Member Info for rpoodle

I must be mad but I bought a few. I’ve seen this kind of activity before, and it’s often accompanied by a (short-lived) price increase. Any meaningful news would be a mega bonus, of course…

$500/day sounds about right to me. The cost of the rig hire might be around half that, but add in the accompanying staff and logistics (including helicopter) and it probably works out to that sum (or perhaps even slightly more).

Just a quick thought: the “technical work” mentioned in the context of Jamaica might refer to the sea bed testing etc that is usually done as part of an Environment Impact Assessment (necessary for regulatory approval ahead of drilling a well). This won’t happen until/if a farm-in is finalized (presumably the farmee will be the operator). I’d expect a license extension to not be a problem.

Listened to the webcast. Comments regarding Jamaica were significantly more upbeat than in the past. “We are very glad to say that we’re coming towards the end of the process.” Time will tell, of course, but a farm-in feels materially closer than indicated previously. If it does indeed happen, then the identity of the partner will be the critical factor.

I’m a holder here, but am a tad concerned about the company’s cash situation. The higher oil price doesn’t mean much if Egypt doesn’t pay up (in dollars)—and its currency/foreign-exchange situation is pretty dire right now. It would be good to get an update from the company, so we can get some clarity on this point.

Yeah, look like the 1m trade was a sell, and the 2m was a buy. Similarly, there’s another 1.45m trade that’s popped up too, which also looks a buy

Things may change, but a placing at this time seems highly unlikely. Companies that are flagging potential share buybacks clearly are not pondering placements—unless, as I said, the situation changes markedly (e.g. the Maria sale does not go through).

I bought a few more. This has to be one of the most undervalued stocks on AIM. It produces oil (profitably), has a few million coming in from an upcoming asset sale, has a possible mega farm-down opportunity, and will most like be debt free by the end of the summer. And all yours for seven million quid.

Lots of fear here, but I bought a few at 1.05. It feels there’s actually more upside risk than downside in this instance.

I remain convinced that the tax bill to FIG will be dropped. After the farmin with Premier, Rockhopper were on the hook for two tax payments: one for the cash element (which has been paid); and the other for the development carry (which has not been paid). However, of course, almost all the development carry was never provided (as Premier never got to FID), so by all rights Rockhopper should not be required to pay the tax bill. After all, why should they pay tax on monies they never received? I’m a bit baffled, to be honest, why this tax liability persists, but I remain convinced it won’t ever actually happen.

I’m still digesting all of this, but the element that is front of mind right now is the compound interest element of the award.
Although repeatedly mentioned in the past, for whatever reason I had never pondered its implications.
The level feels fairly punitive to me (4% over Euribor), which may in part reflect the irritation of the arbiters at the constant delaying tactics of the Italian lawyers during this case.
Whatever the case, the interest rate provides a small measure of deterrence to Italy, and reassurance to RKH. Personally, I retain the point of view that Italy will refuse to pay up (especially keeping in mind the likely make-up of its next government). Whether Italy seeks an annulment is more uncertain—as we all know and as the RNS said, there are not many avenues to try that route.
But, whichever route it chooses, the longer Italy does not pay, the more expensive the award becomes. And this is where the money that Rockhopper raised comes in handy. Because Rockhopper has sufficient cash to sit and wait, while Italy thrashes around. All the while, Rockhopper will be getting over €8m a year in receivables (i.e. compound interest owed by Italy).
The compound interest figure may also help Rockhopper if it seeks to sell the award to a third party (such as a “vulture fund”). The length of time this could take to play out might be a deterrence to someone “buying the award” from Rockhopper, and thus it would be common for the buyer to demand a hefty discount. In this instance though, the more Italy prevaricates, the bigger the award becomes—so, arguably, a long wait is perhaps a positive.
All in all, this is a big bloody deal, and I’m not selling until the share price is a chunk higher than the current level….

This is an extraordinary result. The actual figure, if you include compound interest at 4% annually over six years, is €240m. Congrats to all!!!!

Final section:

In a statement, the Falkland Islands government said that it supported oil production “provided it is done to the necessary standards”. It said it was too early for definitive plans on how oil revenues would be used. “However, the Falkland Islands have significant infrastructure renewal requirements,” a spokesman said.

Esther Bertram, chief executive of Falklands Conservation, a charity that is devoted to protecting the island’s wildlife, said that the group did not oppose all oil development but wanted additional environmental safeguards, including new laws, protection for inshore waters and funds in place for any remedial work required.

“I think it will be quite interesting to see what happens because in the recent elections many voters talked about the environment being one of the big issues for them,” she said.

While some Falkland islanders may hope that the deal with Navitas will bring their dream of riches closer, others will remember that much has been promised before, and that much hangs on the oil price. Rockhopper and Premier calculated that the Sea Lion field had a breakeven cost of about $40 a barrel, well below the current $100-plus.

“I think there is a much higher chance of it happening than at any time in recent years,” said Werner Riding, oil and gas analyst at Peel Hunt, Rockhopper’s broker. “It will have a motivated new operator in Navitas, and they should be able to finance it. It is a good-sized resource and by the time they reach the final investment decision they will have confidence on proven reserves. At a $100 oil price it is definitely bankable.”

And on it goes….

Harbour was less interested in the Falklands, and in December it withdrew, with Navitas taking its place. When the deal closes the Israeli company will take a 65 per cent share of the field, with Rockhopper keeping 35 per cent. Rockhopper raised $10 million this month to help to fund its side of the agreement.

Tadmor, who has separate interests in film production, including the 2016 movie Norman, starring Richard Gere, said that the Israeli group had been tracking the Sea Lion field for some time. “We were interested going right back to when Premier got involved,” he said. “It is a perfect fit for us. We like situations where there are challenges, and we have a track record of making things work in difficult places.”

According to Tadmor, much of the hard work has already been done. “Premier and Rockhopper together have spent a lot of money on the development. We will refine the production concept, but basically we see this as getting an asset which is already a long way down the road.”

Navitas also brings access to an interesting source of funds: Israeli investors, who Tadmor says are eager for more access to oil and gas assets. He dismisses opposition to new oil and gas fields on climate change grounds. “The truth is that the transition from hydrocarbons to new sources of energy is going to take much longer than people think, and in the meantime we will need new sources of oil and gas.”

He is also relaxed about Argentina’s denunciations. “We are aware of the conflict, but it is a UK territory.

“Our experience in the eastern Mediterranean makes me believe that oil discoveries are positive developments — if we do well then other oil companies, even the majors, will come to the Falklands.”

Both Moody and Tadmor are, understandably, keen to stress the impact that oil production could have on British energy security. “This could be big enough to replace all the oil imports the UK has from Russia,” Moody says.

It will also be a big deal for the Falklands economy. The Falkland Islands government — there is a newish administration in place after elections that took place in November last year — will take a 9 per cent royalty on each barrel produced, and will also charge corporation tax on the Sea Lion operations. “Depending on what your assumption is about the oil price, that is a giant amount of money for the islands,” Moody says, while Tadmor estimates that the first phase could triple the Falklands’ gross domestic product at a stroke.

It’s actually a bloody long article. Will provide the rest in two more posts:

If all goes according to the Rockhopper plan, and there are regulatory hurdles still to overcome, including a sign-off in Westminster, a final investment decision could be taken in two years’ time.

The Falklands has been the next big thing in oil several times in the past. Industry giants, including Shell, explored without luck in the 1990s, and there was a flurry of interest around 2010 when a rapidly-rising oil price sparked a prospecting rush.

A gaggle of Aim-quoted explorers nicknamed the “sheikhs of the South Atlantic” — including Desire Petroleum, Falkland Oil and Gas, Argos Resources, Borders & Southern and Rockhopper — raised money from investors eager to believe that riches awaited. It was a febrile atmosphere; comments on investor bulletin boards at the time showed many who bought the shares believed Britain’s willingness to fight to reclaim the Falklands from Argentine invasion in 1982 was proof enough that large quantities of oil would be found.

After that rush of activity, however, the oil price dropped and market interest fell. Rockhopper, a tiny company headquartered in a Wiltshire farmhouse, is one of those to have stayed the course, and has the licence not only for Sea Lion but other potential fields. Moody, who is Rockhopper’s co-founder as well as its chief executive, first got involved in 2004 after having conversations with Richard Visick, the one-time owner of Weddell Island, the third-largest in the Falklands. “The acreage that Shell and others had been exploring was coming off licence — it was open for someone else to come in. Richard said ‘I think there is an opportunity here’, and we set it up together.”

In 2010 Rockhopper struck oil on Sea Lion, not far from where Shell had been working more than a decade earlier. “They missed it only by about 1,000 metres,” Moody says. The discovery, which is estimated to contain at least 500 million barrels, made Rockhopper a potential target for other oil explorers hungry for promising prospects. It held talks with Cairn Energy before striking a development deal with Premier Oil, a London-listed company with interests in the UK, Mexico and Asia.

Premier paid $231 million upfront for a 60 per cent stake, with the promise to pay another $770 million of development costs. The partners predicted that oil would flow by 2017. It never came to pass, though. The oil price fell, and while Premier and Rockhopper spent money on studies and engineering work on how to bring the field into production, actual development was shelved.

Premier was distracted by problems at other fields and a shaky balance sheet. In March last year it merged with another medium-sized oil company, Chrysaor Holdings, with the combined company renamed Harbour Energy.

It’s too long to post in full, but here’s the link
https://www.thetimes.co.uk/article/falklands-black-gold-rush-might-at-last-be-a-reality-s0g3jww7p

Well, I never thought I’d see the day. The Times actually writing an upbeat article about the Falkland oil sector’s prospects!

Falklands’ black gold rush might at last be a reality

The odds are shortening on the South Atlantic becoming an energy powerhouse

The Falkland Islands’ GDP could triple and production in the nearby Sea Lion field could replace all UK Russian oil imports, say the heads of Rockhopper and Navitas, which have signed a development deal
The Falkland Islands’ GDP could triple and production in the nearby Sea Lion field could replace all UK Russian oil imports, say the heads of Rockhopper and Navitas, which have signed a development deal
Dominic O’Connell
Saturday July 23 2022, 12.01am BST, The Times
Head north from the Falkland Islands, across the South Atlantic waves where albatross wheel and whales sound, and you pass over what could be a big new oil province — a significant source of hydrocarbons controlled not by sheikhs or oligarchs, but by the United Kingdom.

The Falklands might seem an odd candidate to become an energy powerhouse. The likely presence of commercial quantities of oil has been known for decades, yet successful development has always seemed improbable. The islands were too remote, the weather too inhospitable, the cost too high.

Now, however, the odds are shortening. The Sea Lion field, which has been an on-again, off-again prospect since oil was discovered there 12 years ago, is on again. Rockhopper, the exploration venture that found it, has struck a development deal with Navitas, an Israeli oil company with a reputation for bringing difficult prospects into production. Its chief executive, Gideon Tadmor, was an influential figure in the opening up of the eastern Mediterranean as a big new source of gas, and the company recently completed a deal to develop the Shenandoah field in the Gulf of Mexico, which had previously been discounted for being in water too deep with well pressures too high.

Rockhopper’s Sam Moody says the project will “transform the economy” of the islands
Rockhopper’s Sam Moody says the project will “transform the economy” of the islands
TIMES PHOTOGRAPHER NICKY RAY
“We are closer than we have ever been to it actually happening,” says Ashley Kelty, senior oil and gas analyst at the stockbroker Panmure Gordon, who made the trip to the islands to examine the project when it last looked likely to happen. “It will transform the economy of the Falkland Islands,” says Sam Moody, Rockhopper’s chief executive. “And it is big enough to make a difference to the security of the UK’s energy supply.”

Argentina, which has denounced oil and gas exploration in Falklands waters as illegal because of its territorial claim to the islands, remains implacably opposed. Environmental campaigners have in the past also objected, although a local wildlife charity is not calling for a blanket ban.

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If all goes according to the Rockhopper plan, and there are regulato

There’s a pretty tense game of chicken taking place at the moment between Rockhopper, its bank balance, and the ICSID.
According to the ICSID rules, a verdict on Ombrina Mare has to take place by August 22, or October 22 if the ICSID asks for an extension. Meanwhile, in terms of its remaining bank balance, RKH say this (the last sentence is the key one):
“ The Group believes that a funding solution is achievable, with options including the issue of equity in addition to the potential award of significant monetary damages with respect to international arbitration proceedings against the Republic of Italy in relation to the Ombrina Mare field which declared closed on the 25 April 2022. At the time of writing, the final form and availability of funding is yet to be determined. Subject to market conditions we anticipate having raised sufficient funds by the end of Q3 2022.”
So basically, if the ICSID issues its award without the extension, RKH may be able to avoid an equity raise at the current very depressed share price. But, if the ICSID does not (and the award decision is delayed to Q4), it’s a less happy story.
One final point: I’m making an assumption here (and I believe a reasonable one) that a positive ICSID verdict would help RKH’s cash position significantly and rapidly in two possible ways. First, RKH could borrow (or even sell to a vulture fund at a discount) against the award. Second, and alternatively, a meaningful award would push the share price much higher, allowing RKH to raise equity at a less dilutive higher share price. I am NOT assuming any award to RKH would be immediately followed by Italy handing over cash. That’s not realistic in my view.
Of course RKH could also receive a negative verdict from the ICSID.
Whatever the case, it looks like the funding decision is going to go down to the wire…

I’m kicking myself for not getting back in here. We know that Borders need money, and soon. There are various best-case scenarios—ranging from a farm-in to a takeover—that may occur, to of course disastrous scenarios—simply put, they can’t raise money and go bust.
However, even in that latter case, it’s been clear to me for a long time that they will have to have a go at raising the share price (in order to minimize dilution), and that means front loading some news. Which means there’s at least a short term trading opportunity here. What that news would be, who knows, and to be fair there’s not a huge amount of new info they can share about a discovery made almost a decade ago. But we know from their half-year report that they’ve been exploring other development options, so they can at least provide some info in that regard.
Anyhow, however it turns out, all the very best of luck to holders here: you’ve balls of steel (even the girls).

Regarding financing options, I’d be quite surprised, to be honest, if Italy actually paid up. But it would be a legally binding ruling, and thus just the promise of upcoming money would be very significant—Rockhopper could take a range of options, from borrowing against the future cash payout, to selling off the entire amount to a vulture fund (or similar type of organization). Clearly the first option would mean paying an interest rate, and the second would mean taking a discount on the amount awarded (anywhere up to a 50% hit), but, critically, either option would preclude the need for a highly dilutory equity raise.
Or course, it’s probably worth not getting ahead of ourselves (we don’t even know if Rockhopper has actually won), but I just wanted to make the point that the award and promise of cash would be instantly transformational, even if Italy does not pay up.