Rockhopper Exploration plc the oil and gas exploration and production company with interests in the North Falkland Basin and the Greater Mediterranean region, announces that the 14/20-1 ‘Isobel Deep’ well was spudded, by Premier Oil as operator, at 22:20 local time on the 8th April 2015.
The Well is located on licence PL004a in which Rockhopper has a 24% working interest and is an exploration well on the Isobel deep prospect. The Isobel Deep Well will be the first test of the F3 fan system entering the basin from the South East margin as a sequence of stacked reservoirs. This well will be targeting the Isobel deep fan in the area of maximum mapped reservoir thickness and has a GCoS of 20%. The well is targeting Gross Pmean resources of 72 million bbls (range 9 - 207 million bbls) although the complex as a whole in this area has gross Pmean prospective resources of just over 500 million bbls.
Drilling operations are expected to take approximately 30 days and no coring or testing is planned for this well. A further release will be made when drilling is completed.
The North Falkland Basin wells are anticipated to cost approximately US$50 million each. As a result of the various carry arrangements, the total net cash exposure to Rockhopper of the four wells is estimated at approximately US$25 million.
Samuel Moody, CEO, commented:
“We are delighted to be spudding the second well of the campaign following the successful Zebedee oil and gas discovery. The Isobel Deep Well is a high risk high impact well which has the potential in the success case to open a new development area.”
Confirmation of Falkland Island capital gains tax liability deferment
Rockhopper Exploration plc, has announced that it has agreed binding documentation with the Falkland Island Government (FIG) in relation to the tax arising from the Company’s 2012 farm-out to Premier Oil plc.
The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and reflects the principles agreed between Rockhopper and FIG in December 2013 and is made under Falkland Islands Extra Statutory Concession 16.
- Outstanding tax liability confirmed at £64.4 million (approximately US$95.7 million) and payable on the first royalty payment date on Sea Lion (or earlier subject to certain events)
- First royalty payment date anticipated to occur within six months of first oil production which itself is estimated to occur in late 2019 (assuming Sea Lion project sanction in mid 2016).
- Outstanding tax liability amount may be revised downwards if the Falkland Islands’ Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier is used to fund exploration activities in the Falkland Island license areas; or (ii) any element of the Development Carry from Premier becomes “irrecoverable”.
- Rockhopper provides certain “creditor protection” undertakings to FIG while the tax liability remains outstanding including (i) restriction on dividends or distributions; (ii) granting of first ranking security over Rockhopper assets; and (iii) while such security is in place, restrictions, subject to conventional carve outs, on granting further security.
- Intention that at the point Rockhopper is able to secure senior debt for the Sea Lion project, the security provided to FIG will be released and FIG will be provided with a standby letter of credit to preserve its creditor position.
- Rockhopper retains balance sheet strength with cash resources at year end 2015 projected to be approximately US$125 million.
Sam Moody, CEO of Rockhopper, commented:
“We are delighted to have reached this settlement with FIG under which we now have much greater certainty both on the quantum and timing of the deferred tax liability.
“Under the amended commercial arrangements with Premier we intend to access the full $48 million of Exploration Carry during the 2015 drilling campaign which should allow us to reduce the outstanding tax liability by up to £4.7 million (approximately $7.0 million).
“The security arrangements and undertakings agreed provide credit protection to FIG while preserving Rockhopper’s strong balance sheet and ability to obtain senior debt for the Sea Lion development on a cost effective basis.
“As we progress towards the award of the FEED contract during Q2 2015 and now that we have the certainty of the tax settlement in place, our ability to progress discussions with external debt providers (as an alternative to the standby loan from Premier) for our uncarried portion of Sea Lion development costs is significantly enhanced.”
Adapted from a press release by David Bizley