Rockhopper: operational and corporate update

Sea Lion Phase 1, North Falkland Basin (RKH 40% working interest)

The front end engineering and design (FEED) process continues to make good progress with the technical engineering phase of FEED approaching conclusion. During 2017, the focus will shift to the commercial, fiscal and financing elements of the project. Engagement with Falkland Islands Government (FIG) on a range of operational, fiscal and regulatory matters is expected to continue through H1 2017.

Rockhopper notes the recent announcement by Premier Oil in relation to its proposed refinancing. Rockhopper believes the completion of Premier’s refinancing will significantly enhance the discussions around the financing of the Sea Lion development.

Abu Sennan, Egypt (RKH 22% working interest)

The work programme and budget for the Abu Sennan Concession sees the imminent drilling of both an exploration and a development well close to the Al Jahraa and Al Jahraa SE fields (over which a new development lease was awarded in Q4 2016) during the first half of 2017.

The exploration well, Al Jahraa-SE2, which is due to spud in March 2017, will target the AR-C reservoir in the fault block immediately to the south of the Al Jahraa SE field.

On completion of the exploration well, the rig will move directly to Al Jahraa-9, which is a development well expected to spud in May 2017. This development well targets the AR-C reservoir at a location deeper than the current deepest oil penetration at Al Jahraa-4 (no oil water contact has yet been encountered in the field) thereby aiming to prove additional reserves. The well also seeks to demonstrate the connection between the Al Jahraa and Al Jahraa SE fields through the oil leg. In addition, the operator has proposed two work-over operations during Q2 2017.

The outcome of operations in H1 2017 on the Abu Sennan Concession will determine the activities during the second half of the year.

In addition, the Company notes the recent announcement by Kuwait Energy in relation to the farm-out of a 25% interest in the Abu Sennan Concession. The Company has confirmed to Kuwait Energy that it waives its right of pre-emption in relation to this transaction. Whilst the details of Kuwait Energy’s proposed farm-out are confidential they nonetheless re-enforce the attractive terms on which Rockhopper entered the Abu Sennan Concession last year.

Ocean Rig settlement

As set out in the Company’s interim results announcement on 14 September 2016, the operators of the 2015/16 North Falkland Basin exploration campaign entered into arbitration with Ocean Rig in relation to the termination of Eirik Raude rig.

The Company can now confirm that a settlement has been reached between the operators and Ocean Rig.

Year-end 2016 cash position and 2017 capital expenditure guidance

As previously disclosed, Rockhopper’s year-end 2016 cash balance was approximately US$80 million (unaudited). Adjusting the year-end cash position for Rockhopper’s contribution to anticipated North Falkland Basin exploration campaign close out costs and the settlement with Ocean Rig, keeps Rockhopper’s adjusted year-end cash balance in line with the Company’s previous guidance of US$60 - 65 million. In addition to the year-end cash position, Rockhopper’s Egyptian General Petroleum Corporation (EGPC) receivable balance as at 31 December was approximately US$4 million.

2017 development, exploration and abandonment spend is expected to be approximately US$13 million, of which US$8 million relates to pre-development activities on Sea Lion, US$3 million to exploration and development activities in Egypt and US$2 million to abandonment costs. The abandonment spend principally relates to the decommissioning and removal of the Ombrina Mare tripod – the cost of which Rockhopper will seek to recover through an international arbitration process of which a further update will be provided shortly.

Appointment of Senior Independent Director and Board committee changes

Following the retirement of Bob Peters from the Board effective 31 December 2016, Keith Lough, currently non-executive director and Chairman of the Audit and Risk Committee, has been appointed Senior Independent Director.

In addition, the composition of the Board Committees has been reviewed such that each of the Audit and Risk Committee and the Remuneration Committee will now comprise: Tim Bushell, Keith Lough, John Martin and John Summers. Keith Lough remains Chairman of the Audit and Risk Committee and Tim Bushell remains Chairman of the Remuneration Committee.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/08022017/rockhopper-operational-and-corporate-update/