Rockhopper Exploration progresses in the North Falkland, Greater Mediterranean
LONDON -- Rockhpper has made progress in many areas of interest, with plans for further growth in 2019.
Sea Lion Phase 1, North Falkland Basin (RKH 40% working interest)
Good progress continues to be made on a range of commercial, fiscal and financing matters to allow the project to progress to sanction. Letters of Intent previously signed with a number of contractors to the project have recently been extended on the same commercial terms for periods of up to 12 months.
Abu Sennan, Egypt (22% working interest)
Current production from the Abu Sennan concession is approximately 3,800 boed gross (840 boepd net to Rockhopper), broadly in line with average production rates throughout 2018.
As previously announced, the Al Jahraa-10 well reached total depth on Oct. 16, 2018 in the Abu Roash-F formation. Oil pay was calculated in the Abu Roash-C and Abu Roash-D levels. Following testing operations, the well was brought into production from Abu Roash-C at a rate of 130 barrels of oil per day ("bopd") gross, and subject to further increase. Upside potential exists in Abu Roash-D which is being evaluated for possible acid stimulation.
Exploration well ASZ-1X located on Prospect S was spudded on Nov. 8, 2018 and was the first of two commitment wells to be drilled in the first phase of the new concession. An oil discovery was made in the Abu Roash-Clevel with preparations underway to test and produce. The operator has applied to Egyptian General Petroleum Corporation ("EGPC") for a development lease over the discovery.
2019 drilling campaign
Following joint venture approval, an active drilling program has been agreed for 2019 including the drilling of one exploration well, two development wells and a water injection well. Activity in 2019 continues to target the Al Jahraa field, as well as further exploring the concession. Drilling is expected to commence in the first quarter of 2019 with capital expenditure, net to Rockhopper's 22% interest, of approximately $4 million.
Egypt payment situation
Rockhopper continues to experience an improving payment situation in Egypt. As at Dec. 31, 2018, Rockhopper's EGPC receivable balance was approximately $1.5 million (unaudited).
Civita disposal update
On June 8, 2017, Rockhopper announced the conditional disposal of a portfolio of non-core interests onshore Italy to Northern Petroleum Plc ("Northern"). Northern has subsequently undertaken a corporate name change to Cabot Energy plc ("Cabot").
Following failure to satisfy all relevant conditions precedent, including receipt of requisite regulatory approvals in Italy, the Company and Cabot have mutually agreed not to proceed with the transaction. As a result, Rockhopper retains the benefit of the positive cash flows generated from the Civita portfolio which, had the transaction proceeded, would have been paid to Cabot.
Following restoration of production at Civita in July 2018, the field has continued to produce at an average daily rate of approximately 130 boepd.
Ombrina Mare arbitration
In March 2017, Rockhopper commenced international arbitration proceedings against the Republic of Italy in relation to the Ombrina Mare field. The hearing is currently scheduled for early February 2019.
Rockhopper continues to believe it has strong prospects of recovering very significant monetary damages - on the basis of lost profits - as a result of the Republic of Italy's breaches of the Energy Charter Treaty. All costs associated with the arbitration are funded on a non-recourse ("no win - no fee") basis from a specialist arbitration funder.
Year-end cash guidance
Rockhopper's year-end 2018 cash balance was $40 million (unaudited). The company has accrued but unpaid costs, as at the year end, of approximately $5 million (unaudited) related to pre-development expenditures on Sea Lion.
Sam Moody, chief executive of Rockhopper, commented:
"Our focus for Sea Lion remains on putting the financing together and we continue to work closely with the operator to unlock the project during 2019.
"We are delighted to announce yet another successful oil discovery in Egypt meaning that 2018 has seen two successful development infill wells and two new commercial discoveries. With the payment situation having improved markedly and an active programme for the year ahead, our Egyptian assets continue to perform well.
"Our Ombrina Mare arbitration process remains on track with the hearing expected to commence in around a month and an outcome expected around mid-year."