Member Info for Stevo12

Citizen

I think you have hit the nail on the head. I had not considered that project cash flows post first oil will be net of phase 2 capex, but on reflection this is probably right which will result in Navitas loan being repaid over a longer period.

I would prefer the phase 2 FID to be signed off ASAP but possibly after first oil which will result in Phase 2 CAPEX starting a few months post first oil. More importantly I am comfortable that Sam has got this under control.

I cannot see a farm out in the near future - if it was going to happen it would have happened over the last 6 months.

I could see a potential farm out as Sealion approaches first oil in 2027/28, but for non-sealion licences. I certainly would like to have a US mid-cap on board ASAP for both political cover on development experience.

We have a clear roadmap to phase 1 with equity in place and hopefully $1b senior debt to be signed off shortly. However scratching my head a little on how RKH funds phase 2+ if 85% of the cash generation goes to repay Navitas loan of circa $200m (which will take approx 8 months) alongside senior debt amortisation and interest.

I assume RKH can borrow on their own against future cash flows.

Thoughts?

Agreed SEK but I don’t think Enquest will agree to acceptable terms unless they are forced by their bond holders.

This will reach a critical point in 2026 when Enquest seeks to refine their $600m plus debt (the refinancing needs to be done at least 12 months ahead of the debt maturity in Oct 2027). If oil price continues to fall in Q425 and 2026, Enquest will be in a very difficult position and could end up with the bond holders calling the tune and we know how that dance ends.

If an Enquest merger does not happen, which would be a great shame as there are bags of synergies, there will be other opportunities for Serica. We just need Triton to be back on full production for £2

Alma

Navitas are required to fund $707m of the $800m equity to first oil, plus a $50m deposit to FIG.

They are siting on $200m+ of cash and should be cash flowing over $400m per year from Shenandoah alone. The Navitas team know what they are doing and the $300m raise to be approved on Sunday will be sufficient, together with current and future cash generation, to meet their obligations.

The senior debt providers would not be progressing if they were not comfortable that RKH/Navitas can fund their $800m share.

Alma

A refinement on your note. The $800m equity funding will be cash funded $93m by RKH and $707m by Navitas. RKH then repays $186m to Navitas from proceeds of oil sales.

In addition to the $92m equity funding, RKH will need to deposit $25m with FI in case the development programme is abandoned. There are also other cash costs including exiting Italy and potential FI tax payment on first oil as well as ongoing overheads. RKH should hold close to $200m in cash at Fid with a $50m+ safety blanket.

We should have more clarity on Navitas funding at the weekend.

Many industry observes are projecting oil in the $50-60 range in 2026, while gas prices are projected to remain relatively robust.

This may leave Serica in a unique position to drive consolidation as other group’s and PE led businesses struggle to keep their heads above water and refinance. Enquest will need to refinance its $600m+ debt by October 2026 and may struggle if they are negative cash flowing in 2025 and 2026 and funders of other O&G companies will potentially push for consolidation. There are few O&G companies in Serica’s position with effectively no debt, a gas business that will be spinning off cash and an oil business with a low FCF break even.

2026 will undoubtedly present some really interesting opportunities for Serica to acquisitively grow production. A major positive reshaping of EPL will give other UK O&G companies some breathing space, but $50-60 oil is going to be a real challenge.

Serica feels like a good place to be.

LTT

You are correct. The $800m of equity ($100m RKH and $700m Navitas) will be spent first before the $1b debt facility is drawn down. This will be a requirement of the facility. As Navitas loan to RKH is interest free, RKH should not be paying interest until 2027.

Happy

Apologies a typo on the debt number. I meant $1.4b and not $1.7b. I took the $1.4b from the 30 June 2025 Q2 filings by Navitas and it is their gross debt. I think the presentation included the 31 March 2025 debt figure.

I used unrisked NPV for Sealion as the potential future end game valuation once phase 1 is in production and phase 2 in development and compared to current valuation to arrive at an estimate that current RKH share price is at a 40-50% discounted from the unrisked value. This was to highlight the potential increase in value as each risk is removed (FID, production volumes and reserve quality and quantity etc).

Agree that I have over simplified by just using Shenandoah and the key issue is that NPV10 is an arbitrary discount factor used by the sector for comparison and is not a prediction of how the market will value Sealion or Shenandoah. The actual discount rate applied by the market for sealion may be higher or lower than 10% and depends on the interest rate on the debt, the debt/equity split and the equity risk.

Marlon

In your comparison of Nav to RKH you are missing out the debt held by Navitas of approx $1.7b which results in Navitas having an Enterprise value of approx $5b. Based on RKH market cap, the current value of Sealion to Navitas is approx $1.3b resulting in their other fields, primarily Shenandoah, valued at $3.7b (excluding debt).

The NSAI NPV10 valuation of Shenandoah was $3.8b, similar to the unrisked Sealion valuation of $3.6b. Clearly now that Shenandoah is in production the field is largely derisked and market value looks close to NSAI NPV 10.

My conclusion is that the current RKH valuation is at a discount of 40-50% to the unrisked value at first oil proving a potential value for Sealion of £1.35-1.60 once phase 1 in production and phase to FID signed off. I have no idea as to value Mr Market will place on wider basin.

The tax liability relating to the premier oil free carry does not crystallise until after first oil. It understandable that RKH are trying to resolve it now while they have leverage, however i cannot see it delaying FID. The liability as i recall is $44m and RKH recognised 50% in the 2024 financial statements and i am sure there is a deal to be done with FI as the free carry fell away as Harbour withdrew.

This is an irritant but not a deal breaker.

NastyN

My guesstimate for FID is late October.

1. Rockhopper Equity raise - completed with cash in bank and only subject to rubber stamping at EGM

2. Navitas equity raise - Pretty much a done deal with approvals and commitments formalised in early September

3. FI sign off - the timing of the election has been deliberately pushed back to December to allow FID in early Q4.

4. Senior debt - the equity raises would not have progressed unless the banks had given very positive noises. Due diligence must be fairly advanced by now with negotiations of terms progressing - interest rates, repayment terms, security etc.

Confirmation of Navitas equity raise in September will be a further confirmation that bank financing is also progressing satisfactorily.

We must now be in the 80%+ probability of FID happening with bank financing the only real hurdle.

There has been comment on a couple of BBs that Ithaca has invested $23.5m in an upstream O&G company and RKH has been sited as a potential.

The Israel connection is there via Dalek but the timing does not look right to me.

Larger shareholders who have participated in the placing will not be able to apply for the OO. What percentage of current shareholding that were invited to participate in private closing is anyone’s guess. However it will provide some additional shares for us plebs.

I am sure everyone invited would have participated in placing.

Happy

You are correct that Premier’s financing plans were linked to UKEF but the Tories decided to not offer export finance guarantees to OG which scuppered the Sealion project. Not surprisingly Labour has not changed the stance re supporting overseas O&G projects. The pending Navitas FID has no reliance or expectation of UKEF and UK government have no involvement in FI O&G policy.

The financing is totally standalone and will be judged on its own merits. Of course the UK could threaten to remove military support but this would massively backfire due to the strength of public opinion and the FI lobby.

Hope you are all well and I still read the Enquest board on an occasional basis to keep in touch. I sincerely hope I will reinvest in Enquest in the not too distant future and in the meantime i continue to hold Enquest bonds. I will not comment on Enquest specific matters while i am out, but just wanted to add to Aimoil comments on EPL.

The key to amending /replacing EPL will be the OBR forecasts. If the OBR projects that EPL will create a deficit within the 5 year forward window then the Treasury will be more likely to take action. However we need to recognise that the reduction in core and EPL tax paid is largely the fall in oil prices, as opposed to much lower production (it takes time for production to be impacted by reduced investment). Accordingly OBR forecast of future oil and gas prices will be key.

The challenge is will the U turn happen before irreversible damage caused. Oil industry has proven in the past to be pretty agile.

Keep your chin up Kraken!

Trying to get back on topic. Are there any compliance/ regulatory differences between and open offer and a rights issue? And why would we need a Rights issue.

Given RKH have announced a small OO, this could surely be expanded if the conditional rights was voted down. If the insurance claim is agreed/paid i really don’t see the immediate need for the conditional placing as the cash is not required to support FID. If the OO was expanded (with a small delay) it should have no impact on FID as monies not needed and will provide additional headroom.

Also with price somewhere between today’s price and £1 on FID, an OO at 53p would be massively oversubscribed.

Come on Sam, reward those that have supported you over the last decade+. If the insurance proceeds are received pre EGM, I will vote against conditional placing.

Happy

There will still be some risk of FID not happening reflected in the current price. We have probably gone from a less than 25% chance of FID 12 months ago to possibly 75-80%+ as we stand today. There is still risk that the funding package is not secured, Navitas equity raise does not come through, world war 3 breaks out, Argentina kicks off etc. Hopefully all unlikely but there will be a discount until FID is secured.

Post FID i agree with your progression to valuation at first oil with 2P reserve and production flow rates confirmed and phase 2 receives FID.

I would not rule out another bite at Enquest. There has been an increased divergence in share price performance post the merger being aborted and Enquest will be struggling to cover cash costs at sub $70 Brent. Should oil price softness continue into 2026 with potentially low $60 or god forbid $50 oil, Enquest will struggle and will need a partner with cash reserves that can refinance its debts. A merger always made good operational sense and Enquest creditors may be in a position to push for a merger in mid to late 2026.

Watch out for Enquest 1/2 year update

Building on Londoners comments, my first point of call is to assess whether the dividend yield is attractive and sustainable. The $1b FCF for 2025 looks secure for at least the next several years with 2x cover in 2025 and $0.5b less capex in 2026 and beyond. This provides a lot of headroom for oil and gas price volatility and while 2025 and 2026 are not looking like great years for commodity prices, the medium term outlook for oil and gas prices is positive.

It certainly looks like Harbour can grow dividend by 3-5% per year (excluding buybacks) and repay $0.5m pa of debt and hybrids for next 3 -5 years minimum. Each $0.5b debt reduction should add approx 25p to share price. So without any major events there should be a steady as you go dividend and share price increase providing an approx 20% pa return.

There are also some major potentially positive momentum shifts: clarity on post EPL tax regime, buyback of a major slug of BASF shares, oil price moving back North, Mexico development, Argentinian LNG. There is certainly a large decom liability out there and at some point this will come clearer into focus, but $0.5b per annum cost is very affordable for next several years (which HMRC pays 40-50% of).

Overall i am very happy with HBR holding and should be a nice steady earner for next few years. Linda has always been conservative and while i think we overpaid for WD assets, it was an essential move for Harbour.

There are also a few potential negatives out there and while I hope and pray for a just end to the war for UKraine, European gas prices would likely fall even with a modest level of Russian gas flowing into Europe.

Ralph

A US mid-cap would have also been my preference taking say 10% from RKH and 30% from Navitas for a fully funded carry to first oil.

This would have been less dilutive than the private placement and have brought an experienced partner to the party with US connections. However if this was going to happen it would have happened 6 months ago. Maybe another opportunity post first oil.