming a licencee (targeting late Q3 or Q4). In turn, Premier will fund Rockhopper's share of the remaining pre-effective date costs, with interest accruing at 12% per annum, which, on completion of the farm-in, will be rolled into the Standby Loan.
The previously announced Standby Loan (which will be available from Premier to cover Rockhopper's share of production area licence fees and any Capital Gains Tax liability) will now attract interest at 12% per annum (previously 15% per annum). ""

Could this be the sticking point? Could Harbour be after the past 2 years of incurred costs they have paid on behalf of RKH paid back at a rate of 12% interest per annum?

Not sure what those costs would be as they effectively mothballed everything from April 2020, but even a couple of million with interest at 12% could wipe out our cash reserves and cause an urgent fund raise.

If they go for a fund raise, I do hope they can do a small enough amount to get us to signing the deal with Navitas and limit dilution, but then they would also have to consider the possibility that OM result could go against us (as unlikely as that seems) or they string it out for another year, so it would have to be large enough to keep us in the game come what may.

LTT

My money is on Cairn with their Indian cash coming in or Delek, whom would have the cash, connections and clout to get the show on the road. It would show a real confidence in the project getting someone like Delek in and then getting funds wouldn't be a problem a all.

Cannot see any issue with Navitas farm in/becoming operator, this has been on the cards in one form or another since January 2020, so if FIG had any objections surely they would have come to light by now.

LTT

Hi Surfit, I would imagine that’s the plan. The new dock is being planned for, not sure if it’s signed off, still under discussion or is being built as we speak, but it would take a couple of years either way from now so can’t imagine them getting rid whilst it’s still useful and if it still has some life in it, it makes sense to use it to get things going on SL in an expedited fashion!

With oil prices in the high 80’s( hopefully won’t go too much higher as that can have many negative effects) there is good reason to get things cracking especially with many forecasting tight markets for many years to come.

LTT

I think the issue will be the dock decomm, Harbour may want to walk away scot free, but Navitas won't want to be on the hook for that cost whenever or at least 65% of it when it arises, and why should they be, Harbour strung us and them along throughout Covid and then at the eleventh hour just said no! It's just not good enough to just say we inherited it from PMO and we don't want it anymore, PMO had responsibilities.

I wonder in the current climate if Harbour are not thinking they made the wrong decision and are changing their mind! Can they actually do that? Could Navitas take on the 65% then allow Harbour back in to the tune of 25% this reducing their exposure! Ok probably not, but Harbours share price is 18p in old PMO money and they seem to be stuck in a rut, and with Toulmount still not on line!!!!! In a way I am glad PMO are not still in charge otherwise they would be kicking the can down the road AGAIN!

LTT

Thanks for the refresher DeusExMachina, interesting read, plus the 5k raising to 10k barrels per day would have been nice to have! So that will be the numbers they are working with for the OM award, but is all depends when they start the hypothetical production from, do they do a average of barrel per day over X amount of years, working in some down time?

All very interesting.

LTT

Hopefully a reasonable payout of £100m after lawyers/funders fees would re-rate us to 32p+ then any predator would hopefully offer 45p/55p+ which of course would be nice after the dark times, but would no way reflect true value once Navitas is signed up; a partner comes on board; FID done and project is sanctioned! Particularly if that happens without a fund raise/share issue due to an OM award and basically being carried to first oil bar what, 11% percent of total development costs to fund ourselves, then rest is covered interest free! And up to FID fully funded at a rate of 8% all to be paid back out of production. What’s not to like!

So as must as it seems appealing , wouldn’t want this long shot outsider to stumble at the last fence.

LTT

Well I suppose if you are getting FIG to sign off on Harbour out and Navitas in, it might have been common courteously to head down there for a face to face before FIG sign off on a Head of Terms that could change the islands for ever, if Navitas intend to walk the walk and crack on with things, but covid have put that on the back burner no doubt.

LTT

Hi Portstanley, that is a contentious issue. At the investors meeting Sam was asked about this (from my memory) he said something like, they have paid the initial $40+m in tax as part of the cash they received upon PMO's farm in, however the remainder was to do with the free carry part of the deal which was deferred to first oil. Now the issue is, FIG believe they should get that payment, but RKH is saying, "How can we pay tax on something we have never received, as the project is not going ahead so the free carry was never received!".

There was mention of if it came to the crunch they could go to a British court to resolve the matter, but it's shouldn't get that far, it's just a matter of understanding.

Hope that helps.

LTT

Sorry meant to say, " I'd like to think Sam, Harbour, Navitas and FIG are in confab as we speak, ok maybe not sat around a table in the Falklands during these covid times, but zoom meetings are the norm these days so there is no reason they cannot be on with that now."

Because the FIG are really the kingpin in the mix, if they agree to harbour out and Navitas in, then it's game on, if for some reason they don't want Navitas to be involved or they have a greener mandate and therefore don't want any oil development then all bets are off! Can't see that happening but who knows!

Better keep our lawyers in a retainer after OM, in case we need them again eh!!!!!!
;-)

( said with tongue very much in cheek!)

LTT

Hi Much, all I can think of is people are jaded and any gain is a way out, particularly those who have lower averages or were lucky enough to get in on a punt in the 6 & 7p lows.

I was convinced Harbour would sign up to SL and would be planning for FID by now, how wrong was I! So there will be those who feel RKH will get a meagre payout or nothing at all and then there will be an inevitable drop in the share price. Basically the expectation is that defeat can always be plucked from the jaws of victory as far as the Falkland's oilies are concerned!

However, my own feeling is they might just possible do it this time, the stars are aligning and they have stayed the course despite the odds. Going by the timescales that Harbour had 3 months to take a pi55 or get off the pot, I'd like to think Sam, Harbour and Navitas are in confab as we speak, ok maybe not sat around a table in the Falklands during these covid times, but zoom meetings are the norm these days so there is no reason they cannot be on with that now. Harbour must be wanting to get off the hook for costs, also they will be in the frame for the Temp Dock decomm, at least 60% of it, so that will have to be part of any agreement. Either Navitas and RKH take it on, but if no monies are exchanging hands, why should Navitas take on that cost, so more likely Harbour (with it's cash cows of NS) will have to put some money in an account ready for their share of Decomm costs, which will arise hopefully at a later date, hopefully 2/3 years down the line.

Anyway went a bit off track there. With a bit of luck we could get news at any time on Navitas taking over as operator or OM award coming in, either of these events would be the start of RKH's transformation from Ugly Duckling into a Swan!

LTT