Rockhopper to sell Abu Sennan interest to United Oil and Gas

Oil and gas company Rockhopper Exploration has signed a share purchase agreement with United Oil and Gas for the sale of Rockhopper Egypt, it announced on Tuesday, for consideration of $16m.

The AIM-traded firm said the key asset of Rockhopper Egypt was a 22% working interest in the Abu Sennan concession.

It said that under the terms of the agreement, the consideration would be satisfied by a payment by United of no less than $11m in cash at completion.

In order to satisfy the cash component of the consideration, United had announced a prepayment financing structure of up to $8m with BP.

Rockhopper explained that in addition, United had announced its intention to raise capital through the issue of new shares simultaneously to the proposed acquisition.

A proportion of such placement proceeds would be used to make a further cash payment to Rockhopper shortly after completion.

Any shortfall between the headline consideration of $16m and the cash payments from United would be satisfied in new United shares being issued to Rockhopper.

The consideration shares issued to Rockhopper would be priced at the price at which United issue new shares as part of its proposed capital raise.

Any consideration shares held by Rockhopper in United would be subject to certain lock-up and orderly market disposal provisions for a period of up to 12 months from completion.

The transaction remained subject to the satisfaction of customary conditions, including United shareholder approval, completion of the readmission of United to trading on AIM, and receipt of Egyptian government approvals.

Rockhopper said the transaction was expected to complete during the fourth quarter of 2019, with the effective date being 1 January 2019.

For the year ended 31 December, Abu Sennan produced approximately 813 barrels of oil equivalent per day net to Rockhopper's 22% working interest.

Revenue after tax was $6.2m, and the loss after tax totalled $2.2m on the 22% interest in Abu Sennan in the 12 month period.

The net book value of Abu Sennan for the year was $13.8m.

"Abu Sennan has been an excellent asset for Rockhopper, but with activity ramping up during 2019 ahead of the formal loan application for the senior debt element of our core Sea Lion development, we have decided this is the moment to sell at a point where we can crystallise real value," said Rockhopper chief executive officer Sam Moody.

"Having acquired our interest in August 2016 for $11.9m and agreed to sell for $16m, plus benefitting from approximately $4m of free cash flow during our period of ownership to the effective date, we will have generated a material return on investment.

"We have a number of potentially transformational catalysts in the coming months including the hugely important submission of the Sea Lion project information memorandum to senior debt lenders, continued progress on Sea Lion financing discussions in the autumn and the outcome of our Ombrina Mare arbitration in the first quarter of 2020."