Member Info for Stevo12

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.

Having held for 15 years if it got anywhere near £2 on FID i would sell in a heart beat. Not that I don’t believe in the long term value of FI and I would expect to be back in for first oil, however £2 would be an irrational value.

My best guesstimate is that we drift down to 70p by end of August and rise to 80p post Navitas and Rockhopper EGMs in September and then 90-100p on FID ($1.1-1.2b market cap) with a subsequent 20% per year share price increase to first oil if all goes to plan (although not necessarily straight line).

I would probably exit in the 130p+ range at FID and buy back in pre first oil.

Nasty.

I think you are correct that we will see a dip pre FID announcement to shake out the weak. August is not going to see any meaningful news flow and i would not be surprised with a drift down. September will then see activity with the Navitas meeting to approve the $700m equity raise and Rockhopper EGM. October should hopefully see the bank approval and possibly FID post FI approval.

With December elections and Purdah, i do think this needs to be signed off by end of October.

SpaceH

Although i am very much looking forward to dividends, Rock will be debt free in mid 2032. Divs could start in 2031 if RKH carries approx $300-400m of debt.

There are significant cash outflows in 2028 to 2030 on phase 2+ as production ramps up to over 100K BOPD.

FI tax policy is independent of UK and oil profits will be taxed at 25% plus a royalty. Projected to raise £3b from Sealion alone.

Harbour were clear on acquiring Premier that their policy was to invest in established production in proven basins which could then be expanded through near field opportunities. A greenfield investment in FI was not in their sweet spot. Real shame as we could have been cash flowing $700m pa net by now from an investment of a 1/5th of the WD acquisition. Navitas have stepped in and will be handsomely rewarded. Equally Rockhopper is doing very nicely thank you very much.

Sorry did not see earlier posts

LTT

I think the 32k BOPD is Navitas share of production. 65% of 50k BOPD would equate to 32.5k. The real revenue starts flowing through the phase 2 ramp up.

Kerching

If you look at the segmental note in the interim statement you will see that approx 95% of operating profit is made in UK and Norway. Norway rate 78% and Uk effective rate about 85% for Harbour. Norway profits roughly double UK and so blended 80% looks about rights.

Very little profit from Argentina at the moment due to local gas pricesL LNG investment will significantly improve profits by accessing international gas markets.

Scandalous though!

Chattingbull

What are Harbour suppose to do? Ed and Kier are hell bent on following Thatcher’s playbook on Coal and closing down the North Sea. If the government though taxation and licensing is preventing new field development, what does Harbour do with its UK exploration and development teams.

While everyone talks about a headline rate of 78%, it is really much higher as interest on debt and ABEX costs are not deductible against the EPL (as they are in Norway).

Jack

I was assuming strong FCF generation post the half year with Triton now producing which will take Serica into zero net debt ASAP.

I am certainly expecting net debt to be zero by year end with a cash build in 2026. I think we will see a buyback programme in 2026 unless their a significant acquisition.

JEBR

Thanks for doing the analysis. We should however be mindful that NPV10 discount rate is an industry standard to enable comparability across multiple projects. The actual discount rate applied by the market in valuing RKH future cash flows at first oil and FID (weighted average cost of capital) will depend on debt/equity mix, cost of debt and the beta on the equity. The WACC of UK NS groups (Harbour, Ithaca etc) are in the 11-12% range.

The NPV valuation also includes the cash flows from phase 2 and surprised that, in total, capex for phase 1 and 2 was a little over $2b - i was expecting something higher. I do think by first oil the share price will start to reflect the wider NFB opportunities and concur that £2+ is realistic.

At £2 per share on first oil, market cap will be £1.8b with debt of approx £400m, so EV of £2.2b for 250m barrels of oil. A value of around $11/ barrel for oil in a relatively low tax environment is very reasonable and compares to $20/barrel in North Sea pre EPL. So could well be higher.

While I agree with Denis that the presentation included a lot of “jam tomorrow”, I did take away a number of positives, namely:

1. C.Cox is bring real operational discipline which was sadly lacking by previous senior team. Getting the basics right around maintenance and operational performance may not be that sexy, but an essential platform.

2. The number of high value field extensions available which HMG will effectively fund 85% of development costs with revenue hopefully coming through in a lower tax environment.

3. Serica is a relatively safe bet in NS with no debt, much lower cash cost per barrel than competitor companies (really important if oil does go down into $50 territory) and ability to maintain production in 45-50k BOPD range for many years to come.

4. Serica pulled the plug on Enquest merger as deal did not work for Serica shareholders.

5. The poor due diligence or misrepresentations of the Tailwind transaction were revealed: Tailwind tax losses can not be used against BKR profits and significant under maintenance of the Triton platform.

In terms of exit, my gut feel is that mid to late 2026 will be optimum time with bumper 2026 cash flows coming in and hopefully clarity on the tax regime post EPL. In the meantime 10% dividend yield and hopefully at least a 50% upside in share price from here.

While I feel that RKH could have raised more funds from LTH’s and with insurance monies, RKH are raising approx $30m more than needed, I am going to support management. Sam after years of underperforming has performed a blinder over last 12 months.

The big takeaways for me from last couple of weeks is that FID is now highly probable (never thought i would say that!) and we are probably going it alone to phase 1 first oil. If a third party was coming it would have been pre this funding round. No financial need for a third party post funding unless to accelerate phase 2 or fund other Falkland projects.

I am still concerned that there is very limited depth in the Navitas team to be operator (a role they have never done before) and would have felt more comfortable if it was a Harbour like company managing the development phase. However we are working with highly experienced sub-contractors who are performing the majority of the work.

Happy

I don’t think the announcement of FID and the new placement shares being available to trade will be concurrent. It will take at least a few days to release the cash from escrow and issue shares and register them.

There is inevitably some uncertainty remaining over FID and announcement of FID will remove that uncertainty which will translate to a share price increase- how much no one knows but should be at least 10%.

You are right that there could be selling over the next few months as placement shares are flipped and share price action depends on II appetite. Hopefully this will all settle down after 6 months post FID and then a steady rise as pieces come in to place with a big step on first oil.

I agree with others than phase 2 will receive FID pre first oil and this will require another equity raise probably in early 2027.

If I am reading the Navitas announcement correctly they are looking to raise $700m to fund theirs and 2/3rds of Rockhoppers development costs. This implies that Rockhopper will be required to fund $92m.

Accordingly not sure why Rock is raising $140m now plus the cash in bank and insurance proceeds. Navitas are looking to complete their fund raise in September - surely Rock could have waited a couple of weeks to get insurance monies confirmed. There has been mention that Rock will need to deposit $25m for decom costs (presume Navitas would need to deposit $50m) and not sure if this is part of the increase in cost to first oil of $1.65b.

Feels like Sam has been very conservative in raising $140m now which is fine, but obviously very dilutive.

SpaceH

The $1.4b to first oil was reconfirmed in the June presentation and the $1.68b referenced yesterday was the first time I had seen the higher number.

I spoke to Canaccord this morning and the placement was fully subscribed before yesterday’s announcements with monies in escrow account. Imperative that Rockhopper demonstrated that they have funding in place. 100% gain for the “Jonny come latelys” with no risk - great work if you can get it. This has cost the LTH approx 20-25p per share but it will be in the rounding if Sealion opens up a new basin.

My understanding is the $1.8b (£1.4b) valuation is a fully de-risked valuation and while FID is a major hurdle (risk) removed, there is still risk that there will be problems with the development or the oil to does not flow in the volumes expected. This risk will only be removed on stabilisation post first oil.

Croft

I fully agree with you that when Rockhopper gets to first oil, the share price will have started to reflect the other substantial opportunities.

My valuation of sea lion only was the recent NPV10 valuation of £1.4b / 920m shares (post dilution) translating to £1.52 on first oil. This will be discounted back to about £1 at FID to reflect development risk and time value of money etc. If the market requires a higher discount rate than NPV10 then value will fall but this should be about right on a blended cost of capital. Price on FID may go higher due to hype etc.

I have no idea what value will be ascribed to Isobel and other opportunities between now and 2028 but this will happen if Navitas demonstrate appetite to grow NFB .

I have not contact Sam. I have however contact Canaccord directly. My point was that if shareholders are contacting Sam they can ask him to instruct /request that Canaccord give existing shareholder the opportunity to participate in placing.

In comms with Sam, we can ask that Canaccord ( the bookrunner) gives current shareholders the opportunity to participate in the placing.

I have contacted Canaccord today to enquire as to the lot sizes and process to participate in the placement.

There may be a minimum investment of £100k+ but i will post the response when received. I would certainly like a piece of the action!