Rockhopper Exploration and Premier Oil, partners in the Sea Lion project located offshore the Falkland Islands, have agreed to extend the exclusivity period to Navitas Petroleum, further closing in on a definitive Sea Lion farm-out despite current market conditions.
Premier Oil, the operator, and its partner Rockhopper in January 2020 signed detailed heads of terms with Navitas Petroleum for a farm in of a 30 per cent interest in the Sea Lion project.
The companies reaffirmed their intention to convert the heads of terms into a fully documented agreements in March, regardless of the current market uncertainty related to COVID-19 and commodity price weakness.
On Thursday, Rockhopper said that the exclusivity period awarded to Navitas was extended until the earlier of 31 December 2020, execution of the definitive transaction document targeted for late 2Q or 3Q, or until a decision by Navitas not to proceed with the farm-in.
Also, the effective date of the farm-in proposed in the heads of terms will now be amended from 1 March to the date on which the Falkland Islands Government approves Navitas becoming a licensee – targeted for late 3Q or 4Q.
In turn, Premier will fund Rockhopper’s share of the remaining pre-effective date costs, with interest accruing at 12 per cent per annum, which, on completion of the farm-in, will be rolled into the standby loan.
The previously announced standby loan, which will be available from Premier to cover Rockhopper’s share of production area licence fees and any capital gains tax liability, will now attract interest at 12 per cent annually, not the arranged 15 per cent.
According to Rockhopper, all other proposed terms in the heads of terms remain unchanged with Rockhopper’s costs for the Phase 1 development from the effective date to Phase 1 project completion – estimated to occur 9-12 months after first oil – continuing to be funded by Premier Oil and Navitas.
Once definitive documentation is reached, completion of the farm-in will remain subject to agreed consents and approvals. Rockhopper remains responsible for funding its share of costs incurred before 1 January 2020.
Sam Moody , CEO of Rockhopper, said: “ We are pleased to have made significant progress on the farm in, and that all parties have reinforced their commitment to its completion, despite the volatile market conditions. Sea Lion remains a highly exciting project and the farm in will underpin our ongoing efforts to move it towards sanction. We look forward to updating shareholders further ”.