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Edison issues outlook on Rockhopper Exploration (RKH)(September 26, 2017)
Edison Investment Research Limited
London, UK, 26 September 2017
Edison issues outlook on Rockhopper Exploration (RKH)
Rockhopper (RKH) holds c 50% of the Sea Lion field, one of the largest undeveloped fields globally. With gross contingent 2C reserves of 517mmbbls (and 900mmbbls 3C), the phased development of the fields has been delayed by a number of factors. However, with costs falling to produce an NPV10 break-even of less than $45/bbl and a more solid funding solution becoming apparent over the last six months, a final investment decision (FID) is being targeted in 2018. Together with its Mediterranean production assets and $63m in cash at end H117, it is well placed to realise long-term value. We have reviewed our modelling and applied lower long-term oil price assumptions, which results in a core NAV of 44p/share.
After reducing our long-term oil price to $70/bbl in 2022 (previously c $80/bbl) and a number of other adjustments, our (risked) core NAV falls to 44p/share, which assumes just a 20% chance of success - this would rise to 81p/share if risking for Phase 1 is increased to 50% (and Phase 2 to 25%). While the timing and ability to fund the development are still uncertain, our analysis indicates that there should be material long-term value in the assets.
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