Rockhopper Exploration - Operator confident in 2018 Sea Lion Phase 1 FID

Premier Oil’s (PMO’s) FY17 results highlighted progress made by the Sea Lion project operator in securing vendor/debt financing, a key hurdle ahead of the final investment decision (FID). Premier’s proposed financing structure proposes a combination of vendor finance ($375m), senior debt ($750m) and equity ($375m) to fund the $1.5bn gross capex bill ahead of first oil. We had previously heavily risked Sea Lion Phase 1, given perceived uncertainty over Premier’s commitment to the project. We believe deleveraging of Premier’s balance sheet, the materiality of Sea Lion in the context of Premier’s development portfolio and progress made with regard to project finance significantly increase our confidence in the project reaching FID. We risk Sea Lion Phase 1 at a 40% chance of success (up from 20%), increasing our valuation of Rockhopper (RKH) from 44.2p/share to 62.9p/share (+42%).