A trading update, North Sea acquisitions, financing, extension of credit and Sea Lion farm-out from PMO this morning. Trading at the end of 2019 remained good, 78.4 kboed was at the upper end of guidance with Catcher as ever taking the plaudits. Big-P ticked another box while Tolmount remains the gift that keeps on giving with first gas expected end of 2020, expect 20-25 kboed for its 50% interest and of course Tolmount East operations.
Elsewhere the company are releasing funds through carry of wells at Tuna which is sensible and even with exploration at the Andaman Sea which I like and hair raising stuff in Alaska gives some upside potential. The Mexican sale hasn’t happened yet for which just this once I will give the company the benefit of the doubt but capex and opex are both below guidance and net debt is down $330m to $1.99bn, who sent the CFO out into the street to sell stuff to get it below $2bn…?
At Sea Lion PMO has signed HoT’s with Navitas Petroleum to farm-in for a 30% interest in the project which seems to have come up ironically before the FID supported by the debt package put together last year. It is anticipated that appointment of a new Minister is imminent and the project can fly. *see RKH comment.
And there’s more…this team has been busy with the acquisition of North Sea assets from BP including the Andrew Area and the Shearwater assets for $615m and a 25% interest in Tolmount from Dana for $191m which is an absolute gimme as deals go. They add 23/- b/d of cash generative production with development upside and generate $1bn of free cash flow by 2023. So, you get 82 mmboe of reserves and contingent resources for less than $10 per barrel.
The whole bang shoot will be paid for by a $500m underwritten equity raise (bridged for $300m) where the shareholders are already onside as are the bond holders who, quite rightly havent heeded any of the frankly rank diatribe by some short hedge funds who should know better. This management has been a magnificent and outstanding performer over a longer, not shorter term period, the shares will perform very well to justify the excellent position they have put the company in.
Rockhopper Exploration- Proof if proof were needed…
RKH with PMO have signed HoT’s with Navitas Petroleum to farm-in for a 30% interest in the Sea Lion project, a deal that slightly amends the terms but strengthens the development with progress towards sanction. Rockhopper’s costs will be met by a combination of carry and loans from Premier and Navitas until Phase 1 project completion with potential upside from the Isobel and Elaine prospects.
As CEO Sam Moody says, this is a milestone for Sea Lion and RKH as Navitas has the experience in the Gulf of Mexico as well as in project finance which ‘materially strengthen the enhance the prospects’ for such a financing. ‘We regard their joining as an important catalyst as well as industry endorsement of Sea Lion’s scale (independently audited 2C resources of c.520 mmbbls) and potential (NPV10 at first oil c.$4bn**)’. Rockhopper shareholders can be delighted that all their project costs are being covered from the start of 2020 through to Phase 1 project completion which is estimated to be 9-12 months after first oil.
As mentioned above, the fact that it is the farm-out of Sea Lion has turned up before the sanction and FID following last year’s extensive filing of documentation is perhaps the bigger surprise. But one that makes better reading as one must hope that with all the debt requests in and a new Ministerial appointment imminent Sea Lion is for once and for all, on the way…
RockRose Energy – Who’s that coming over the hill…
Lurking not far away from Premier was RockRose who have put up an exemplary performance in the North Sea of late and no doubt messrs Durranti and Rose had them in mind when the dug into their pockets to buy assets from BP. Today RRE had its year end trading update in which it delivered on all key financial and operational targets in 2019 and is well placed to continue to make further progress in 2020.
Pro-forma production of 19,200 boepd was in line with guidance or 20,500 excluding planned shutdowns and the company produced 21,000 bopd in December again in line with guidance. All was helped by the Marathon UK deal completing in July and backdated until January.
As expected the company instigated a dividend policy with an interim of 60p in October and expects to pay 25p making 85p for the 2019 year. The company still has cash of $370.7m of which $54.9m is restricted so I reckon it has well over £18 per share to compare with the ludicrously low share price of 1921p, and no debt. As has previously been written here the company has 7 wells planned over the next 12 months with the idea of converting 2C resources to 2P reserves delivering significant production growth. This will lead to 2020 capex of $200m due to well phasing and lead to higher production. With active hedging currently accounting for 455/- bbls ensuring liquidity and at a creditable $65.70 into the bargain.
Rumours have abounded that RockRose has been in every data room large and small recently so one cannot doubt AA’s hunger for another deal and the fact that one of these was well over a billion folding ones for Siccar Point means size, as they say, is not a sticking point. Shares remain far too cheap, it’s only a matter of time before the next move…