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Just looking again at the recent Rockhopper presentation video:

https://www.youtube.com/watch?v=sEZ9D0Wsgm8

Stewart says that "Several hundred million euro" are being claimed in the Ombrina Mare arbitration.

Looking on the internet, 'several' seems to suggest greater than 3 but less than 5.

400 million Euro?

Sea Lion is an attractive investment and I would hope that many parties are interested.

If I had $800 million to invest I would offer Premier Oil a debt and equity split so that I had some skin in the production profits.

I thought that but I now think they may be some sort of housekeeping trades as they disappear later. Not sure why.

How would they make money from that?

Do they want an upfront fee or something?

It's interesting to think that the only thing in the way of this could be the UK government. This country really needs a bit of 'political confidence' at the moment.

Let's assume that UKEF refuse to go ahead but the oil price stays high. If PMO managed to offload Zama and make inroads into their debt then could they raise equivalent funding from elsewhere? I guess though that the contractor rates and loan notes may expire and then $1.5billion may be too little. :-(

Will this Sea Lion project ever go ahead ??

Great first post Fibonacci112.

You said:

"Quite what the recovery would be is open to debate - indeed, there is to be an arbitration on it."

I know that these ECT awards are in flux and the EU is trying to get their member states to relinquish and defer etc.

(The EU are clearly going for a federalist superstate with national absolution, but that is another topic of discussion!)

Assuming Rockhopper win the arbitration and are awarded a defined sum, how do you see events going from there?

Sounds encouraging.

I haven't an account but the Google search says:

"Premier Oil and Rockhopper Exploration are expected complete bank mandates in Q2 2019 for the financing of the $1.5 billion Sea Lion oil ..."

Giblets, I agree that electric cars may not be very close, but I know that there isn't much appetite for oil investment at the moment. The more help Sea Lion gets from the participants, the more likely it will go ahead.

Another way of looking at it is from an investor's point of view:

Currently at a $62 per barrel oil price there would be about $27 revenue from the $35 per barrel field costs.

The 9% royalty at $62 is $5.58 which reduces that $27 to $21.42

An investor will naturally worry what would happen in a low oil price though.

At $45 per barrel oil price there would be about $10 revenue from the $35 per barrel field costs.

The 9% royalty at $45 is $4.05 which reduces the $10 to $5.95

That's risky if you are putting in millions.

It makes much more sense for FIG to make this attractive by moving their tax take to later in the production.

I'm sure PMO have been discussing this, but it definitely makes sense to put all the tax reduction up-front. That way this project has the most chance of going ahead.

If FIG hold-out for a fixed Royalty Tax and it doesn't go ahead, then no-one will have any revenue. Electric cars etc. may make this a dead-in-the-water project unless it gets going soon!!

I still think a definite win-win could be designed here if FIG adjusted their flat 9% Royalty Tax.

Here's an example:

Field production 400 million barrels
The first 70 million barrels at a 0% Royalty Tax
The subsequent 330 million barrels at an 11% Royalty Tax
Royalty Tax Revenue then equivalent to 36.3 million barrels

(The current Royalty Tax Revenue at a flat 9% of 400 million barrels is 36.0 million barrels equivalent)

It would be the same overall revenue for FIG, but for the first few years investors will see an increase in the revenue by circa $6 a barrel at the current oil price. It's a 20% uplift in profit or thereabouts which would give confidence to investors that they will be repaid.

I think that it may be enough to kick-start this project.

Anyone agree?

200,000 I meant!

Two large trades of 519,391 and 200,00 as buys today.

Nothing has changed on the website as far as I can see.

If you are a prospective investor for the fundraising for Sea Lion then you will want to be sure that you will be repaid.

If you are the Falkland Island Government then you want Sea Lion to go ahead because it will be transformational for the finances of the Islands.

So, how can the chances of FID be increased?

The FIG Royalty Tax on oil production is very competitive, but from where we stand now any costs on production will reduce the confidence that the project will be able to repay its raised investment debt.

So, to increase this confidence, how about the idea that FIG offers that the first XX million barrels can be produced completely free of tax. After that, production is taxed in such a way that the revenue to FIG will be the same or even larger than now over the project lifetime?

The result being that FIG get more money and any prospective lenders have more confidence in the project.

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Good find Fecm.

It's the only 'Recent Notable Matters' he mentions without numbers in it though.

I do hope that is because they are about to be released!?

Would Rockhopper have a legal claim for Monte Grosso I wonder?

I didn't think about Monte Grosso but i see it is 23% working interest. ~250 mmbbl oil prospect (resource) and 23% chance of success.

Yes, the upside is there with this share.

I agree it looks good and your points about the assets are good ones Redon.

The question then is, how much of one's portfolio should be sensibly allocated to this?

That's where the Kelly Criterion can at least help.

I reckon 12.5% or thereabouts. Anyone agree?

DYOR

Auson, Yes I think the Kelly Criterion is very powerful in certain situations like this.

If we can semi-accurately calculate the figures then we should know if this is a compelling investment or not.

If as you say the share price will only halve if things don't turn out in 2019, then A=0.5
If we assume only a 20% chance of FID, then W=0.2
If we assume a 4 fold profit on success to £1.21 per share, then B=4

Plugging that in we get an optimal investment at 20% of portfolio.

(Above is only a guess so everyone please DYOR).