Rockhopper Exploration plc (AIM: RKH) said Sea Lion operator Navitas Petroleum is taking action to replace two contractors connected with the Falkland Islands oil development.
The update follows continuing efforts by the Argentine government to impose sanctions on companies and contractors involved in Sea Lion and other Falkland Islands activities, according to Navitas. Argentina has also recently pursued legal action against Navitas over the project.
Navitas referred to media reporting in which a contractor associated with Sea Lion said it would not undertake work on the project or participate in Falkland Islands oil exploration and production.
The operator said it is now replacing two “breaching contractors” and making any necessary adjustments to the project.
Importantly, Navitas said development of Sea Lion is continuing and that, at this stage, it does not expect the contractor issue to have a material adverse effect on the project.
It also said the development continues with the support of the Falkland Islands Government and UK Government.
However, Navitas explicitly cautioned that its assessment could change.
Potential risks include delays or failure in replacing the two contractors, difficulties making required project adjustments, additional contractors withdrawing from Falkland Islands work, or further escalation in Argentine regulatory and geopolitical action.
For investors, the important distinction is that Sea Lion has not been halted and Navitas is not currently guiding to a material project impact.
The immediate execution risk is whether replacement contractors can be secured quickly enough to avoid delays or additional costs.
The next material indicator will therefore be confirmation that the two contractor positions have been successfully replaced and that Sea Lion development continues without disruption to the existing programme.
