Rockhopper is a London-listed E&P with fully funded development of Sea Lion, a 500+mmbbl field in the Falklands as well as the potential of a similar size discovery to the south. It also holds production and exploration assets in the Mediterranean.
We believe the current share price implies a c 20% chance of success for Sea Lion Phase 1 at $70/bbl long-term oil price (excluding any value for further phases of Sea Lion). Given recent progress with the award of letters of intent (LOIs) for key project components and with more than 60 people working on the development, we are more positive on the chance of success. In our view, key outstanding risks are project funding and politics. H119 has the potential to be eventful, with more definitive guidance on the availability of export credit funding. As recently stated by the operator, Premier Oil, a formal application and project information memorandum for senior debt is expected to be submitted in Q219. The Ombrina Mare arbitration hearing took place in Paris with an outcome expected in late 2019. The company believes it has strong prospects of recovering significant monetary damages. Our valuation stands at 78.9p/share.
Sea Lion JV is considering export credit and vendor/contractor finance as alternatives for field development. Contractor selection and finalising of LOIs to underpin the provision of vendor funding for $400m is progressing.