Rockhopper Exploration
Written by
Rockhopper Exploration |
Operational update |
Company update |
Oil & gas |
9 February 2017 |
Share price performance
Business description
Next events
Analysts
Rockhopper Exploration is a research client of Edison Investment Research Limited |
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The operational update from Rockhopper (RKH) contains no significant news, but does draw a line on the rig litigation (now settled) and provides further detail on the drilling activity in Egypt in 2017. Two wells will be drilled in H117, an exploration well followed by a development well, which will target a reservoir deeper than so far seen at Al Jahraa-4. The company hopes it will prove up the connection between the Al Jahraa and Al Jahraa SE fields. The company remains in strong financial health, with $60-65m cash at year end (after adjustments), and the largest net holding of reserves in Sea Lion. Our core NAV falls slightly from 74p/share to 73p/share.
Year |
Revenue |
PBT* |
Operating cash flow ($m) |
Net cash/ |
Capex |
12/14 |
1.9 |
(7.6) |
(11.2) |
199.7 |
(11.3) |
12/15 |
4.0 |
(44.7) |
(6.9) |
110.4 |
(80.3) |
12/16e |
7.8 |
122.9 |
(24.4) |
79.8 |
(34.2) |
12/17e |
11.1 |
(18.1) |
(1.7) |
50.1 |
(28.0) |
Note: *PBT is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Egyptian work programme
2017 will be the first full year of RKH’s ownership of the Abu Sennan asset. We model full-year 2017 production at similar levels to 2016 and note the development well and two workovers planned that will contribute to this. The recent acquisition of a 25% stake in Abu Sennan by Global Connect (private) underlines the attractive nature of the asset, even though the financial terms have not been disclosed.
Sea Lion development still in background
Sea Lion’s development has been dependent on the ability of Premier Oil (PMO) to fund the capex, leading to delays given PMO’s reduced financial health in recent years. Recent refinancing moves by PMO could lead to a more positive picture in 2017, although we believe any news on a farm-down is unlikely in the near term (we still expect both partners to seek a farm-down to a larger player that is better positioned to develop >500mmboe of Sea Lion resources (not including Isobel Deep/Elaine, which could be of a similar magnitude).
Valuation: Reduced to 73p/share
We have adjusted our modelling to reflect the company’s cash position and forecast capital expenditure in 2017, resulting in a slight revision of the core NAV to 73p/share (from 74p/share). The bulk of the value is in the Sea Lion development, where the technical studies part of FEED is almost complete, although we note that RKH’s WI and NPV may change with a farm-down. The substantial cash reserves of $60-65m at year end equate to around 11p/share. Egyptian and Italian production should largely cover the G&A burn and the Egyptian exploration well gives the possibility of further upside in the event of success.
Valuation
Our valuation falls slightly to 73p/share (from 74p/share) after minor adjustments to the year-end cash and capex programme. We also move our 2017 Brent assumption from $51.8/bbl to $51.7/bbl (following EIA forecasts).
Exhibit 1: NAV summary
Asset |
FX £/US$1.3 |
|
|
Recoverable reserves |
|
Net risked value |
|
|
|||
Shares: 457m |
WI |
CoS |
Gross |
Net |
NPV |
at WACC of 12.5% |
at WACCs of |
||||
Country |
First production |
% |
|
mmboe |
$/boe |
$m |
/share |
10% |
15% |
||
Net (debt)/cash at Dec 2016e |
80 |
14 |
14 |
14 |
|||||||
G&A (NPV10 of five years) |
(41) |
(7) |
(7) |
(7) |
|||||||
2017 Exploration |
(2) |
(0) |
(0) |
(0) |
|||||||
Remaining payments for Falkland exploration (from 2016, paid in 2017) |
(18) |
(3) |
(3) |
(3) |
|||||||
Production |
0 |
0 |
|||||||||
Guendalina |
Italy |
20% |
100% |
2.0 |
0.4 |
11.7 |
5 |
1 |
1 |
1 |
|
Civita |
Italy |
100% |
100% |
0.2 |
0.2 |
3.1 |
0 |
0 |
0 |
0 |
|
Abu Sennan |
Egypt |
22% |
100% |
19 |
4.1 |
3.1 |
13 |
2 |
3 |
2 |
|
Development |
0 |
0 |
|||||||||
Sea Lion Phase 1 |
Falkland Islands |
2022 |
40% |
25% |
220 |
88 |
9.5 |
209 |
37 |
47 |
29 |
Sea Lion Phase 2 in PL32 |
Falkland Islands |
2026 |
40% |
20% |
88 |
35 |
4.9 |
35 |
6 |
9 |
4 |
Sea Lion Phase 2 in PL04 |
Falkland Islands |
2026 |
64% |
20% |
215 |
137 |
4.9 |
136 |
24 |
36 |
16 |
Core NAV |
|
|
|
|
544 |
265 |
|
416 |
73 |
99 |
55 |
Isobel Elaine |
Falkland Islands |
64% |
13% |
472 |
302 |
2.1 |
81 |
14 |
29 |
6 |
|
Isobel Elaine (CPR volumes) |
Falkland Islands |
64% |
13% |
140 |
90 |
2.1 |
24 |
4 |
8 |
2 |
|
Source: Edison Investment Research
Financials
Rockhopper remains in strong financial health, with $80m cash at year end ($60-65m after campaign close-out costs and the rig settlement). Cash flows from production should largely offset G&A costs, leaving the $13m capital programme in 2017 (including $8m for Sea Lion FEED and $3m for Egyptian drilling/work-overs) as the main outflow leading to our estimated 2017 year-end cash position of $50m.
Exhibit 2: Financial summary
|
|
$'000s |
|
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
Dec |
|
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|||||||||
Revenue |
|
|
|
0 |
0 |
1,910 |
3,966 |
7,823 |
11,079 |
Cost of Sales (incl. depreciation of production assets) |
0 |
0 |
(3,970) |
(11,049) |
(7,593) |
(12,968) |
|||
Gross Profit |
0 |
0 |
(2,060) |
(7,083) |
230 |
(1,890) |
|||
EBITDA |
|
|
|
(12,924) |
(17,230) |
(8,031) |
(32,824) |
134,033 |
(3,905) |
Clean EBITDAX |
|
|
(6,966) |
(15,769) |
(6,249) |
(9,890) |
(3,172) |
(3,905) |
|
Operating Profit (before amort. and except.) |
(13,191) |
(17,230) |
(8,031) |
(40,922) |
129,507 |
(12,580) |
|||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Exceptionals |
58,668 |
0 |
0 |
0 |
0 |
0 |
|||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Operating Profit |
45,477 |
(17,230) |
(8,031) |
(40,922) |
129,507 |
(12,580) |
|||
Net Interest |
1,640 |
1,499 |
448 |
(3,775) |
(6,574) |
(5,523) |
|||
Profit Before Tax (norm) |
|
(11,551) |
(15,731) |
(7,583) |
(44,697) |
122,933 |
(18,103) |
||
Profit Before Tax (FRS 3) |
|
47,117 |
(15,731) |
(7,583) |
(44,697) |
122,933 |
(18,103) |
||
Tax |
(122,359) |
(62,542) |
(5) |
55,395 |
(530) |
(634) |
|||
Profit After Tax (norm) |
(133,910) |
(78,273) |
(7,588) |
10,698 |
122,403 |
(18,737) |
|||
Profit After Tax (FRS 3) |
(75,242) |
(78,273) |
(7,588) |
10,698 |
122,403 |
(18,737) |
|||
Average Number of Shares Outstanding (m) |
284.2 |
284.3 |
292.6 |
293.4 |
456.5 |
456.5 |
|||
EPS - normalised (US$c) |
|
(47.1) |
(27.5) |
(2.6) |
3.6 |
26.8 |
(4.1) |
||
EPS - normalised and fully diluted (US$c) |
(47.1) |
(27.5) |
(2.6) |
3.6 |
26.8 |
(4.1) |
|||
EPS - (IFRS) (US$c) |
|
|
(26.5) |
(27.5) |
(2.6) |
3.6 |
26.8 |
(4.1) |
|
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
152,540 |
154,009 |
227,816 |
279,098 |
489,068 |
492,558 |
|
Intangible Assets |
151,957 |
153,656 |
204,164 |
256,658 |
460,944 |
460,924 |
|||
Tangible Assets |
583 |
353 |
12,146 |
12,637 |
18,120 |
21,630 |
|||
Goodwill / Other |
0 |
0 |
11,506 |
9,803 |
10,004 |
10,004 |
|||
Current Assets |
|
|
299,582 |
249,723 |
207,979 |
120,495 |
105,351 |
75,638 |
|
Stocks |
0 |
0 |
2,188 |
1,670 |
1,866 |
1,866 |
|||
Debtors |
1,559 |
1,932 |
4,681 |
6,199 |
22,000 |
22,000 |
|||
Cash |
297,741 |
247,482 |
199,726 |
110,434 |
79,828 |
50,115 |
|||
Other |
282 |
309 |
1,384 |
2,192 |
1,657 |
1,657 |
|||
Current Liabilities |
|
|
(34,921) |
(110,140) |
(119,797) |
(30,466) |
(30,009) |
(30,009) |
|
Creditors |
(34,921) |
(110,140) |
(119,797) |
(30,466) |
(30,009) |
(30,009) |
|||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Long Term Liabilities |
|
|
(85,304) |
(39,137) |
(60,960) |
(106,893) |
(142,062) |
(147,585) |
|
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Other long term liabilities |
(85,304) |
(39,137) |
(60,960) |
(106,893) |
(142,062) |
(147,585) |
|||
Net Assets |
|
|
|
331,897 |
254,455 |
255,038 |
262,234 |
422,348 |
390,602 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
(14,029) |
(12,834) |
(11,237) |
(6,856) |
(24,441) |
(1,713) |
|
Net Interest |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Capex |
207,746 |
(42,267) |
(11,261) |
(80,302) |
(34,223) |
(28,001) |
|||
Acquisitions/disposals |
0 |
0 |
(24,037) |
0 |
(4,688) |
0 |
|||
Equity financing / buybacks |
(2,337) |
4,842 |
(1,201) |
(2,116) |
32,752 |
0 |
|||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Net Cash Flow |
191,380 |
(50,259) |
(47,736) |
(89,274) |
(30,601) |
(29,714) |
|||
Opening net debt/(cash) |
|
(103,263) |
(297,741) |
(247,482) |
(199,726) |
(110,434) |
(79,828) |
||
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Other |
3,098 |
0 |
(20) |
(18) |
(5) |
(0) |
|||
Closing net debt/(cash) |
|
|
(297,741) |
(247,482) |
(199,726) |
(110,434) |
(79,828) |
(50,115) |
|
Source: Edison Investment Research, company accounts
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