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If you look for Premier Oil, Sea Lion on Linked in you can see there’s been a wave of people hired since around May for the Sea Lion project.

If this article is true, it could have substantially good or bad ramifications for Rockhopper. The article mentions that Premier is considering selling “some or all” its “Latin American” businesses for pay for Chevron’s fields in the North Sea. In my view, if only its Mexican licenses were sold, that would be massively positive as the massive uptick in Premier’s production would make sanction of Sea Lion far simpler. If, however, it were to put Sea Lion up for sale, there would be enormous uncertainty—although of course a lot would depend who bought it! In truth, overall, I’m a little skeptical about much of this happening: 1) (and probably most important): Premier are unlikely to win the auction as they are up against other bidders with deeper pockets. 2) If Premier did win the auction, selling Sea Lion would be tricky, as the purchaser would have to take on the large development carries owed to Rockhopper. As such, Zama is more likely to be sold, but even then it would be tricky as appraisal is ongoing. 3) any effort to purchase the Chevron assets via a rights issue would probably run into a wall of opposition from shareholders (it would be massively dilutive). Nonetheless, the story could well have an impact on the two companies’ share prices next week....

Premier Oil, led by Tony Durrant, in cash call for North Sea fields The debt-laden explorer Premier Oil is preparing to tap shareholders for cash to help it buy about $1.5bn of fields in the North Sea. Premier is in the running to pick up fields being sold by US oil giant Chevron and is believed to be considering a rights issue or share placing to help pay for them should it win the auction. Industry sources said chief executive Tony Durrant could sell all or part of its Latin American business to help pay for the deal — and minimise the size of any share sale. Premier’s shares have slumped from 500p in 2011 to less than 80p last week, valuing the company at below£650m and making an equity fundraising a tough sell. Premier has made it past the initial round of bidding for the Chevron assets, but faces tough competition. It is understood to be vying with the private equity-backed Chrysaor, the Israeli conglomerate Delek and Sir Jim Ratcliffe’s chemicals business Ineos. The $1.5bn price tag is roughly twice Premier’s market value. Observers believe the company could make the pitch that the Chevron package would allow it to transform its sprawling portfolio into one more centred on the North Sea — where it has a huge reservoir of tax credits — and chart a quicker path out from under its $2.3bn (£1.8bn) debt mountain. The auction is part of the latest carve-up of the North Sea, as challengers pick over fields being discarded by established firms. Premier produces 80,000 barrels of oil a day from fields in the UK, Pakistan, Vietnam and Indonesia. Its Latin American arm has stakes in exploration licences in Brazil, a 25% stake in the Zama block off Mexico, which is believed to have more than 1bn barrels of oil, and a share ADVERTISEMENT of the Sea Lion project in the Falkland Islands, which is thought to contain about 520m barrels. Ratcliffe is also in talks with ConocoPhillips over a separate package worth about $2bn. It is believed that his interest in the Chevron package will depend on whether or not his Conoco deal goes through. His exclusivity period of three months is understood to have been extended by one month as talks continue amid volatile oil prices. Premier declined to comment on “market speculation”.

Premier Oil, led by Tony Durrant, in cash call for North Sea fields The debt-laden explorer Premier Oil is preparing to tap shareholders for cash to help it buy about $1.5bn of fields in the North Sea. Premier is in the running to pick up fields being sold by US oil giant Chevron and is believed to be considering a rights issue or share placing to help pay for them should it win the auction. Industry sources said chief executive Tony Durrant could sell all or part of its Latin American business to help pay for the deal — and minimise the size of any share sale. Premier’s shares have slumped from 500p in 2011 to less than 80p last week, valuing the company at below£650m and making an equity fundraising a tough sell. Premier has made it past the initial round of bidding for the Chevron assets, but faces tough competition. It is understood to be vying with the private equity-backed Chrysaor, the Israeli conglomerate Delek and Sir Jim Ratcliffe’s chemicals business Ineos. The $1.5bn price tag is roughly twice Premier’s market value. Observers believe the company could make the pitch that the Chevron package would allow it to transform its sprawling portfolio into one more centred on the North Sea — where it has a huge reservoir of tax credits — and chart a quicker path out from under its $2.3bn (£1.8bn) debt mountain. The auction is part of the latest carve-up of the North Sea, as challengers pick over fields being discarded by established firms. Premier produces 80,000 barrels of oil a day from fields in the UK, Pakistan, Vietnam and Indonesia. Its Latin American arm has stakes in exploration licences in Brazil, a 25% stake in the Zama block off Mexico, which is believed to have more than 1bn barrels of oil, and a share of the Sea Lion project in the Falkland Islands, which is thought to contain about 520m barrels. Ratcliffe is also in talks with ConocoPhillips over a separate package worth about $2bn. It is believed that his interest in the Chevron package will depend on whether or not his Conoco deal goes through. His exclusivity period of three months is understood to have been extended by one month as talks continue amid volatile oil prices. Premier declined to comment on “market speculation”.

It's a fascinating topic this, and one that will garner increased attention as we enter Q2. Apparently, Rockhopper are claiming 275m euros (see link below)--albeit the exact figure has never been confirmed by Rockhopper--so 50% of that would still be an enormous sum...

https://www.primadanoi.it/news/abruzzo/578091/ombrina-mare-adesso-rockhopper-chiede-risarcimento-record-da-275-milioni.html

One of the many intriguing wrinkles in this case--believe it or not--is Brexit. Notably, Spain are refusing to abide by an earlier Energy Charter Treaty judgment because of a European Court of Justice ruling that an EU company should not be able to take another EU country to court via the Energy Charter Treaty (arguing that EU laws are consistent, so there is no need for a third party dispute mechanism). It's an argument that's been rejected by the judges at the ICSID, but it would provide a legal shield for Italy to hide behind if it chose not to pay out after the ruling. Unless, of course, the UK is not in the EU.....

Personally, I'm not remotely for Brexit--and I'd rather not stir up that hornet's nest here--but, like I said, it could provide an extraordinary twist.

Sea Lion is $35/b, but $45/b including a 10% IRR. To see where Zama sits in terms of its break even, there’s a great chart on slide 24 in the below presentation https://s22.q4cdn.com/446717946/files/doc_presentations/2018/11/Talos-Energy_Jefferies-Conference-vF.PDF Zama is fantastically placed on the chart (and Sea Lion not too bad either). The decision for Premier is what they forecast for that oil price. The top rate of profit tax for the block in which Zama is located is around 69%, and there’s a royalty too of course. In the Falklands the profit tax is only 26% (there is a royalty there too of course) but the break even is higher (as previously mentioned). In short, if Premier expect oil prices to remain relatively weak over the long term (c.50-60/b max), it makes more sense to go with the lower break even of Zama and perhaps try to sell Sea Lion. If they are expecting the oil price to be persistently above $60-65/b, Sea Lion looks potentially more profitable—in which case they may be tempted to sell Zama instead. Nice dilemma to have in truth....

I had mentioned on this board that I had very recently spoken to Rockhopper and been given the strong impression that nothing is imminent, so none of this is a surprise. It is damned frustrating that things are going ao slowly, but not too surprising. I've been told that they are still aiming for project sanction this year so let's see where we go from here. If that looks like slipping, then I may too walk away, but it's only early January right now.... As for the rest, it's actually very positive. The falling through of the Civita sale to Cabot is a big relief. Although it means decommissioning costs down the road, cash preservation is key and as such the revenues from Civita, and the $1.3m we won't now be giving to Cabot, is pleasing. It also helps explain why year-end cash is net $35m (incl accrued Sea Lion costs) rather than $30m as previously indicated. And with another oil discovery in Egypt and the clear failure of the Italian ministry of environment to stop the ECT court case, the rest of the update is actually quite positive. On Sea Lion, I think I'll wait and see what Premier say in their extensive year-end results in March before making any big decisions on my Rockhopper holding. All IMO...

Anyone got an Upstream subscription? https://www.upstreamonline.com/live/1665870/premier-hires-ensco-for-north-sea-drilling

Cheers garbs

Great minds, Giblets!

One possibility that could expedite sanction is a farm-in I guess. Although Premier have said that they would prefer to get finance in place first, the potential for a farm-in by BW Offshore (who are bidding on the FPSO) fascinates me.
I wrote this on the PMO page a week or so ago:

"For me, the only plausible near term trigger for SL is BW Offshore (who run the Catcher FPSO). BW Offshore are bidding for the Sea Lion FPSO contract, and have a stated desire to buy stakes in fields in which they are also providing the producing platform (they already have two to three operated fields under development). But pure speculation on my part."

Just to refinforce the point, BW Offshore's Q3 presentation states that:
"The general energy complacency and investor pressure on conventional big oil is providing opening for new companies with a different “view”
Discovered oil deposits of < 200 million bbls can be bought at fairly reasonable prices (USD 3/ bbls)"

Clearly they are shopping around....

Interesting insight; thanks Surfit. Regarding your comment on the lack of established infrastructure in the Falklands, Premier Oil put out an ad in the local press a little while ago for local businesses to participate in the supply chain/logistics support, and FIG are allotting some space for equipment. I can't find the advert now though unfortunately.

Oil price is back above US$55/barrel (US$56/b in fact). I'd be interested to get others considered opinion on this, but in my view (and based on Premier's previous comments), US$55/b is the absolute minimum for Sea Lion to even be considered to be approved (TD had stated a year or two back that Premier were looking at $55/b as a minimum, and for it to remain above that level for a while). Above $60/b I'd see Sea Lion sanction as likely in 2019, and above $65/b it is a slam-dunk.
Of course, below US$55/b, or a very volatile price that goes regularly above and below that level, would in my opinion put Sea Lion back in the freezer.

FYI, Sea Lion is $25/barrel to produce, including FPSO lease costs. Including financing (lending) costs, total lifetime field costs are $35/b. I still am struggling to see how on earth Premier will raise the finance though. The talks with the ECAs have been going on for ever, with no murmurs that they are close to competition. For me, the only plausible near term trigger for SL is BW Offshore (who run the Catcher FPSO). BW Offshore are bidding for the Sea Lion FPSO contract, and have a stated desire to buy stakes in fields in which they are also providing the producing platform (they already have two operated fields under development). But pure speculation on my part....

I've been told that we are "likely" to be getting an update on Sea Lion early in the new year. I'd assume on January 10th, as that is when Premier has its next trading update scheduled....

On the possible 50% reduction in damages because of Rockhopper's failure to do due diligence, I do wonder if Rockhopper have a defense against that: 1) the law banning oil developments less than 12 miles from the coastline was only reimposed after Rockhopper bought MOG. 2) the Italian ministry of environment actually signed off approval of the OM development in late 2015--which I think is further than MOG ever got. The only stage left was the Ministry of Planning, which was supposed to be a mere rubber stamp. However, the government then reimposed the 12 miles law.... Anyhow, who can guess which way a court will go. I was looking at research over past ECT cases and it appears that there are a whole range of outcomes possible (including the claimant's case being accepted but no financial compensation awarded). So, in short, I'm expecting nowt, but keeping my fingers crossed. Happy Christmas everyone; here's hoping for good fortune in 2019

It is kinda nuts in my opinion, but under the ECT they are actually entirely entitled to chase compensation for lost profits. According to the Italian press Rockhopper are seeking €275m https://www.google.com/amp/s/www.primadanoi.it/news/abruzzo/578091/ombrina-mare-adesso-rockhopper-chiede-risarcimento-record-da-275-milioni.amp

Hi giblets. Premier have hedged about 30% at around that price, but that leaves the other 70%....

I spoke to the company today as to why we had yet to receive an update on the delay to FID and was told that Rockhopper are focused on the sanction date, not the FID, and as such they felt it does not require them to provide an update. I'll leave you to make your own judgment. I did appreciate them getting back in touch though. The big problem is the low oil price currently. That slows down Premier's debt repayment which means they are less disposed to spending real money on Sea Lion. My hope is that Premier can swap some of their holding in Sea Lion for a producing asset (such as one of Chevron's that it is selling off in the North Sea?), which would provide regular revenue to put towards the development. But there's no rumours of such a thing currently. Here's hoping for a big Ombrina Mare compensation award; anything on Sea Lion would frankly be a bonus in the next few months...

Bought a few more here myself.