Israeli player inks preliminary pact with Premier and Rockhopper to acquire significant stake amid financing talks for field project
Upstream, January 7, 2020
Premier Oil and partner Rockhopper Exploration in the Sea Lion field development prospect off the Falkland Islands have agreed a farm-in deal in an effort to grease the wheels of financing for the proposed project.
Israeli player Navitas Petroleum is set to acquire a 30% interest in Sea Lion licences PL032, PL004b and PL004c under a newly minted heads of terms that will leave UK operator Premier with 40% and Rockhopper on 30% to align stakes across the permits.
Rockhopper said it believes the proposed deal, expected to be completed in the second quarter of this year, “will increase the likelihood of a successful senior debt project financing” for phase one of the Sea Lion development that has been stalled by funding issues.
The co-venturers are seeking to finalise a key loan deal with prospective financiers to bankroll the first phase of Sea Lion, which will entail exploitation of 250 million barrels of oil for an estimated investment of $1.8 billion, so they can move forward on a final investment decision.
The field in Premier-operated licence PL032 north of the Falklands, which is estimated to hold a total of 520 million barrels, is set to be developed using 23 subsea wells hooked up to a floating production, storage and offloading vessel.
Under the transaction, Rockhopper’s costs for the first phase of Sea Lion that are not covered by debt would be met by a combination of carry and loans from Premier and Navitas from 1 January 2020 – the effective date of the proposed deal – to project completion on phase one.
In addition, the latter companies would make a contingent payment of up to $48 million to Rockhopper for future development phases in the North Falklands basin.
It would mean that all of Rockhopper’s project costs would be covered for phase one through to project completion, expected within 12 months of first oil, contingent on sanction of the development.
Navitas and Premier also have an option with Rockhopper to acquire stakes in the latter’s PL004a that hosts the Isobel-Elaine prospect, which is targeted for development under a third phase of Sea Lion.
This would entail Navitas and Premier gaining respective 30% and 4% interests in the licence for a contingent payments of up to $12 million from phase-three cash flows.
The transaction, due to become a binding deal in the first quarter, marks the potential entry into the Falklands play of Tel Aviv-based Navitas, which mainly has operations onshore and offshore North America.
Rockhopper chief executive Sam Moody said Navitas’ involvement in Sea Lion would “materially strengthen and enhance the prospects for a successful project financing, as clearly demonstrated by their success in funding other similar developments elsewhere in the world and with proven access to capital markets”.