Rockhopper has provided an update on the company’s Greater Mediterranean assets, reporting improved production from Abu Sennan, strong realisations and confirmation of a four-well drilling programme in 2018. The company’s Egyptian receivables position is significantly reduced ($4.5m outstanding) and historical liabilities to Beach Energy have been satisfied, meaning that Rockhopper will now benefit from 100% of payments from EGPC relating to its net interest. Cash flows from the company’s Egyptian asset base are expected to cover operational costs, G&A and contribute to maintenance capex going forward. Our last published valuation ranges from a core NAV of 44p/share (Phase 1 risked at 20% CoS) to 81p/share (Phase 1 at 50% CoS).
Written by
Rockhopper Exploration |
Greater Med assets provide positive cash flow |
Corporate update |
Oil & gas |
26 February 2018 |
Share price performance
Business description
Analysts
Rockhopper Exploration is a research client of Edison Investment Research Limited |
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Rockhopper has provided an update on the company’s Greater Mediterranean assets, reporting improved production from Abu Sennan, strong realisations and confirmation of a four-well drilling programme in 2018. The company’s Egyptian receivables position is significantly reduced ($4.5m outstanding) and historical liabilities to Beach Energy have been satisfied, meaning that Rockhopper will now benefit from 100% of payments from EGPC relating to its net interest. Cash flows from the company’s Egyptian asset base are expected to cover operational costs, G&A and contribute to maintenance capex going forward. Our last published valuation ranges from a core NAV of 44p/share (Phase 1 risked at 20% CoS) to 81p/share (Phase 1 at 50% CoS).
Year |
Revenue (US$m) |
PBT |
Cash from |
Net (debt)/ |
Capex |
12/15 |
4.0 |
(44.7) |
(6.9) |
110.4 |
(80.9) |
12/16 |
7.4 |
98.0 |
(21.2) |
81.0 |
(40.2) |
12/17e |
9.8 |
(9.5) |
(1.7) |
51.3 |
(26.3) |
12/18e |
8.1 |
(18.4) |
0.4 |
40.9 |
(11.0) |
Note: Figures are as reported.
Abu Sennan: producing slightly ahead of management expectations following workovers in H217 at 880kboed net. Following JV approval, the company is to drill one exploration well (Prospect ‘S’), two development wells and a water injection programme at Al Jahraa in 2018. The focus remains on replacing reserves and maintaining production with the potential to materially increase recovery factor over time. (Abu Sennan accounts for 2p/share of our NAV). Net capex for the assets is estimated at $3m in 2018.
El Qa’an Plain: the Raya-1X commitment well is to be drilled in 2018, targeting a relatively high COS, but small (1-2mmbo) prospect close to existing discoveries.
Italy: Guendalina continues to perform to forecast (290kboed in 2017); however, the Civita gas field incurred downtime in February 2018 due to a pipeline depressurisation event, which is to be remedied. Rockhopper continues to look at divesting its non-core Italian assets, including Civita (currently just 0.3p/share of our NAV), to Cabot Energy.
Sea Lion Phase 1 financing: Sea Lion Phase 1 continues to progress towards project sanction, targeted for end-2018. Focus remains on financing the $1.5bn gross capex required to achieve first oil. We expect to hear a further update on Sea Lion at Premier Oil’s full-year results on 8 March 2018.
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Research: Investment Companies
Utilico Emerging Markets (UEM) aims to generate long-term growth in capital and income from a portfolio of 60-90 emerging market equities. Exposure is diversified by geography, with a large concentration in infrastructure, utility and related sectors. Manager Charles Jillings is bullish on the outlook for emerging market equities in 2018 due to a widespread economic improvement, which should result in another year of robust corporate profits. UEM has announced that it is proposing to change its domicile from Bermuda to the UK, which has the potential to improve investor perception and may lead to a narrower discount.