AGM 2025

Jun 27, 2025

Slides

Well, firstly, let me welcome you all to the 2025 Rockhopper AGM. As has been the case for the last few years, there is no facility to broadcast live from this venue. I've already recorded this presentation, and that recording will be made available on the website after this meeting concludes. In order that the presentation is as close to the recording as possible, I'm going to read it out. Turning to slide two. Look, it's fair to say a lot has happened since we met last year. Your company is the closest it has been to bringing Sea Lion to FID. Though risks remain, these are certainly very exciting times for Rockhopper. I'll take the developments in the order that they're set out here on the slide. For the first time, a mandate has been signed with a lead technical bank, and that means that the financing plan for the development has changed from being a bond-led structure to being a more traditional senior debt-led project financing. The plan is for that lead bank, who are a very well-known international bank with experience of lending to oil and gas projects, to cornerstone the financing and then, in essence, syndicate the balance of that financing. Mostly as the result of that change to the financing plan, additional due diligence is required, and that has meant a new target for FID of the second half of this year. I'll talk a little bit more about the financing during the rest of this presentation. Secondly, we published a new independent resource evaluation for our North Falkland Basin assets. A copy of that is available on our website. We use the same firm as that used by Navitas, Netherland, Sewell or NSAI for short. In the back of that report, there are a number of tables of cash flows that are net to our 35% working interest, which are post FIG, or Falkland Islands Government tax and royalties. As it says on the slide here, at an oil price of $70 Brent, the value of the 255 million barrels of recoverable development pending barrels net to us is $1.8 billion. Thirdly, towards the end of last year, all of our licenses, and in fact all of the licenses in the Falklands, were extended to the end of 2026. Fourthly, of course, in a fairly recent piece of bad news, we were fully annulled in the Ombrina Mare arbitration. Fortunately, we had put in place an insurance policy to cover this eventuality for EUR 31 million, of which more later. Fifthly, we've signed an SPA to dispose the balance of our Italian portfolio, and we're currently awaiting regulatory consent on that transaction. Then in terms of cash pre any insurance payout, we currently have around $20 million of cash on our balance sheet. Turning to slide 3. You can see here a summary of the key resource and valuation numbers contained in the NSAI report I talked about a minute ago. The top left table, as it says, are the gross numbers, and then on the right are the Rockhopper net 35% numbers. These numbers are oil only as there is not currently any commercially viable gas discovery in the basin. The only value for the gas is it can be used in the development for fuel and as an aid to lift the oil in the wells. If you focus on the 2C or the best estimate numbers, I've picked out a couple in bold here, you can see a gross resource base of 727 million barrels development pending, of which we have 35%, or on the right-hand side in bold, 255 million barrels. As has been the case for some time, those barrels will be developed in phases. We're currently seeking basically to finance and unlock what are the first two phases, and there's a little more detail on that on the next slide. Now, as I've already mentioned, the valuation highlighted on this slide is net to our 35%, net of Falkland taxes and net of Falklands royalties, but it is pre any financing calculations. We've included in the NSAI report some oil price sensitivities at $60 and $80 oil. To save you all from looking it up, I can tell you now that at $60 a barrel, the $1.8 billion number on the slide you can see there would drop to $1.3 billion. At $80 oil, that number rises to $2.4 billion. These numbers really just confirm that Sea Lion, as all of us here know today, is potentially a hugely valuable asset for all of our stakeholders. Turning to slide four. Nothing really that new on this slide, but it's just to confirm the current plan is to develop those 727 million barrels I referenced a second ago by using two FPSOs. The first two phases, which are the first two maps in the top left section of the right-hand side of the slide that say NDA phase one and NDA phase two. The first two phases use a single FPSO, but with two drilling campaigns. In total, that develops 314 million barrels. It's those 300-odd million barrels we're seeking to unlock first. Then at some stage in the future, you would bring a second larger FPSO to the basin and develop the balance of 400 or so million barrels. So in total, you end up with over 100,000 barrels a day between the two vessels. Now that first FPSO, as has been the case for some time, has been identified, and it does remain available for the development. It's our view here that once the first phase is sanctioned, the world is a very different place to the last 15 years or so since we made the discovery, and we would then be moving into a different phase for your company. Pre-first oil project costs are still estimated by the operator to be around $1.4 billion, but more on the actual financing requirement in a minute. Moving to slide 5. I appreciate many of you will be familiar with this, but it's always worth a quick reminder of the key commercial terms between us and Navitas. We benefit from 2 loans, a pre-FID loan and a post-FID loan. The pre-FID loan is the one we're currently utilizing, and it covers all of our phase one project costs, but it explicitly excludes both license fees and any Rockhopper specific taxes. That loan carries an interest rate of 8%, and I would say the current balance is probably somewhere around $20 million. The post-FID loan is far more important and valuable to us, and that loan covers two-thirds of our phase one project costs from FID to the earlier of 12 months post first oil or project completion. That loan again excludes license fees and any Rockhopper specific taxes. Both of those loans are repayable from the Rockhopper share of post-financing cash flows. While I'm on this slide, I'll talk a little bit about the interplay between these loans, the project financing, and our likely equity requirement. Now, as I've said, the operator talks about project costs being between FID and first oil of around $1.4 billion, and the target is to raise up to or around $1 billion in the senior debt package. It's important to understand that the lending banks are going to impose a number of additional financing requirements on us over and above that $1.4 billion number for items such as contingencies and various reserve accounts. All of these numbers are, of course, moving around somewhat. I'm just going to go over an example here so that it's clear to everybody how the math works, and then, of course, you can input your own numbers. Just to do everything in round numbers, let's assume the total project financing requirement is $1.8 billion, of which the senior debt element is $800 million. We have 35%. If we did not have the loans, we would simply say 35% of $800 million, being the difference between $1.8 billion and $1 billion, and 35% of that $800 million is $280 million. Without the loans, that would be our equity requirement. Of that $280 million I'm using in this particular example, we need to provide for one-third, which is around $95 million. Now, I want to reemphasize here, none of these numbers have been completely finalized, and of course, in the end, we are going to be driven by the bank's requirements. To answer a possibly obvious question, all of that equity needs to go into the project ahead of the loans being made available to be drawn. Hopefully that's clear. With that in mind, let's move on to the insurance policy on slide six. Now, as I mentioned at the start, we were fully annulled in the arbitration and what we and our lawyers and the new funders found a very surprising decision. We had put in place an insurance policy for that exact eventuality for EUR 31 million. We have submitted our claims and our statements of loss to the various insurers. Now, under the terms of the policy, they have approximately one month from that submission to tell us whether they intend to pay out under the policy or to dispute the claim. To date, we have no feedback giving us any indication which way they're likely to go. Obviously, as and when we hear anything definitive, we will of course make an RNS to inform the market. Slide seven. Slide seven is really a reminder of the key terms of the monetization deal we entered into with a new funder, and it is worth just running over some of this. Plainly, the EUR 65 million tranche two is now not going to be paid because the entire award has been annulled. I just did want to confirm, because I've had this question a few times, that the tranche one payment which we already received is not refundable by us to the new funder. It's worth noting that we believe some tax will be due on any amounts we receive, and the law is quite complex. We may not know for some time the exact amount we have to pay. We believe it could be between 10%-15% of what we receive, and that does include, we think, tax payable on any insurance payout. An obvious question is what happens now? We're still working on this with both the new funders and the lawyers. Again, once we come to a firm conclusion on that, we will make an RNS. I think it's fair to say we are leaning currently towards launching a new arbitration, but that's not a final decision. Moving to slide 8. Nothing really new on slide 8, just a reminder that we have signed an SPA with a local Italian operator for them to acquire the balance of our Italian portfolio, and that is currently awaiting regulatory consent. Of course, as we all are aware, it does mean that there's a cash outflow should this transaction complete. On the upside, as you can see here, it would result in a pretty meaningful reduction, not only in long-run P&A liabilities, but also in cash run rate. Turning to slide nine. In summary, really, with one exception, very strong progress over the last 12 months and a hugely positive outlook for Sea Lion. We've got independent confirmation that Sea Lion's a potentially hugely valuable asset. We have a lead technical and lending bank appointed. We have positive feedback from providers of that capital to the senior debt facility. As we know, the operator talks in public about taking FID by year-end, which would mean getting to first oil two and a half years after that, so during 2028. As I mentioned earlier, I think it's abundantly clear to anyone looking at us as an investment or holding our stock already that we are going to need more capital in order to take FID. The exact amount of that additional capital remains a function of project costs, banking requirements, progress on the financing and so on. Plainly, there's an interaction between the project funding requirement and our balance sheet, and earlier I gave an example calculation which showed a potential equity project requirement for Rockhopper of $95 million. We've got roughly $20 million on our balance sheet today, and assuming we get the insurance payout on Ombrina Mare, that's around an additional EUR 36 or EUR 37 million pre-tax at today's exchange rates. It's likely that of that $56 million or $57 million total headline number, probably around $40 million is really going to be free cash because of the various calls on the money that are going to happen. I would say that in the context of a project that net to Rockhopper at $80 a barrel has an NPV10 of $2.4 billion with additional upside. The likely amount of any equity that we need to take FID is relatively small. We have never been this close to FID, but it is important to remember that risks remain, including completing the financing, sourcing our own capital, and of course, obtaining outstanding regulatory consents. With that, I'll wrap up and thank you all again for attending.