Take over of Falklands Oil and Gas transforms Rockhopper into billion-barrel oil explorer

Premier Oil PO_Falklands_Apr2015Having completed its all-share take-over of Falkland Oil and Gas (FOG), Rockhopper Exploration has consolidated its position as the lead-  and largest –  operator in the North Falklands Basin with material interests in all licences in the area.

And also as a result of the merger with FOG, Rockhopper now has material interests in licences to the South and East of the Falkland Islands. A full technical review of this acreage will be undertaken during the course of 2016.

Meanwhile, for the year ended 31 December 2015, Rockhopper reported revenue of $4 million and profit after tax of $11 million, compared to $2 million and an $8 million loss respectively in 2014.

Pierre Jungels, Chairman of Rockhopper, told shareholders: 2015 has been transformational for your company.

“Through our merger with Falkland Oil & Gas we have consolidated our leading acreage and resource position in the North Falkland Basin. Our exploration campaign has achieved significant success with multiple oil discoveries at Zebedee and Isobel Deep.

“Since its foundation in 2004, Rockhopper has evolved from a fledgling oil explorer to a leading UK-listed independent oil and gas exploration company, having discovered what we believe will likely become over a billion barrels of recoverable oil in the North Falkland Basin.

“The potential of the Isobel-Elaine complex, in a previously underexplored part of the basin, has been materially de-risked and supports management’s view that the North Falkland Basin could ultimately deliver a billion barrels of recoverable oil.

“The Sea Lion project has entered FEED – another significant milestone on the path towards project sanction.

Going forward, we anticipate additional cost reduction opportunities being pursued during FEED to further enhance the economics of the Sea Lion project as we move towards a project sanction decision point in mid-2017.

“Meanwhile, Premier Oil has confirmed its intention to seek an additional partner ahead of taking project sanction and Rockhopper will support Premier Oil in this initiative.”

John Martin and Tim Bushell, previously Chairman and Chief Executive respectively of FOG, have joined the Rockhopper board as non-executive directors.

 Meanwhile, the Sea Lion field has been significantly de-risked and and ‘significant improvement’s have been identified to enhance overall project economics in response to the lower oil price environment. These include:

  • Recoverable resources to be commercialised increased from 160 mmbbls to approximately 220 mmbbls (operator’s estimate)
  • Field peak production increased from approximately 60,000 to 85,000 bbls per day
  • Field life increased from 15 to 20 years
  • Well count increasing from 14 to 18, with 13 wells drilled pre-first oil
  • Despite the increase in scope, the estimate of pre-first oil capex requirement remains at US$1.8 billion, equivalent to approximately US$8 per barrel – a 30% reduction in pre-first oil capex per barrel. Further cost reductions are expected given the current market environment
  • Significant improvement in project economics for both partners resulting in a materially lower break-even oil price for the project

 On the basis of the improved project, a Floating Production Storage and Offloading (“FPSO”) FEED contract was entered into with SBM Offshore, with work anticipated to take between up to 18 months to complete.

The FEED contract for SURF Transport and Installation was entered into with Subsea7, for Flexibles with National Oilwell Varco and for the Subsea Production System with One Subsea.

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