Rockhopper Exploration PLC (AIM:RKH) has put in place an insurance policy to cover the potential annulment of the Ombrina Mare Arbitration Award.
The policy guarantees that the company will receive no less than €31million in the event of an annulment or partial annulment. The policy was arranged through a specialist FCA-registered brokerage and underwritten by A-rated carriers, with a total cost of €4 million.
Also, Rockhopper announced it had signed a share purchase agreement with Zodiac Energy Limited to exit its Italian assets.
"The steps announced today provide us with further strategic and commercial clarity as we continue to focus on progressing the Sea Lion development,” chief executive Samuel Moody said in a statement.
“The combination of the insurance policy and transaction with Zodiac allows us to refocus the company on Sea Lion by further reducing both short and long-term costs, reducing risk, and protecting our balance sheet whilst maintaining some potential upside in two Italian licences."
The divestment sees Zodiac make two payments with €3 million paid upfront, followed by a contingent payment of €2.5 million if the attempted annulment is defended successfully and at least €10 million is recovered in the arbitration.
Rockhopper will retain a royalty interest in two undeveloped Italian licenses – potentially giving it either 10% of future revenues or 25% of the proceeds from any sale of the licences.
As a result of the two arrangements, Rockhopper’s liabilities related to Italian licenses will decrease by $15 million, and its annual cash burn is expected to reduce by €500,000 to €750,000.