Falklands : Conditional £Billion for Falklands’ oil
Submitted by Falkland Islands News Network (Juanita Brock) 12.07.2012 (Article Archived on 26.07.2012)
Rockhopper Exploration has announced that it has entered into a conditional farm-out agreement with Premier Oil plc
Conditional £Billion for Falklands’ oil
By J. Brock (FINN)
Rockhopper Exploration has announced that it has entered into a conditional farm-out agreement with Premier Oil plc ("Premier"), regarding the Company's interests in its petroleum licences in the North Falkland. Potentially this could mean Premier acquiring 60 per cent of Rockhopper's interests in its North Falkland Basin licences. The deal could also include US$231 million upfront cash payment on completion of transaction, US$722 million Sea Lion development carry (net to Rockhopper), US$48 million exploration carry (net to Rockhopper).
Premier Oil would also provide standby financing arrangement at Rockhopper's election to cover any additional development capex beyond the development carry of US$722 million and become operator of the Sea Lion development.
The Area of Mutual Interest ("AMI") would be reserved for future co-operation in the North Falkland Basin and analogous plays in South Africa, Namibia and Southern Mozambique and Rockhopper would take sub-surface lead on exploration activities.
Details of the Transaction
Premier has agreed to farm into 60 per cent. of Rockhopper's interests in its licences (being PL023, PL024, PL032, PL033, PL003 and PL004, thereafter the "Licences") in the North Falkland Basin including the Sea Lion development and adjacent discoveries, Casper and Casper South ("Development Area") and would assume operatorship of the Sea Lion development, located in licences PL032 and PL004b
Premier Oil has agreed to pay Rockhopper an upfront cash consideration of US$231 million, payable on completion of the Transaction ("Completion") and would be committed to carry Rockhopper's portion of development costs in relation to the Development Area up to the first US$1.8 billion of gross capital expenditure (US$722 million net to Rockhopper) (the "Development Carry")
Rockhopper has the option to fund any further development costs beyond the Development Carry through an arrangement with Premier described below (the "Standby Financing Arrangement"). Alternatively, Rockhopper can independently source third party financing for this portion of development costs if it so chooses
Premier and Rockhopper have agreed to undertake a front end engineering and design study to optimise the Development Area, targeting submission of the final development plan by H1 2014 with a view to bringing the Development Area onstream in H1 2017
On Completion, Premier and Rockhopper will also enter into the AMI agreement in relation to future joint exploration activities in the North Falkland Basin and certain areas of offshore Southern Africa containing analogous plays to Sea Lion (Namibia, South Africa and Southern Mozambique)
· Premier has agreed to fund the first US$120 million gross expenditure (US$48 million net to Rockhopper) related to further exploration activities on the Licences or in the AMI area (the "Exploration Carry")
Rockhopper to take sub-surface lead on all exploration activities in the AMI area, thereby leveraging the Company's existing knowledge and expertise gained in the North Falkland Basin
Details of the Standby Financing Arrangement
Premier will make available to Rockhopper an optional standby financing facility. In the event that Rockhopper chooses to draw down on this facility, Premier will take an enhanced share of entitlement production and cash flows from the Sea Lion and related fields. The enhanced share will continue until Premier has realised a 15 per cent. post tax Internal Rate of Return ("IRR") on its investment (defined as Premier's working interest share of capital expenditure plus the amount of the drawn standby financing facility). Thereafter, cash flows will be shared pro-rata to equity interests. If costs exceed the approved development project budget by more than 10 per cent., the entitlement production share due to Premier will be adjusted to deliver a reduced 12 per cent. IRR on incremental funds drawn by Rockhopper from the standby financing facility to fund the project overrun costs.
Completion and Approvals
The proposed acquisition is expected to complete in September 2012 after satisfaction of customary closing conditions (including the approval of the Falkland Islands Government).
The Transaction is subject to capital gains tax in the Falkland Islands.
Sam Moody, Chief Executive of Rockhopper, commented:
"I am delighted that we have been able to secure such a high quality partner for our work in moving the Sea Lion development forward - Premier have an outstanding track record in developing and running producing assets and also have significant international experience. This is an excellent transaction for the company and its shareholders. It helps crystallise the value of our discoveries in the North Falkland Basin area centred on the Sea Lion field, as well as providing the funds to examine further the remaining potential of our acreage in the region. The transaction also presents the opportunity to pursue other exploration prospects in countries where there are geological similarities to the Falkland Islands and where our sub-surface skill sets can potentially create additional value. We are very much looking forward to beginning our work with Premier."
Further information can be obtained at:
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11262774
|
