The big news from
Bringing in a partner was the only viable option because the alternative would have been to raise $2bn (£1.2bn) of capital to fund development costs. By securing a partner, Rockhopper can now look forward to tapping the estimated 142m barrels of oil that should start to generate cash flow from 2017. In fact, Rockhopper's share of that cash flow is expected to exceed $2bn. For now, though, the plan is to have a three well exploration programme in place for 2014.
At the operating level, half-year losses were reduced as a result of a $25m fall in exploration and evaluation expenses to just $4m - reflecting a $15m drop in impairment charges and a $10m reduction in development costs. Free cash deposits stood at $43m at the half-year but, in October, and as a result of the farm-out agreement, Rockhopper received an additional $231m - which, after transaction costs, leaves free cash of around $270m.
| ROCKHOPPER EXPLORATION (RKH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 158p | MARKET VALUE: | £449m | |
| TOUCH: | 157-158p | 12-MONTH HIGH: | 399p | LOW: 143p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 141¢* | NET CASH: | $93.3m** | |
IC VIEW
Rockhopper was always going to struggle to raise sufficient capital to exploit the Sea Lion field. So, with Premier Oil as a partner, the finance is now in place to eventually turn this oil find into cash. Uncertainty over the group's ability to secure a partner has helped the shares slide by 45 per cent since early July. But, at current levels - and with Premier now on board - expect a re-rating. Buy.
Last IC view: Buy, 255p, 12 July 2012
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