Rockhopper’s (RKH) full year 2016 results do not reveal any material news, but do help underline the progress the company made in 2016 with the acquisition of production assets in Egypt and the continued lowering of costs at Sea Lion. Net production of 1,350boe/d helps to offset general costs and maintain the substantial cash balance (end of year $81m). Most importantly, perhaps, is that the board considers the Sea Lion development to be “sufficiently robust to be sanctioned in the current environment, assuming the required capital investment can be secured”. Therefore, focus continues on working with the operator (Premier) in getting the project to FID. We point investors to our recent note on the mechanisms that the partnership can follow and the impact on RKH’s value. Our NAV is 73p/share.
Written by
Rockhopper Exploration |
Sea Lion economics robust in current environment |
2016 results |
Oil & gas |
12 April 2017 |
Share price performance
Business description
Analysts
Rockhopper Exploration is a research client of Edison Investment Research Limited |
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Rockhopper’s (RKH) full year 2016 results do not reveal any material news, but do help underline the progress the company made in 2016 with the acquisition of production assets in Egypt and the continued lowering of costs at Sea Lion. Net production of 1,350boe/d helps to offset general costs and maintain the substantial cash balance (end of year $81m). Most importantly, perhaps, is that the board considers the Sea Lion development to be “sufficiently robust to be sanctioned in the current environment, assuming the required capital investment can be secured”. Therefore, focus continues on working with the operator (Premier) in getting the project to FID. We point investors to our recent note on the mechanisms that the partnership can follow and the impact on RKH’s value. Our NAV is 73p/share.
Year |
Total revenues (US$m) |
Reported PBT (US$m) |
Cash from |
Net (debt)/cash (US$m) |
Capex (US$m) |
06/14 |
1.9 |
(7.6) |
(11.2) |
199.7 |
(11.3) |
12/15 |
4.0 |
(44.7) |
(6.9) |
110.4 |
(80.9) |
12/16e |
7.9 |
123.0 |
(24.4) |
79.9 |
(34.2) |
12/17e |
11.1 |
(18.1) |
(1.7) |
50.2 |
(13.0) |
Note: Year end changed in 2014 from June to December. All the 2016 numbers above are our estimates. We will adjust our model to reflect reported results in a future note.
The 2016 financial results are less important than the improved outlook for the company in 2017 and beyond. The acquisition of the Beach Energy assets gives it a foothold in Egypt and a larger production base in the greater Mediterranean, which it intends to grow further. Opex has fallen to $14/boe, while company G&A is down 30% over the last two years.
In the Falklands, the FEED process has continued to deliver savings, leveraging the cost deflation in the service environment, with life of field costs at $35/bbl and an estimated NPV10 break-even of $45/bbl. The company is therefore convinced that the project could be sanctioned in the current environment, with the main obstacle being the financing (currently reliant on PMO). We believe that both partners are aligned in progressing this large development – 2C resources are over 500mmboe and 3C over 900mmboe.
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Disclaimer
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Disclaimer
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Once again, Carr’s Group results demonstrate how diversification gives resilience to cyclicity in any one market. This time outperformance in UK Agriculture, supported by improving farmer confidence, offset weak demand in the US for feed blocks caused by a surplus of cattle following a period of restocking. This drove a 5% increase in pre-exceptional PBT to £8.9m. Our estimates already include downward revisions for prolonged weakness in US feed block demand and contract delays in UK manufacturing activity, so we leave both our estimates and indicative valuation of 158p/share unchanged.