London-listed Rockhopper Exploration (AIM:RKH) has signed a Heads of Terms agreement with Navitas Petroleum to farm-in to the Sea Lion Project, the company detailed in a morning statement.
The agreement was reached with Premier Oil and Navitas Petroleum for a 30% stake in the Sea Lion oil field located in the Falkland Islands off the Argentinean coast.
The operator, Premier oil, will hold a 40% operating interest across the Sea Lion licenses PL032, PL004b and PL004c, and Rockhopper and Navitas will hold 30% respectively.
Rockhopper, whose shares soared this morning, view the new partnership agreement as an important catalyst and industry endorsement of the project.
According to Rockhopper, the deal will strengthen the Sea Lion joint venture and increase the likelihood of a successful senior debt project financing for the first phase of development at the site.
Shares in Rockhopper Exploration were trading 34.33% higher at 20.15p on Tuesday afternoon.
The company detailed that all project costs will be covered from the start of March 2020 by Premier and Navitas through an interest free loan to be repaid from 85% of Rockhopper's working interest of free cash flow.
In the event of a successful sanction, said Samuel Moody, Chief Executive of Rockhopper, project costs will continue to be covered through to Phase 1 Project Completion.
This will occur “while maintaining a very material 30% stake in the Sea Lion project along with additional upside in the PL004a licence containing the Isobel discovery,” he added.
Rockhopper also expects to receive up to $48m worth of contingent consideration from Premier and Navitas on future development phases in the North Falkland Basin site.
Shares in Premier Oil were trading 14.19% higher at 115.89p on Tuesday afternoon.
“This transaction will therefore materially strengthen the Company financially,” Moody highlighted.
The companies expect the finalisation of a sale and purchase agreement during the first quarter of 2020 with a farm-in completion of the transaction expected in the second quarter.
“Our arrangements with Navitas are at a detailed non-binding Heads of Terms stage and we look forward to working with them to put in place formal binding documentation in the coming months,” said Moody.
On another note, Premier Oil revealed a second major deal this morning with its proposed acquisition of two North Sea assets from BP for a total US$625 million.
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