Rockhopper Exploration and Premier Oil have agreed to adopt a phased, lower cost development solution for the Sea Lion field in the North Falkland Basin, off Falkland Islands.
According to Rockhopper Exploration these are the highlights of phased development concept:
– Initial phase to commercialise approximately 160 mmbbls oil;
– Leased FPSO development concept targeting gross production plateau of 50,000 – 60,000 barrels oil per day;
– Costs to first oil on the initial phase estimated at less than $2 billion;
– Confirmation from Premier that a project of this size can be funded from existing facilities and cash flows and that a farm-out is no longer a pre-requisite to be able to sanction the project;
– Continuing to target first oil in 2019 following sanction in H1 2016;
In light of the move to a phased development, Rockhopper and Premier have agreed the following amendments to their commercial arrangements (subject to documentation and internal approvals):
– Rockhopper to access the full $48 million Exploration Carry for the 2015 drilling campaign;
– Rockhopper to contribute 40% of pre sanction costs, currently estimated at $100 million gross;
– Anticipated net cash outflow to Rockhopper for Falklands activities during 2015 remains in line with previous guidance at approximately US$ 50 – 70 million;
– Rockhopper to retain $337 million Development Carry for the initial phase; a further $337 million Development Carry deferred to the next phase of development;
– Existing Standby Finance arrangements to be simplified to a more traditional loan structure of up to $750 million from Premier. Rockhopper will continue to review alternative funding sources;
– Rockhopper remains fully financed through a combination of Development Carry and simplified loan from Premier;
– Revised commercial terms remain subject to documentation and respective board approvals.
Further details of proposed phased Sea Lion development
The lower cost Initial Development Scheme is designed to target more than 50% of the resources contained within PL032 and is likely to focus those resources in the North East segment of the field. Rockhopper Exploration says that subsequent phases of the development, which will require separate project sanction, will then target the remaining resources in PL032, the already discovered resources in PL004 and any potential additional resources discovered during the 2015 exploration campaign. According to the company, initial indications suggest that the concept is likely to consist of 10-15 wells in total. Production will be via an FPSO that is anticipated to be a leased facility and will target a gross production plateau of approximately 50,000 to 60,000 barrels per day in the initial phase. The company says that a further announcement will be made once the Initial Development Scheme is further advanced.
Sam Moody, Rockhopper Exploration’s CEO commented:
“We have worked closely with Premier Oil on a lower cost initial development scheme that allows us to move together towards project sanction that is not contingent on the involvement of a third party.
“Overall, we are delighted with this revised approach as it materially reduces uncertainty of first-oil from Sea Lion, which we expect to be on production in 2019, as well as very significantly reduces the capex required to reach production.
“The decision to adopt a phased FPSO development together with our high impact four well exploration campaign currently due to begin as early as March 2015, is an exciting development as we continue to grow the business for the long term.”