In addition, Rockhopper and Premier have agreed certain amendments to their existing commercial arrangements.
Highlights
Working interests aligned across the Sea Lion licences PL032, PL004b and PL004c: Premier 40% (Operator); Rockhopper 30%; Navitas 30%
Adds additional strength to the Sea Lion joint venture which Rockhopper believes will increase the likelihood of a successful senior debt project financing for the Sea Lion Phase 1 development
Rockhopper's costs for the Phase 1 development (not met by senior debt) to be met by a combination of carry and loans from Premier and Navitas from
Greater alignment and simplified commercial arrangements across the joint venture
Rockhopper maintains material share of Phase 1 project NPV, a significant 30% interest in Phase 2 Sea Lion development, and additional upside from the Isobel-Elaine area (PL004a)
Contingent consideration payable to Rockhopper by Premier and Navitas of up to
Finalisation of a Sale and Purchase Agreement is expected during Q1 2020 ('SPA Signing') with completion subject to satisfaction of certain conditions including regulatory approval, expected in Q2 2020 ('Farm-in Completion')
'Furthermore, we are obviously very pleased to announce that all of our project costs are being covered from the start of 2020 and in the event of a successful sanction that they will continue to be covered through to Phase 1 Project Completion (estimated 9 - 12 months after first oil) while maintaining a very material 30% stake in the Sea Lion project along with additional upside in the PL004a licence containing the Isobel discovery. This transaction will therefore materially strengthen the Company financially.
'Discussions are continuing to progress with senior lenders regarding project financing and should be positively supported by the Transaction. We will update the market on the progress of those discussions in due course.
'Our arrangements with Navitas are at a detailed non-binding Heads of Terms stage and we look forward to working with them to put in place formal binding documentation in the coming months. In the intervening period, we are pleased that Premier has separately agreed funding arrangements for all of Rockhopper's costs on Sea Lion.'
Details of the Heads of Terms
Working interests
Working interest in Sea Lion licences PL032, PL004b and PL004c to be aligned: Premier 40% (Operator); Rockhopper 30%; Navitas 30%.
Phase 1 funding
The joint venture will continue to pursue a senior debt project finance (or similar) to fund the Phase 1 development of Sea Lion.
Existing funding arrangements between Rockhopper and Premier are to be replaced such that Rockhopper is funded for all pre- and post-sanction costs not met by senior debt by Premier and/or Navitas through a combination of carry and loans.
Premier will carry all of Rockhopper's costs from
Premier and Navitas will fund all of Rockhopper's project development costs (excluding production area licence fees and taxes) from
An additional standby loan ('Standby Loan') will be available from Premier to cover Rockhopper's share of production area licence fees and any Capital Gains Tax liability. This new Standby Loan will attract interest at a rate of 15% per annum and will be repaid from Rockhopper's residual share of Phase 1 free cash flow.
Phase 2 consideration and funding
Existing funding arrangements between Rockhopper and Premier will be replaced such that, subject to certain conditions, Rockhopper will receive contingent payments of up to
PL004a -
Rockhopper has granted Navitas and Premier an option to acquire working interests in PL004a (30% and 4% respectively) to align working interests across PL032 and PL004. The option must be exercised by Navitas within 8 years of completion of the Transaction, or the date of Phase 2 FID ('Financial Investment Decision'). In the event the option is exercised and subject to certain conditions, Rockhopper will receive contingent payments of up to
Area of Mutual Interest Agreement ('AMI')
It is intended that Navitas will become a party to the AMI entered into between Rockhopper and Premier in 2012 in relation to future joint exploration activities in the
Conditions and withdrawal right
Conditions to SPA Signing (target Q1 2020): Completion of Navitas due diligence
Agreement of Definitive Transaction Documentation and associated Phase 1 project documents (including but not limited to Joint Operating Agreement, joint venture Financing Agreement, joint venture Marketing Agreement, Decommissioning Security Agreement, Field Security Agreement)
Conditions to closing of Transaction ('Farm-in Completion') (target Q2 2020): Falkland Islands Government approval for the transaction
Following Farm-in Completion, but prior to
In the event that Navitas' board has failed to take a positive Phase 1 FID by
In the event that either Navitas elects to withdraw or Premier elects to remove Navitas, Premier will have the option to step into the Navitas arrangements, or, in the very unlikely event, implement a wind down of the project which could ultimately result in relinquishment of the acreage. In either event, Rockhopper is liable for its share of project wind down costs with no funding support from Premier and/or Navitas and if Premier does opt to wind down the project then Rockhopper has the right to acquire Premier's interest and become 100% working interest licence holder and Operator of licences PL032, PL004a, b and c, subject to all necessary regulatory approvals.
Contact:
Tel: +44 (0) 20 7390 0234
About Navitas
Navitas has an established asset portfolio, including: conventional onshore production (Neches field and Denbury assets (latter closing in
Navitas' Chairman is Mr
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