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Oil analyst sceptical over Rockhopper Exploration’s chances of Italian pay-out

Published: 11:29 23 Mar 2017 GMT

Oil workers on a well
WH Ireland analyst says European institutions are anti oil and gas

WH Ireland analyst Brendan Long is sceptical about the prospect of Rockhopper Exploration Plc (LON:RKH) getting a pay-out from Italy.

The Falkland and Mediterranean focussed oil junior this morning told investors that it is launching claims against Italy for damages and compensation, after an offshore development was blocked by the government.

The company said it has started international arbitration proceedings in relation to the Ombrina Mare asset.

Italy’s Ministry of Economic Development last February decided not to award Rockhopper a production concession for the field and the company is now seeking recompense for what it believes is a breach of the EU’s Energy Charter Treaty (ECT).

Rockhopper added that, based on legal opinion it has received, it believes it has strong prospects of recovering very significant monetary damages, which would be sought on the basis of lost profits.

Over at WH Ireland, however, analyst Brendan Long reckons Rockhopper may be swimming against the political tide.

“EU institutions have an anti oil & gas agenda and we see with difficulty how they will award damages to an oil & gas company no matter the law,” the analyst said in a note.

Elsewhere, oil companies expert Malcolm Graham Wood, in his daily blog, said: “Given the wording of the statement from Rockhopper I would be incredibly surprised if they were taking this lightly and of course have said that they have taken ‘legal and expert opinions’ which must have helped make this decision.”

“The company has said that whilst it had hoped to avoid this process it has become pretty much the only option and protects its shareholders interests ‘at no extra cost to the company’.

“At this stage it is impossible to try to guess quite how much RKH might be awarded should they win, and of course this case is likely to take a couple of years but a spreadsheet of the Ombrina Mare project would likely suggest a very substantial number.”

 

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