AIM-listed Rockhopper Exploration, the oil and gas company with key interests in the North Falkland Basin, has provided an update in respect of the insurance policy announced on 14 October 2024, intended to protect against an unsuccessful outcome in the Ombrina Mare ICSID arbitration, and the exit of Rockhopper's other Italian assets, as also announced on 14 October 2024.
Annulment Insurance
Rockhopper is delighted to confirm that it has now received the full €31 million entitlement under the insurance arrangements (the 'Insurance Proceeds').
A new request for arbitration has been drafted and is expected to be submitted in the coming weeks. An update will be provided in Rockhopper's interim results to 30 June 2025. Under the agreement (the 'Monetisation Agreement') with the new funder announced on 20 December 2023, the costs of contesting the new request for arbitration are borne by the new funder.
To the extent that Rockhopper makes a financial recovery from any new arbitration, after deductions for any reasonable costs and expenses incurred, that recovery will be utilised to reimburse the insurers in respect of the Insurance Proceeds.
Italian Disposal
On the 14 October 2024, Rockhopper announced its planned exit from Italy through the signing of a share purchase agreement ('SPA') with Zodiac Energy. The SPA is for the sale of Rockhopper Civita Limited (a wholly owned subsidiary of Rockhopper Exploration Plc). Rockhopper Civita Limited holds all Rockhopper's Italian assets and liabilities, except for the Ombrina Mare arbitration.
The SPA is conditional on receipt of approvals from the Falkland Islands Government and the Italian regulator. As part of this approval process, the Italian regulator requested the recapitalisation of Rockhopper Civita Limited (the 'Recapitalisation') before consideration be given to the proposed transfer.
The Recapitalisation has occurred; however, this was not envisaged under the SPA and so an amended SPA (the 'Amended SPA') has now been agreed and signed. Under the terms of the SPA, Rockhopper would have paid Zodiac in two instalments, with a retained upside participation to Rockhopper in two undeveloped licences (the 'Earn Out Agreements'). Under the SPA, the second of those instalments and the Earn Out Agreements were contingent on successfully defending the Republic of Italy's annulment application and receiving a minimum of €10 million from the Monetisation Agreement. Following receipt of the €31 million of Insurance Proceeds the substance of the Amended SPA is as previously announced, except the second contingent tranche and associated Earn Out Agreements are no longer contingent and as if Rockhopper had won the annulment. The key terms of the Amended SPA are:
- As consideration for the transaction, Zodiac will pay £1 and assume any outstanding liabilities from Rockhopper to Rockhopper Civita Ltd, such amounts not to exceed €4.5 million.
In turn, on completion, Rockhopper will:
- Provide evidence of the Recapitalisation and any subsequent additional recapitalisations;
- Provide evidence of there being no less than €5.5 million, in aggregate, in Rockhopper Civita Limited's cash and term deposits balances; and
- Receive the Earn Out Agreements - meaning that Rockhopper will retain a royalty on two assets within the Rockhopper Civita Limited portfolio, those being AC19 (a northern Adriatic licence with two gas discoveries and an additional adjacent prospect) and Serra San Bernado (which contains the Monte Grosso exploration prospect).
The royalties will take the form of either 10% of the revenues of the interests acquired by Zodiac or, should they realise value by on-selling the licences acquired, 25% of the gross proceeds received for the part sold.
The transaction continues to be subject to both Italian regulatory and Falkland Islands Government approval, the timing of which is uncertain. To allow for the delays caused by the Recapitalisation, the longstop date under the Amended SPA has been revised to 31 March 2026, which should be sufficient to enable these approvals to be given.
Following completion of the transaction, Rockhopper will have no remaining liabilities relating to its Italian licences, its P&A liability will have been reduced by some US$12.6 million (as at 31 December 2024) and its annual cash burn reduced by approximately €500,000 - €750,000.
Samuel Moody, CEO of Rockhopper, commented:
'The steps announced today provide us with further strategic and commercial clarity as we continue to focus on progressing the Sea Lion development. The combination of the insurance and transaction with Zodiac allows us to refocus the Company on Sea Lion by further reducing both short- and long-term costs, reducing risk, and protecting our balance sheet whilst maintaining some potential upside in two Italian licences.'
Source: Rockhopper Exploration
