Hartshead Resources NL (Hartshead, ASX: HHR) and Viaro Energy Ltd. (Viaro), are delighted to announce a significant advancement in their joint venture through their respective subsidiaries, Hartshead Resource Ltd (HRL) and RockRose Energy (RockRose). The partners have successfully negotiated amendments to their Farm-out Agreement (FOA) and Joint Operating Agreement (JOA), introducing a robust financing framework for the Phase 1 development of the UK Southern Gas Basin License P2607.
Key Highlights of the Agreement:
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Enhanced Financing Backstop: Hartshead has secured the option to divest an additional 20% equity interest in License P2607. In exchange, RockRose will provide an uncapped free carry covering all gross costs for Phase 1 project development, effectively serving as a Financing Backstop.
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- Amended Farm-out Agreements: These amendments ensure full funding security for 100% of the Phase 1 project development costs.
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- Flexibility in Financing Decision: Post Final Investment Decision (FID), Hartshead retains the option to activate the Financing Backstop once the existing RockRose carry for Phase 1 is fully utilized. This move could elevate the total committed project funding to over A$800 million.
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- Retention of Interest and Alternative Funding: Hartshead maintains the flexibility to retain its 40% interest in the project, with the option to seek alternative funding sources.
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- Conversion of Phase 1 Cash Bonus: The existing Phase 1 cash bonus has been transformed into an additional A$54.7 million in work programme carry, applicable if Hartshead retains its 40% interest.
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- Progress Towards FID: The joint venture continues to make significant strides in the project development, moving steadily towards the Final Investment Decision.
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- Phase 2 Bonuses: The agreement preserves the Phase 2 bonuses, amounting to A$9.0 million in cash.
The revised terms under the FOA and JOA provide Hartshead with a solid financial foundation for its share of costs for Phase 1. This arrangement offers a significant de-risking of project financing, paving a clear path towards development and future cash flow. The uncapped carry is a landmark achievement for Hartshead, positioning the company for a potentially debt-free funded interest in the project.
Hartshead's option to not proceed with the Financing Backstop and to explore alternative financing solutions to maintain its current 40% interest adds an additional layer of strategic flexibility. This decision is expected to be made once the existing carry commitment from RockRose is fully expended, projected to be by Q2 2025.
Chris Lewis, Hartshead CEO, commented “The execution of the amendments to the farm-out agreement and joint operating agreement with RockRose, allows us to advance the Phase I development of the Anning and Somerville gas fields by securing the option of an uncapped carry for our interest of the project. Hartshead is in a unique position as it has the added ability of being able to retain its 40% interest via alternative financing whilst ensuring it is now able to progress to take Final Investment Decision and progress towards project development, now that it has a Financing Backstop provided.
The Joint Venture team between Hartshead and RockRose has integrated exceptionally well over the last few months and I would like to personally thank RockRose for their support in the Joint Venture on licence P2607 and the significant progression of the Phase 1 development."
Francesco Mazzagatti, CEO of Viaro Energy, commented “I am quite pleased with the restructuring of our original farmin agreement with Hartshead, as it provides us with complete certainty that the development of Anning and Somerville will be fully funded to completion. Giving our partner the option of a financing backstop ensures stability for the JV, a particular challenge for North Sea operators nowadays with the shrinking pool of traditional capital providers for E&P opportunities. With the amendments in place, we can now confidently proceed to the FID. I am grateful to the Hartshead team for a smooth and seamless cooperation at every stage of our developing partnership.”
Hartshead will continue to pursue the option to introduce project debt and maintain the current 40% equity interest in Licence P2607 however the Financing Backstop enables the Company to progress the Final Investment Decision and accelerate project development.
Contact details:
Jane Morgan