Rockhopper Exploration
Written by
Rockhopper Exploration |
Proposed merger with FOGL |
Acquisition |
Oil & gas |
24 November 2015 |
Share price performance
Business description
Analysts
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Rockhopper has announced a proposed merger with FOGL, consolidating ownership of assets in the North Falkland basin, in which the Sea Lion development and Isobel/Elaine Deep discovery lie. As a result, the new entity will have large interests in both major discoveries in the Falkland Islands, making any future deals to develop/farm-down the assets much easier. The deal could complete in January 2016 (after shareholder and government approvals), around the time of the Isobel-2 well result, which is aiming to further de-risk >500mmboe resources.
Year end |
Revenue |
PBT* |
Operating cash flow ($m) |
Net (debt)/cash |
Capex |
12/14 |
1.9 |
(7.4) |
(11.2) |
199.7 |
10.6 |
Note: *PBT is normalised, excluding amortisation of acquired intangibles, share-based payments and exceptional items.
Under the all-share deal, RKH is paying 0.2993 new shares for each FOGL share, effectively valuing FOGL at an 11% premium to last night’s closing price, which will result in current Rockhopper shareholders owning 65% and FOGL 35% of the enlarged entity. Attention is focused on the North Falklands basin; the merger adds 110mmbbls of 2C resources to the group, with the key asset of working interests in PL004.
We note that Premier has indicated that it is trying to farm-down the Sea Lion development to reduce risk. According to Rockhopper management a key consideration was that the new entity represents a much cleaner vehicle by which farm-downs of Sea Lion (and possibly Isobel/Elaine) could be struck. Any industry player interested in the Falklands now only has to deal with two companies with large equity positions and strong balance sheets.
Rockhopper remains financially robust with $130m of cash on the balance sheet (no debt) at the end of October, and remains fully carried for the development of the Sea Lion (Phase 1) development.
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