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Rockhopper Exploration - Phase 1, a step closer to FID

Premier Oil’s (PMO) half-year results included several indications of the operator’s intent to progress the development of Sea Lion. This included: 1) sanction by Premier’s board of the Tolmount gas project, a key project that precedes Sea Lion in Premier’s development hopper (Falkland’s accounted for c 44% of Premier’s December 2017 net 2P reserves); 2) PMO’s expectation of remaining FCF positive at $65/bbl including Sea Lion capex; 3) the appointment of a pathfinder bank to assist with the senior financing structure of Sea Lion; and 4) signature of letters of intent (LOIs) with selected contractors for the provision of services and vendor financing. LOIs have been signed with the Sea Lion FPSO provider, drilling contractor, subsea equipment provider, well services, subsea installation contractor and for helicopter services. While Premier did not provide guidance on the timing of final investment decision (FID) for Sea Lion, we assume the project will be sanctioned in mid-2019 with the potential for first oil four years later in 2023. Our latest Rockhopper RENAV of 73.6p/share assumes a 55% commercial chance of success for Sea Lion Phase 1 based on a long-term Brent crude price of $70/bbl.