AIM-listed Rockhopper Exploration, the oil and gas company with key interests in the North Falkland Basin, has announced that its Board has taken a final investment decision ('FID') relating to the development of Phase 1 of the Sea Lion field located offshore to the north of the Falkland Islands and has accordingly now sanctioned the Project. Partner and Operator, Navitas Petroleum Development and Production, has also taken FID relating to the Project.
As a prerequisite of taking FID, the Boards of both companies have approved the financing arrangements and signed the relevant documentation required to fund Phase 1 of the Project.
Financial close of the Financing is subject to a limited number of customary conditions precedent and Rockhopper expects this to occur over the coming weeks.
All approvals and consents necessary at this stage have now been received for the Project. The Falkland Islands Government ('FIG') has approved the field development and production programme for Phases 1 & 2 of the Northern Development Area within the Sea Lion field (the 'FDP'). Following the approvals, the licences covering Sea Lion will move into the Exploitation Phase, which lasts 35 years, or longer if needed to complete production.
As noted in the Company’s announcement on 31 July 2025, completion of the Company’s US$140 million placing (further details of which are set out in that announcement) is subject to each of Navitas and the Company having made a public announcement that FID has been taken and that Phase 1 of the Project has received all regulatory consents and approvals required at this stage, and Financial Close has occurred. As such, a further announcement will be made at the time of Financial Close, at which point it is expected the the Placing will proceed to completion and the previously announced open offer (the 'Open Offer') will be launched. Further details on the Placing and the Open Offer will be included in that announcement.
Following finalisation of work undertaken on both a technical and commercial level to support the financing of the Project, the total post-FID funding requirement is US$1.8 billion to First Oil and US$2.1 billion to project completion (including contingencies and financing costs).
The Project financing consists of US$1.0 billion of senior debt (of which US$350 million is Rockopper debt), with the balance provided via a combination of joint venture equity and post First Oil cash flows. Rockhopper benefits from previously disclosed financing loans from Navitas in relation to the Project and, as a result, the net Rockhopper equity requirement is approximately US$102 million, in addition to the previously disclosed Rockhopper share of a 5% Equity Overun Support which is approximately US$10 million (therefore in aggregate US$112 million).
The potential value to Shareholders of the Sea Lion Project proceeding is highlighted in the recent independent resource evaluation conducted by Netherland, Sewell & Associates, Inc. ('NSAI') on behalf of Rockhopper (the 'June 2025 NSAI Report'). Whilst this report was produced prior to the final development cost being confirmed, the Board believes it still provides useful guidance to Shareholders. The June 2025 NSAI Report confirmed total gross full field 2C Resource of 917 mmbbls of which 321 mmbbls are attributable to Rockhopper’s net working interest. Of the 917 mmbbls, 727 mmbbls (255 mmbbls net to the Company) are categorised as ‘Development Pending’. NSAI further provided that the 2C Resources of 255 mmbbls has an NPV10 net to Rockhopper (after FIG royalties and taxes) of US$1.85 billion using US$70 brent oil price.[1]
As previously disclosed, Sea Lion will be developed in phases. Phase 1, which has been sanctioned, targets 170 mmbbls (59.5 mmbbls net to Rockhopper) at a peak production of approximately 50,000 bbls/d. Subsequent phases are expected to be self-financing using the excess cash flows of Phase 1. First Oil from Phase 1 is current planned for 2028. Phase 2, which forms part of the same FDP approved by FIG, is anticipated to recover a further gross 2C resource of 149 mmbbls (52.15 mmbbls net to Rockhopper).
At the time of launching the Placing, the estimated net cost to Rockhopper of the Early Project Failure ('EPF') support required by FIG was US$40 million, which Rockhopper believed could be provided at a cost of US$25 million in the form of a surety bond. While the total cost will not be finalised until closer to the time of spudding the first pre drilled well, that estimate has now increased from US$40 million to an estimated US$52.5 million. Currently, it is anticipated that the first well will not be spudded for over 12 months. Rockhopper is currently investigating various options to cover the required EPF support, including increased surety cover, parent company guarantees, cash or any suitable cash backed instrument.
There remains some uncertainty around actual project costs and the EPF requirements from FIG. Any material increases in these items could result in an additional equity requirement for Rockhopper ahead of project completion, or potentially ahead of spudding the first pre drilled well.
Despite these additional costs, Rockhopper remains fully funded to take FID and also has potential for further cash receipts post-Financial Close through the proceeds of the Open Offer and any further exercise of the warrants to be issued in connection with the Placing.
Should any of the required conditions precedent in relation to the financing arrangements not be satisfied, then Financial Close will not occur, the Sea Lion Project will not go ahead, the Placing will not complete and the Open Offer will not be launched. In that unlikely event, it is possible that Rockhopper will have incurred additional costs that would have otherwise have been covered by Navitas loan arrangements. All of the conditions precedent to Financial Close are at an advanced stage and Rockhopper expects them to be completed over the coming weeks.
Key Commerical Contracts
As part of FID, Navitas as operator has entered into a number of key commercial contracts which include, but are not limited to, an FPSO charter agreement (and associated EPC and O&M contracts), drilling rig contract, a framework agreement for the supply of drilling and completion services; and an agreement for the Engineering, Procurement, Construction, Installation and Commissioning of Subsea Umbilicals, Risers, and Flowlines (SURF).
Key Terms of Debt
The Rockhopper senior debt facility will be for US$350 million with a tenor of 7 years. First drawdown shall not be permitted until the agreed equity amount has been distributed into the Project. Semi annual straight line amortisations commence on 31 March 2029. The margin is SOFR2 + 525bps during the pre-completion period, moving to 425bps in years 1 and 2 post Project completion, 450bps during year 3 post completion and 475bps thereafter. Mandatory hedging of 50% PDP3 is required during Year 1 post project completion, 33.3% in Year 2 and 25% in Year 3. A commitment fee of 30% of margin on available undrawn is payable semi annually. The senior debt facility contains other representations, covenants and default provisions that are customary for a facility of this nature.
FIG taxation agreement
As part of the FID process, Rockhopper and FIG have entered into a final settlement agreement relating to a previously disclosed disputed taxation amount on the farm out to Premier Oil in 2012 (as the existing arrangement was incompatible with achieving FID at Sea Lion) and the final settlement agreement will also settle any tax liability in relation to the farm out to Navitas in 2022. The new arrangement provides that Rockhopper shall pay to FIG the tax liability in instalments, amounting to a total of £30 million on an undiscounted basis. The payment schedule is as follows:
- £1 million at signing of the final settlement agreement (paid)
- £2 million at Phase 1 sanction / Financial Close
- £1 million 30 calendar days from First Oil (the “Payment Date“)
- £2 million on the first anniversary of the Payment Date
- £3 million on the second anniversary of the Payment Date
- £7 million on the third anniversary of the Payment Date
- £7 million on the fourth anniversary of the Payment Date
- £7 million on the fifth anniversary of the Payment Date
The final settlement provides that early payments can be made, attracting a discount of 10% per annum. If payments are made late, the agreement provides for interest to be paid at a rate of 10% per annum. FIG’s existing security, including charges over certain Group subsidiary assets, will be replaced by security over a dedicated Rockhopper bank account into which all of the net post financing and post Navitas loan repayment cash flows will be distributed.
Next steps
A further announcement will be made at Financial Close which will, should it occur, trigger completion of the Placing and the launch of the previously announced open offer.
Sam Moody, Chief Executive Officer of Rockhopper Exploration, commented:
'The sanctioning of Sea Lion is a major milestone for Rockhopper and all its stakeholders and represents the culmination of over 20 years of work. When we first discovered Sea Lion in 2010, it was a hugely exciting play-opening well, and the vast amount of work undertaken since then, first in the ensuing drilling campaigns and then the many years of engineering and commercial refinement, is now moving towards its ultimate fruition as we move into the development phase. While much remains to be done as the partnership progresses the project and executes the significant amount of work required to deliver First Oil, I would like to take this opportunity to thank both Navitas and our team at Rockhopper, without whom this would not have been possible. We now look forward to continuing our excellent working relationship Navitas as we look to continue to unlock value for all our stakeholders.'
Unless otherwise defined, capitalised terms have the same meaning as per the Company’s announcement dated 31 July 2025.
Source: Rockhopper Exploration
