TIDMRKH
RNS Number : 6616M
Rockhopper Exploration plc
18 September 2019
18 September 2019
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Half-year results for the six months to 30 June 2019
Rockhopper Exploration plc (AIM: RKH), the oil and gas
exploration and production company with key interests in the North
Falkland Basin, is pleased to announce its results for the six
months ended 30 June 2019.
Year to date highlights
Sea Lion Phase 1 development - project optimised; resource
increased; continued focus on securing senior debt funding ahead of
final investment decision
-- Through the FEED and optimisation processes, the Sea Lion
project has been substantially de-risked from a technical, cost and
schedule perspective
-- Resources to be developed in Phase 1 of the project have
increased from 220 to 250 mmbbls (gross) with associated capex to
first oil estimated at approximately US$1.8 billion (gross)
-- Key service and supply contracts are nearing final agreement
in preparation for execution at project sanction
-- Continued focus on securing senior debt funding ahead of final investment decision
-- Preliminary Information Memorandum and comprehensive set of
independent expert reports, which formed the basis of a financing
guarantee application package for the senior debt component of the
project financing, were submitted to potential senior lenders
including export credit agencies in July 2019
Strong H1 operating and financial performance with continued
focus on costs
-- Net working interest production averaged 1.2 kboepd
-- Revenue of US$4.8 million; operating costs of US$2.2 million
-- Cash operating costs of US$10.3 per boe - low cost base maintained
-- Continued management of G&A costs - US$2.4 million - down over 35% in the last 3 years
-- Cash resources of US$27 million at 30 June 2019 and no debt
Corporate
-- Appointment of Keith Lough as Non-Executive Chairman
following the retirement of David McManus at the Company's AGM in
May 2019
-- Ombrina Mare arbitration - in June 2019 the Tribunal rejected
Italy's request for suspension and related intra-EU jurisdictional
objections
-- Disposal of Rockhopper Egypt Pty Limited for US$16 million
announced in July 2019, with completion anticipated in Q4 2019
Outlook
-- Progression of Sea Lion funding into detailed lender due
diligence and documentation in Q4 2019
-- Outcome in relation to Ombrina Mare arbitration expected in
Q1 2020 - seeking significant monetary damages
-- Year end 2019 cash resources estimated to be in the range of
US$25-30 million, depending on the final mix of consideration
received upon completion of the disposal of Rockhopper Egypt Pty
Limited
Keith Lough, Chairman of Rockhopper, commented:
"2019 has already been a busy period for the Company, and the
next six months have the potential to be transformational for
Rockhopper with a number of very significant catalysts ahead.
"The PIM submission process marked a material milestone in the
project financing process for the Sea Lion development. If, as
expected, the application is well received, we anticipate moving
into a phase of detailed lender due diligence and documentation
during Q4 2019.
"In addition, with a supportive interim ruling on jurisdiction,
we remain positive on the prospects of recovering significant
monetary damages through our international arbitration against the
Republic of Italy in respect of Ombrina Mare and look forward to an
outcome in early 2020."
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive
Stewart MacDonald - Chief Financial Officer
Tel. +44 (0) 20 7390 0234 (via Vigo Communications)
Canaccord Genuity Limited (NOMAD and Joint Broker)
Henry Fitzgerald-O'Connor/James Asensio
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton
Tel. +44 (0) 20 7418 8900
Vigo Communications
Patrick d'Ancona/Ben Simons
Tel. +44 (0) 20 7390 0234
Note regarding Rockhopper oil and gas disclosure
This announcement has been approved by Rockhopper's geological
staff which includes Lucy Williams (Geoscience Manager) who is a
Chartered Geologist, a Fellow of the Geological Society of London
and a Member of both the Petroleum Exploration Society of Great
Britain and American Association of Petroleum Geologists, with over
25 years of experience in petroleum exploration and management and
who is the qualified person as defined in the Guidance Note for
Mining, Oil and Gas Companies issued by the London Stock Exchange
in respect of AIM companies.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Rockhopper's strategy is to build a well-funded, full-cycle,
exploration led E&P company.
In the Falklands, material progress continued to be made in the
first half of 2019 across a range of disciplines including FEED and
optimisation work; finalisation of contractual arrangements with
key service and supply contractors; and the preparation of the
Preliminary Information Memorandum ("PIM") and associated suite of
lender due diligence reports, which were submitted after the period
end.
Sea Lion has the potential to be transformational for Rockhopper
and the Falkland Islands as a whole. The project is at a mature
stage of definition and through the FEED and optimisation process
has been substantially de-risked from a technical, cost and
schedule perspective. Securing funding is the last remaining major
milestone before Sea Lion can reach FID and all efforts are focused
on securing such financing to allow the project to move into the
execution phase.
Our interest in Abu Sennan has performed very well for us both
operationally and financially. However, despite our efforts to
acquire and grow a more material position in Egypt, we were unable
to do so on attractive terms given the competitive market dynamics
and significant buyer interest for assets. Instead we took the
opportunity to divest, crystalise an attractive return on
investment and at the same time strengthen the balance sheet.
Balance sheet cash is preserved for capital investment which
continues to be focused primarily on the progression of the Sea
Lion project towards sanction.
We maintain ambitions, on a highly selective basis, to expand
our production base thereby generating additional free cash flow to
strengthen our balance sheet and invest in future exploration or
other value-accretive growth opportunities both in the Falklands
and elsewhere.
Sea Lion Phase 1 development - project optimised; resource
increased; continued focus on securing senior debt funding ahead of
final investment decision
Rockhopper is the leading acreage holder in the North Falkland
Basin with a material working interest in all key licences.
The overall strategy to develop the North Falkland Basin remains
a phased development solution, starting with Sea Lion Phase 1,
which will commercialise, through a conventional FPSO development
scheme, 250 mmbbls (gross) of oil resources in the northern part of
PL032 (in which Rockhopper has a 40% working interest). A
subsequent Phase 2 development will commercialise the remaining
approximately 280 mmbbls (gross) resources in both PL032 and the
satellite accumulations in the north of PL004 (in which Rockhopper
has a 64% working interest). In addition, there is a further 200
mmbbls (gross) of low risk, near field exploration potential which
could be included in either the Phase 1 or Phase 2 developments.
Phase 3 will entail the development of the Isobel/Elaine fan
complex in the south of PL004, subject to further appraisal
drilling.
Following the FEED and optimisation processes, conducted through
the first half of 2019, the resources to be developed in Phase 1
have increased from 220 to 250 mmbbls (gross) with associated capex
to first oil estimated at approximately US$1.8 billion (gross).
This optimisation and value engineering has resulted in a
substantially de-risked project with robust economics which is
critical as we progress the process to secure senior debt funding
for the project.
The Sea Lion financing plan comprises funding elements including
senior project finance debt (likely involving a combination of
export credit guarantees and loans as well as commercial debt),
vendor financing from contractors and equity from the joint
venture. Rockhopper's share of the joint venture equity is to be
funded through the carry arrangements with Premier.
The joint venture continues to lead engagement with a wide range
of stakeholders to obtain the support required to secure senior
debt, which represents the core of the project's funding strategy.
In this regard, a Preliminary Information Memorandum and
comprehensive set of independent expert reports, which formed the
basis of a financing application for the senior debt component of
the project financing, were submitted to potential senior lenders
including export credit agencies in July 2019.
On the vendor financing side, the project contractors have
undertaken an extensive due diligence and assurance process and,
are nearing final agreement to provide funding for the project,
subject to the finalization of documentation.
Constructive and supportive engagement with the Falkland Islands
Government ("FIG") continues on a range of environmental, fiscal
and regulatory matters with a view to obtaining the consents and
agreements necessary to reach a final investment decision. Formal
approval of the Environmental Impact Statement ("EIS") and Field
Development Plan ("FDP") are expected at sanction.
The Sea Lion Discovery Area is due to expire on 15 April 2020.
The submission of the final Field Development Plan for FIG approval
is expected before that date. However, given the nature of the
project financing currently being pursued, the timetable and
process to secure such funding remains outside our control and
therefore, as a prudent precaution, discussions have commenced with
FIG in relation to a 6 to 12 month extension to the Sea Lion
Discovery Area licence.
Greater Mediterranean - opportunistic disposal of Abu Sennan to
generate attractive return on investment and strengthen the balance
sheet
Our Greater Mediterranean portfolio continued to perform
strongly in H1 2019 with production averaging 1.2 kboepd net to
Rockhopper over the period.
In July 2019, Rockhopper announced the disposal of Rockhopper
Egypt Pty Limited to United Oil and Gas plc ("United") for a
consideration of US$16 million. The key asset of Rockhopper Egypt
Pty Limited is a 22% working interest in the Abu Sennan concession.
Having acquired the interest in Abu Sennan for US$11.9 million in
August 2016 and agreeing to sell for US$16 million, plus
benefitting from free cash flow during our period of ownership, the
Board concluded that now was a suitable time to dispose.
Corporate matters
Rockhopper commenced international arbitration proceedings
against the Republic of Italy in relation to the Ombrina Mare field
in March 2017. The hearing took place in early February 2019 in
Paris. In June 2019, the Tribunal rejected Italy's request for the
suspension of the arbitration and Italy's related intra-EU
jurisdictional objections. It is now expected that further
post-hearing briefings will be submitted in October 2019 and a
final outcome is now expected in Q1 2020.
Rockhopper continues to believe it has strong prospects of
recovering very significant monetary damages - on the basis of lost
profits - as a result of the Republic of Italy's breaches of the
Energy Charter Treaty. All costs associated with the arbitration
are funded on a non-recourse ("no win - no fee") basis from a
specialist arbitration funder.
As part of the Board's long-term succession planning, and having
served on the Board for nearly nine years, the past three as
Non-Executive Chairman, David McManus retired as a Director at the
Company's AGM in May 2019. Keith Lough, previously Senior
Independent Director, succeeded David as Non-Executive Chairman. We
thank David for his significant contribution and wish him every
success in the future.
Environmental, Social and Governance ("ESG")
ESG continues to be a key focus for Rockhopper and we are
committed to acting as a socially responsible contributor to the
global energy mix. On the environmental side, we aim to minimise
future greenhouse gas emissions across the portfolio.
For the Sea Lion development, the objective of minimising future
greenhouse gas emissions has been integral to the concept select,
FEED and optimisation processes. In June 2019, FIG approved the
establishment of an environment fund to receive and administer
future off-setting payments from the Sea Lion joint venture and
distribute those funds for activities aimed at ensuring a positive
environmental legacy.
Outlook
2019 has already been a busy period for the Company, and the
next six months have the potential to be transformational for
Rockhopper with a number of very significant catalysts ahead.
The PIM submission process marked a material milestone in the
project financing process for the Sea Lion development. If, as
expected, the application is well received, we anticipate moving
into a phase of detailed lender due diligence and documentation
during Q4 2019.
With a supportive interim ruling on jurisdiction, we remain
positive on the prospects of recovering significant monetary
damages through our international arbitration against the Republic
of Italy in respect of Ombrina Mare and look forward to an outcome
in early 2020.
Keith Lough Samuel Moody
Non-Executive Chairman Chief Executive Officer
FINANCIAL REVIEW
OVERVIEW
During the first half of 2019, significant progress was made to
advance and execute the financing plan for the Sea Lion Phase 1
development. This culminated in the submission of the Preliminary
Information Memorandum, which forms the basis of a financing loan
and guarantee application, to potential senior lenders, at the end
of July 2019. The submission of the PIM marks a material milestone
in the project financing process.
In July 2019, Rockhopper announced the disposal of Rockhopper
Egypt Pty Limited to United Oil and Gas plc ("United") for
consideration of US$16 million. The key asset of Rockhopper Egypt
Pty Limited is a 22% working interest in the Abu Sennan
concession.
Results summary
US$m (unless otherwise specified) H1 2019 H1 2018
Working interest production
(kboepd) 1.2 1.1
Realised oil price (US$/bbl) 63.1 68.4
Revenue 4.8 5.2
Cash operating costs 2.2 2.2
Recurring administrative
costs ("G&A") 2.4 2.3
Loss after tax (16.5) (7.4)
Cash (out)/in flow from
operating activities (2.8) 4.9
Capital expenditure 15.2 5.4
Cash and term deposits 26.9 46.4
Results for the period
For the period ended 30 June 2019, the Company reported revenues
of US$4.8 million and loss after tax of US$16.5 million. The loss
after tax primarily arose as a result of the US$10.1 million
non-recurring non-cash impairment of goodwill associated with the
Company's Greater Mediterranean portfolio.
REVENUE
The Group's revenues of US$4.8 million (H1 2018: $5.2 million)
during the period relate entirely to the sale of oil and natural
gas in the Greater Mediterranean (Egypt and Italy). The reduction
in revenues from the comparable period reflects a decrease in
realised oil and gas prices, partially offset by a modest increase
in production.
Working interest production averaged approximately 1,190 boepd
during H1 2019, a small increase over the comparable period (H1
2018: 1,100 boepd).
During the period, the Group's gas production in Italy was sold
under short-term contract with an average realised price of EUR0.19
per scm (H1 2018: EUR0.22 per scm), equivalent to US$6.2 per mscf.
Gas is sold at a price linked to the Italian "PSV" (Virtual
Exchange Point) gas marker price.
In Egypt, all of the Group's oil and gas production is sold to
Egypt General Petroleum Company ("EGPC"). The average realised
price for oil was US$63.1 per barrel (H1 2018: $68.4 per barrel), a
small discount to the average Brent price over the same period. Gas
is sold at a fixed price of US$2.65 per mmbtu.
OPERATING COSTS
Cash operating costs, excluding depreciation and impairment
charges, amounted to US$2.2 million (H1 2018: US$2.2 million).
Underlying cash operating costs were flat on H1 2018 levels despite
increased production in the period. Cash operating costs on a per
barrel of oil equivalent basis improved on the comparative period
and remain attractive at US$10.3 per boe.
The Group continues to manage corporate costs having achieved an
approximate 35% reduction in general and administrative ("G&A")
cost, excluding non-recurring expenses related to restructuring and
acquisitions, over the last 3 years. G&A costs remained broadly
flat in H1 2019 amounting to US$2.4 million, compared to the
corresponding period last year (H1 2018: US$2.3 million).
Following the decision in February 2016 by the Ministry of
Economic Development not to award the Group a Production Concession
covering the Ombrina Mare field, in March 2017 the Group commenced
international arbitration proceedings against the Republic of
Italy. All costs associated with the arbitration are funded on a
non-recourse ("no win - no fee") basis from a specialist
arbitration funder.
CASH MOVEMENTS AND CAPITAL EXPITURE
At 30 June 2019, the Company had cash and term deposits of
US$26.9 million (31 December 2018: US$40.4 million) and no
debt.
Cash and term deposit movements during the period:
US$m
----------------------------------------- ------
Opening cash balance (31 December 2018) 40.4
Revenues 4.8
Cost of sales (2.2)
Falkland Islands (7.6)
Greater Mediterranean (2.7)
Admin and miscellaneous (5.8)
Closing cash balance (30 June 2019) 26.9
----------------------------------------- ------
Falkland Islands spend of US$7.6 million relates primarily to
pre-development activities on Sea Lion. Despite the Sea Lion FEED
process concluding in March 2019, and the post-FEED optimisation
expected to conclude in September 2019, increased activity levels
and spend are expected to be maintained throughout 2019 in the lead
up to project sanction.
Spend in the Greater Mediterranean largely relates to the
Egyptian drilling campaign at Abu Sennan.
Admin and miscellaneous includes G&A, foreign exchange and
movements in working capital during the period.
Following completion of the announced disposal of Rockhopper
Egypt Pty Limited, which is anticipated to close in Q4 2019, year
end 2019 cash is estimated to be in the region of US$25-30 million,
depending on the final mix of consideration received at closing of
the disposal.
Mergers, acquisitions and disposals
On 23 July 2019, Rockhopper announced the disposal of Rockhopper
Egypt Pty Limited which holds a 22% working interest in the Abu
Sennan concession to United for a consideration of US$16
million.
Under the terms of the SPA, the consideration will be satisfied
by a payment by United of not less than US$11 million in cash at
completion. In order to satisfy the cash component of the
consideration, United has announced a prepayment financing
structure of up to US$8 million with BP. In addition, United has
announced the intention to raise capital through the issue of new
shares simultaneously to the proposed acquisition. A proportion of
such placement proceeds will be used to make a further cash payment
to Rockhopper shortly after completion. Any shortfall between the
headline consideration of US$16 million and the cash payments from
United will be satisfied in new United shares being issued to
Rockhopper (the "Consideration Shares"). The Consideration Shares
issued to Rockhopper will be priced at the price at which United
issues new shares as part of its proposed capital raise.
Any Consideration Shares held by Rockhopper in United are
subject to certain lock-up and orderly market disposal provisions
for a period of up to 12 months from completion.
The transaction is subject to satisfaction of customary
conditions precedent including United shareholder approval,
completion of the readmission of United to trading on AIM and
receipt of Egyptian government approvals. The transaction is
expected to complete during Q4 2019 with the effective date being 1
January 2019.
The assets and liabilities associated with the transaction, as
at 30 June 2019, are US$17.3 million and US$0.7 million
respectively.
Taxation
On 8 April 2015, the Group agreed binding documentation ("Tax
Settlement Deed") with the Falkland Islands Government in relation
to the tax arising from the Group's farm out to Premier.
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16.
As a result of the Tax Settlement Deed, the outstanding tax
liability was confirmed at GBP64.4 million and is payable on the
earlier of: (i) the first royalty payment date on Sea Lion; (ii)
the date of which Rockhopper disposes of all or a substantial part
of the Group's remaining licence interests in the North Falkland
Basin; or (iii) a change of control of Rockhopper Exploration
plc.
During the first half of 2017, as a result of the Group
receiving the full Exploration Carry from Premier during the
2015/16 drilling campaign, the Falkland Islands Commissioner of
Taxation agreed to reduce the tax liability in line with the terms
of the Tax Settlement Deed. As such, the tax liability has been
revised downwards to GBP59.6 million. The outstanding tax liability
is classified as non-current and is discounted to a period-end
value of US$40.3 million.
Full details of the provisions and undertakings of the Tax
Settlement Deed are disclosed in note 8 of these condensed
consolidated interim financial statements and these include
"creditor protection" provisions including undertakings not to
declare dividends or make distributions while the tax liability
remains outstanding (in whole or in part).
BREXIT
It is the view of the Board that, given the Group's focus on the
North Falkland Basin, Rockhopper's business, assets and operations
will not be materially affected by Brexit. Rockhopper derives a
significant proportion of its revenue from crude oil, a globally
traded commodity priced in US dollars.
Liquidity, counterparty risk and going concern
The Group monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management, with surplus cash held on term deposits with a
number of major financial institutions.
Cash forecasts are regularly produced based on, inter alia, the
Group's production and expenditure forecasts and management's best
estimates of future commodity prices. Sensitivities are run to
reflect different scenarios including changes in production rates,
possible reductions in commodity prices and increased costs.
Management's base case forecast assumes an oil price of
US$65/bbl in 2019 and 2020, production in line with prevailing
rates, expenditures in line with approved budgets, completion of
the disposal of Rockhopper Egypt Pty Limited in Q4 2019 and formal
approval of the Sea Lion Field Development Plan by FIG (which
triggers the commencement of the Development Carry arrangements
with Premier) in H1 2020.
The Group has run downside scenarios, where oil prices are
reduced by a flat $10/bbl throughout the going concern period,
where cost expenditures have increased by 5%, where the disposal of
Rockhopper Egypt Pty Limited does not complete and where delay
occurs to the approval by FIG of the Sea Lion Field Development
Plan.
Under the base case forecast, the Group will have sufficient
financial headroom to meet forecast cash requirements for the 12
months from the date of approval of these condensed consolidated
interim financial statements. However, in the downside scenarios
run, in the absence of any mitigating actions, the Group may have
insufficient funds to meet its forecast cash requirements.
Potential mitigating actions, some of which are outside the Group's
control, could include collection of arbitration award proceeds,
deferral of expenditure or raising additional equity.
Accordingly, after making enquiries and considering the risks
described above, the Directors have assessed that the cash balance
held provides the Group with adequate headroom over forecasted
expenditure for the following 12 months - as a result, the
Directors have adopted the going concern basis of accounting in
preparing these condensed consolidated interim financial
statements. Nonetheless, for the avoidance of doubt, in the
downside scenarios run and in the absence of potential mitigating
actions, a material uncertainty exists that may cast significant
doubt on the Group's ability to continue as a going concern. The
condensed consolidated interim financial statements do not include
any adjustments that may be necessary if the Group were not a going
concern.
PRINCIPAL RISK AND UNCERTAINTIES
A detailed review of the potential risks and uncertainties which
could impact the Company are outlined in the Strategic Report of
the Group's 2018 Annual Report. The Company identified its
principal risks at the end of 2018 as being:
-- sustained low oil price;
-- joint venture partner alignment and funding issues, both of
which could ultimately create a delay to the Sea Lion Final
Investment Decision; and
-- insufficient liquidity and funding capacity in the event of a
protracted delay to the Sea Lion Final Investment Decision.
Since the year-end, the environmental impact of oil and gas
extraction has been added to the risk register, reflecting the
increased focus on ESG issues which could have an adverse impact on
investor and lender sentiment towards the Company and the Sea Lion
project.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors confirm that, to the best of their knowledge, the
condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and the AIM Rules for Companies, and
that the interim results include a fair review of the information
required.
The Directors must not approve the non-statutory group financial
statements unless they are satisfied that the non-statutory group
financial statements give a true and fair view of the state of
affairs of the group and of the profit or loss of the group for
that period. In preparing the non-statutory financial statements,
the Directors are responsible for:
-- selecting suitable accounting policies and then applying them consistently;
-- stating whether applicable IFRSs as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- making judgements and accounting estimates that are reasonable and prudent; and
-- preparing the non-statutory financial statements on the going
concern basis unless it is inappropriate to presume that the group
will continue in business.
The Directors are also responsible for safeguarding the assets
of the group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group's
transactions and disclose with reasonable accuracy at any time the
financial position of the group.
Stewart MacDonald
Chief Financial Officer
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2019
Six months Six months Year
Ended Ended ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Notes $'000 $'000 $'000
------------------------------------- ------ ----------- ----------- ------------
Revenue 4,782 5,204 10,580
------------------------------------- ------ ----------- ----------- ------------
Other cost of sales (2,224) (2,173) (4,563)
Depreciation and impairment of
oil and gas assets (2,595) (1,384) (3,968)
Total cost of sales (4,819) (3,557) (8,531)
------------------------------------- ------ ----------- ----------- ------------
Gross profit (37) 1,647 2,049
Exploration and evaluation expenses (1,085) (3,975) (5,014)
Impairment of goodwill 3 (10,057) - -
Administrative expenses (2,414) (2,285) (5,386)
Charge for share based payments (617) (622) (1,478)
Other income - - 943
Foreign exchange movement 156 377 1,208
------------------------------------- ------ ----------- ----------- ------------
Results from operating activities
and other income (14,054) (4,858) (7,678)
Finance income 415 397 825
Finance expense (2,813) (2,955) (253)
------------------------------------- ------ ----------- ----------- ------------
Loss before tax (16,452) (7,416) (7,106)
Tax 4 - (25) (25)
------------------------------------- ------ ----------- ----------- ------------
LOSS for the period attributable
to the equity shareholders of the
parent company (16,452) (7,441) (7,131)
------------------------------------- ------ ----------- ----------- ------------
Loss per share: cents
Basic 5 (3.62) (1.64) (1.57)
Diluted 5 (3.62) (1.64) (1.57)
------------------------------------- ------ ----------- ----------- ------------
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2019
Six months Six months Year
Ended Ended Ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Notes $'000 $'000 $'000
------------------------------------- ------- ----------- ----------- ------------
Loss for the period (16,452) (7,441) (7,131)
Items that may be reclassified
to profit and loss
Exchange differences on translation
of foreign operations (145) 238 371
---------------------------------------------- ----------- ----------- ------------
TOTAL COMPREHENSIVE Loss FOR THE
period (16,597) (7,203) (6,760)
---------------------------------------------- ----------- ----------- ------------
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2019
As at As at As at
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
----------------------------------------- ------ ---------- ---------- ------------
Notes $'000 $'000 $'000
NON CURRENT Assets
Intangible exploration and evaluation
assets 6 454,366 433,909 447,035
Property, plant and equipment 7 2,622 10,310 11,836
Right-of-use assets 1.3 1,069 - -
Finance lease receivable 1.3 906 - -
Goodwill 3 - 10,508 10,308
CURRENT Assets
Inventories 1,743 1,579 1,779
Other receivables 7,654 9,385 9,510
Finance lease receivable 1.3 199 - -
Restricted cash 565 586 568
Term deposits 20,000 30,000 30,000
Cash and cash equivalents 6,851 16,437 10,426
Assets held for sale 10 17,295 4,160 -
----------------------------------------- ------ ---------- ---------- ------------
Total assets 513,270 516,874 521,462
----------------------------------------- ------ ---------- ---------- ------------
CURRENT Liabilities
Other payables 17,647 6,739 15,148
Lease liability 1.3 391 - -
Liabilities directly associated
with assets held for sale 10 743 9,064 -
NON-CURRENT Liabilities
Lease liability 1.3 1,805 - -
Tax payable 8 40,304 41,980 37,860
Provisions 13,787 5,834 13,888
Deferred tax liability 39,222 39,225 39,223
----------------------------------------- ------ ---------- ---------- ------------
Total liabilities 113,899 102,842 106,119
----------------------------------------- ------ ---------- ---------- ------------
Equity
Share capital 9 7,209 7,204 7,205
Share premium 9 3,509 3,383 3,422
Share based remuneration 9 4,208 4,803 5,103
Shares held by SIP trust 9 (3,370) (3,373) (3,369)
Merger reserve 9 74,332 74,332 74,332
Foreign currency translation reserve 9 (9,893) (9,881) (9,748)
Special reserve 9 456,680 460,077 456,680
Retained losses 9 (133,304) (122,513) (118,282)
----------------------------------------- ------ ---------- ---------- ------------
Attributable to the equity shareholders
of the company 399,371 414,032 415,343
----------------------------------------- ------ ---------- ---------- ------------
Total liabilities and equity 513,270 516,874 521,462
----------------------------------------- ------ ---------- ---------- ------------
These condensed consolidated interim financial statements were
approved by the directors and authorised for issue on 17 September
2019 and are signed on their behalf by:
StEWART MAcDONALD
CHIEF FINANCIAL OFFICER
CONDENSED CONSOLIDATED statement of changes in equity
for the six months ended 30 June 2019
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
----------------
in
capital premium remuneration trust Reserve Reserve reserve losses Equity
For the six
months ended
30 June 2019 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ---------
Balance at
1 January 2019 7,205 3,422 5,103 (3,369) 74,332 (9,748) 456,680 (118,282) 415,343
Total
comprehensive
expense for
the period - - - - - (145) - (16,452) (16,597)
Transfers - - (1,430) - - - 1,430 -
Share based
payments - - 617 - - - - - 617
Share issues
in relation
to SIP 4 87 (82) (1) - - - - 8
Balance at
30 June 2019 7,209 3,509 4,208 (3,370) 74,332 (9,893) 456,680 (133,304) 399,371
---------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ---------
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
-----------------
in
capital premium remuneration trust Reserve Reserve reserve losses Equity
For the six
months ended
30 June 2018 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Balance at
1 January 2018 7,200 3,282 5,609 (3,383) 74,332 (10,119) 460,077 (116,400) 420,598
Total
comprehensive
expense for
the period - - - - - 238 - (7,441) (7,203)
Transfers - - (1,428) 100 - - - 1,328 -
Share based
payments - - 622 - - - - - 622
Share issues
in relation
to SIP 4 101 - (90) - - - - 15
Balance at
30 June 2018 7,204 3,383 4,803 (3,373) 74,332 (9,881) 460,077 (122,513) 414,032
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
---------------
in
capital premium remuneration trust Reserve Reserve reserve losses Equity
For the year
ended
31 December
2018 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
Balance at
1 January
2018 7,200 3,282 5,609 (3,383) 74,332 (10,119) 460,077 (116,400) 420,598
Total
comprehensive
income for
the year - - - - - 371 - (7,131) (6,760)
Share based
payments - - 1,478 - - - - - 1,478
Share issues
in relation
to SIP 5 140 - (118) - - - - 27
Other
transfers - - (1,984) 132 - - (3,397) 5,249 -
---------------
Balance at
31 December
2018 7,205 3,422 5,103 (3,369) 74,332 (9,748) 456,680 (118,282) 415,343
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2019
Six months Six months Year
Ended ended Ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Notes $'000 $'000 $'000
---------------------------------------- --------- ----------- ----------- ------------
Cash flows from operating activities
Net loss before tax (16,452) (7,416) (7,106)
Adjustments to reconcile net
losses to cash utilised
Depreciation 1,913 1,407 4,111
Share based payment charge 617 622 1,478
Impairment of oil and gas assets 700
Impairment of exploration and
evaluation assets 150 3,257 3,884
Impairment of goodwill 10,057 - -
Finance expense 2,813 2,830 253
Finance income (415) (389) (825)
Foreign exchange (307) (430) (2,256)
---------------------------------------------- --- ----------- ----------- ------------
Operating cash flows before movements
in working capital (924) (119) (461)
Changes in:
Inventories 23 - (23)
Other receivables (585) 7,868 7,029
Payables (1,322) (2,733) (103)
Movement on other provisions - (135) (1,012)
---------------------------------------------- --- ----------- ----------- ------------
Cash (utilised)/generated by
operating activities (2,808) 4,881 5,430
---------------------------------------------- --- ----------- ----------- ------------
Cash Flows from investing activities
Capitalised expenditure on exploration
and evaluation assets (8,632) (8,305) (13,940)
Purchase of property, plant and
equipment (1,794) (455) (1,844)
Acquisition of Beach Egypt - (658) (658)
Cash transferred to assets held
for sale (633) - -
Interest 333 258 750
Investing cash flows before movements
in capital balances (10,726) (9,160) (15,692)
Changes in:
Restricted cash 3 (46) (28)
Term deposits 10,000 - -
Cash utilised by investing activities (723) (9,206) (15,720)
---------------------------------------------- --- ----------- ----------- ------------
Cash flows from financing activities
Share incentive plan 13 15 27
Finance expense (6) (5) (9)
---------------------------------------------- --- ----------- ----------- ------------
Cash generated/(utilised) from
financing activities 7 10 18
---------------------------------------------- --- ----------- ----------- ------------
Currency translation differences
relating to cash and cash equivalents (51) 23 (31)
Net cash outflow (3,524) (4,315) (10,272)
Cash and cash equivalents brought
forward 10,426 20,729 20,729
---------------------------------------------- --- ----------- ----------- ------------
Cash and cash equivalents carried
forward 6,851 16,437 10,426
---------------------------------------------- --- ----------- ----------- ------------
Notes to the condensed CONSOLIDATED group financial
statements
for the six months ended 30 June 2019
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ('the Company'), a public limited
company quoted on AIM, incorporated and domiciled in the United
Kingdom ('UK'), together with its subsidiaries (collectively, 'the
Group') holds interests in the Falkland Islands and the Greater
Mediterranean. The registered office of the Company is 5 Welbeck
Street, London, W1G 9YQ.
1.2 Statement of compliance and basis of preparation
These condensed consolidated interim financial statements of the
Group, as at and for the six months ended 30 June 2019, include the
results of the Company and all subsidiaries over which the Company
exercises control.
The condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
("IAS") 34 Interim Financial Reporting as adopted by the European
Union ("EU"). The accounting policies applied in the preparation of
the condensed consolidated interim financial statements are
consistent with the policies applied by the Group in the
consolidated financial statements as at and for the year ended 31
December 2018 which were prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. They do not include all information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the Company and all its
subsidiaries as at the year ended 31 December 2018.
The comparative figures for the year ended 31 December 2018 are
not the Company's statutory accounts for that financial period.
Those accounts have been reported on by the Company's auditor and
delivered to the registrar of companies. The report of the auditor
was: (i) unqualified; (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying his report; and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
December 2018 except for the adoption of IFRS 16 Leases.
The condensed consolidated interim financial statements were
approved by the Board on 17 September 2019.
All values are rounded to the nearest thousand dollars ($'000)
or thousand pounds (GBP'000), except when otherwise indicated.
1.3 Change in accounting policy
Adoption of IFRS 16
The Group has adopted IFRS 16 with effect from 1 January 2019.
The Group applied the modified retrospective approach to adoption,
measuring right-of-use assets at an amount based on their
respective lease liability on adoption, with the cumulative effect
of adopting the standard recognised in the balance sheet on 1
January 2019.
Adjustments on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
and receivables in relation to leases which had previously been
classified as 'operating leases' under the principles of IAS 17
Leases. These leases were measured at the present value of the
remaining lease payments and discounted using an incremental
borrowing rate representing the rate of interest Rockhopper would
have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment. The
incremental borrowing rate applied to the leases as of 1 January
2019 was 6%. The resulting lease liability and receivable as of 1
January 2019 was determined as follows:
1 January
2019
$'000
------------------------------------------------------ ----------
Operating lease commitments disclosed at 31 December
2018 855
Add: finance lease liabilities recognised at 31
December 2018 2,015
Less: effects of discounting (487)
------------------------------------------------------ ----------
Lease liability recognised at 1 January 2019 2,383
The associated right-of-use assets were measured at the amount
equal to the lease, therefore there was no adjustment to retained
earnings on adoption.
The effect of adoption of IFRS 16 is as follows:
Right-of-use Lease receivables Lease liabilities
assets
$'000 $'000 $'000
---------------------------- ------------- ------------------ ------------------
As at 1 January 2019 1,187 1,196 (2,383)
Depreciation expense (118) - -
Interest income/expense - 35 (80)
Receipts/payments - (126) 267
---------------------------- ------------- ------------------ ------------------
Balance as at 30 June 2019 1,069 1,105 (2,196)
Of which are:
Current - 199 (391)
Non-current 1,069 906 (1,805)
---------------------------- ------------- ------------------ ------------------
1,069 1,105 (2,196)
---------------------------- ------------- ------------------ ------------------
Practical expedients applied
In applying IFRS 16 for the first time, the Group used the
following practical expedients permitted by the standard:
-- Reliance on previous assessments on whether leases are onerous;
-- The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of the initial application,
and;
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
The Group's leasing activities and how these are accounted
for
The Group leases and sub-leases various offices typically for
periods of 5 years but may have extension options. Until the 2018
financial year, leases of property were classified as operating
leases. Payments and receipts made under operating leases (net of
any incentives received from the lessor) were charged to profit and
loss on a straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability and receivable at the date at
which the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost,
while the corresponding receipt associated with the sub-lease are
allocated between the receivable and finance income. The finance
cost and income are charged to profit and loss over the lease
period. The right-of-use asset is depreciated over the lease term
on a straight-line basis.
Payment associated with short term leases and leases of low
value assets are recognised on a straight-line basis as an expense
in profit or loss. Short term leases are leases with a lease term
of 12 months or less. Low-value assets comprise IT-equipment and
small items of office furniture.
1.4 Going concern
The Group monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management, with surplus cash held on term deposits with a
number of major financial institutions.
Cash forecasts are regularly produced based on, inter alia, the
Group's production and expenditure forecasts and management's best
estimates of future commodity prices. Sensitivities are run to
reflect different scenarios including changes in production rates,
possible reductions in commodity prices and increased costs.
Management's base case forecast assumes an oil price of
US$65/bbl in 2019 and 2020, production in line with prevailing
rates, expenditures in line with approved budgets, completion of
the disposal of Rockhopper Egypt Pty Limited in Q4 2019 and formal
approval of the Sea Lion Field Development Plan by FIG (which
triggers the commencement of the Development Carry arrangements
with Premier) in H1 2020.
The Group has run downside scenarios, where oil prices are
reduced by a flat $10/bbl throughout the going concern period,
where cost expenditures have increased by 5%, where the disposal of
Rockhopper Egypt Pty Limited does not complete and where delay
occurs to the approval by FIG of the Sea Lion Field Development
Plan.
Under the base case forecast, the Group will have sufficient
financial headroom to meet forecast cash requirements for the 12
months from the date of approval of these condensed consolidated
interim financial statements. However, in the downside scenarios
run, in the absence of any mitigating actions, the Group may have
insufficient funds to meet its forecast cash requirements.
Potential mitigating actions, some of which are outside the Group's
control, could include collection of arbitration award proceeds,
deferral of expenditure or raising additional equity.
Accordingly, after making enquiries and considering the risks
described above, the Directors have assessed that the cash balance
held provides the Group with adequate headroom over forecasted
expenditure for the following 12 months - as a result, the
Directors have adopted the going concern basis of accounting in
preparing these condensed consolidated interim financial
statements. Nonetheless, for the avoidance of doubt, in the
downside scenarios run and in the absence of potential mitigating
actions, a material uncertainty exists that may cast significant
doubt on the Group's ability to continue as a going concern. The
condensed consolidated interim financial statements do not include
any adjustments that may be necessary if the Group were not a going
concern.
1.5 Period end exchange rates
The period end rates of exchange actually used were:
30 June 30 June 2018 31 December
2019 2018
----------- -------- ------------- ------------
GBP : US$ 1.27 1.32 1.28
EUR : US$ 1.14 1.17 1.15
----------- -------- ------------- ------------
2 Revenue and segmental information
Six months ended 30 June 2019
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- --------- -------------- ---------- ----------
Revenue - 4,782 - 4,782
Cost of sales - (4,819) - (4,819)
-------------------------------- --------- -------------- ---------- ----------
Gross profit/(loss) - (37) - (37)
Exploration and evaluation
expenses - (303) (782) (1,085)
Impairment of goodwill - (10,057) - (10,057)
Administrative expenses - (671) (1,743) (2,414)
Charge for share based
payments - - (617) (617)
Foreign exchange movement 338 5 (187) 156
-------------------------------- --------- -------------- ---------- ----------
Results from operating
activities and other income 338 (11,063) (3,329) (14,054)
Finance income - 4 411 415
Finance expense (2,783) (7) (23) (2,813)
-------------------------------- --------- -------------- ---------- ----------
Loss before tax (2,445) (11,066) (2,941) (16,452)
Tax - - - -
-------------------------------- --------- -------------- ---------- ----------
Profit/(loss) for period (2,445) (11,066) (2,941) (16,452)
-------------------------------- --------- -------------- ---------- ----------
Reporting segments assets 453,195 30,007 30,068 513,270
Reporting segments liabilities (79,440) (16,281) (18,178) (113,899)
Material additions to segment assets are disclosed separately in
notes 6 and 7. The disposal group held for sale as at 30 June 2019,
sits within the Greater Mediterranean segment and details are
disclosed separately in note 10.
Six months ended 30 June 2018
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- --------- -------------- ---------- ----------
Revenue - 5,204 - 5,204
Cost of sales - (3,557) - (3,557)
-------------------------------- --------- -------------- ---------- ----------
Gross profit/(loss) - 1,647 - 1,647
Exploration and evaluation
expenses 134 (3,361) (748) (3,975)
Administrative expenses - (735) (1,550) (2,285)
Charge for share based
payments - - (622) (622)
Foreign exchange movement 1,005 (98) (530) 377
-------------------------------- --------- -------------- ---------- ----------
Results from operating
activities and other income 1,139 (2,547) (3,450) (4,858)
Finance income - 8 389 397
Finance expense (2,947) (3) (5) (2,955)
-------------------------------- --------- -------------- ---------- ----------
Loss before tax (1,808) (2,542) (3,066) (7,416)
Tax - (25) - (25)
-------------------------------- --------- -------------- ---------- ----------
Profit/(loss) for period (1,808) (2,567) (3,066) (7,441)
-------------------------------- --------- -------------- ---------- ----------
Reporting segments assets 429,122 42,212 45,540 516,874
Reporting segments liabilities (83,415) (17,946) (1,481) (102,842)
3 Impairment of goodwill
As a result of the acquisition of Mediterranean Oil & Gas
plc in 2014, goodwill of EUR9 million arose relating to the
portfolio of intangible exploration and appraisal assets and the
strategic premium associated with a significant presence in a new
region. However, following the decision to dispose of Rockhopper
Egypt Pty Limited and with Italian portfolio now deemed largely
non-core, a decision was made to impair the goodwill associated
with that acquisition.
4 Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
-------------------------------- ------------ ----------- ------------
Current tax:
Overseas tax - - -
Adjustment in respect of prior
periods - - -
-------------------------------- ------------ ----------- ------------
Total current tax - - -
-------------------------------- ------------ ----------- ------------
Deferred tax:
Overseas tax - (25) 25
-------------------------------- ------------ ----------- ------------
Total deferred tax - (25) 25
-------------------------------- ------------ ----------- ------------
Tax on ordinary activities - (25) 25
-------------------------------- ------------ ----------- ------------
5 Basic and diluted loss per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Number Number Number
--------------------------------- ------------ ------------ ------------
Shares in issue brought forward 457,495,899 457,116,500 457,116,500
Shares issued
- Issued under the SIP 308,503 276,166 379,399
---------------------------------- ------------ ------------ ------------
Shares in issue carried forward 457,804,402 457,392,666 457,495,899
---------------------------------- ------------ ------------ ------------
Weighted average number of
Ordinary Shares 454,574,168 454,444,571 457,369,112
---------------------------------- ------------ ------------ ------------
$'000 $'000 $'000
--------------------------------- ----------- ---------- ----------
Net loss after tax for purposes
of basic and diluted earnings
per share (16,452) (7,441) (7,131)
---------------------------------- ----------- ---------- ----------
Earnings per share - cents
Basic (3.62) (1.64) (1.57)
Diluted (3.62) (1.64) (1.57)
---------------------------------- ----------- ---------- ----------
The weighted average number of Ordinary Shares takes into
account those shares which are treated as own shares held in trust
(see note 9). As the Group is reporting a loss in each period in
accordance with IAS33 the share options are not considered dilutive
because the exercise of the share options would have the effect of
reducing the loss per share.
At the period end the Group had the following unexercised
options and share appreciation rights in issue.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Number Number Number
--------------------------- ----------- ----------- ------------
Long term incentive plan 14,243,094 20,334,386 20,334,386
Share appreciation rights 786,967 1,333,011 890,335
---------------------------- ----------- ----------- ------------
6 Intangible exploration and evaluation assets
During the period additions of US$12.9 million relate to the
Group's interests in the Falkland Islands. This has in part been
offset by a reallocation of costs associated with the disposal of
the Group's interests in Egypt (see note 10).
7 Property, plant and equipment
Additions of US$5.9m during the period relate to the Group's
interests in the Greater Mediterranean, specifically Egypt. This
has been offset by a reallocation of costs associated with the
disposal of the Group's interest Egypt (see note 10).
8 Tax payable
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
------------------------- ----------- ----------- ------------
Current tax payable - - -
Non current tax payable 40,304 41,980 37,860
-------------------------- ----------- ----------- ------------
40,304 41,980 37,860
------------------------- ----------- ----------- ------------
On the 8 April 2015, the Group agreed binding documentation
("Tax Settlement Deed") with the Falkland Island Government ("FIG")
in relation to the tax arising from the Group's farm out to Premier
Oil plc ("Premier").
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16. The Outstanding Tax Liability is intended to be
binding and final except, subject to the satisfaction of the
Falkland Islands' Commissioner of Taxation, Rockhopper shall be
entitled to make an adjustment to the Outstanding Tax Liability if
any part of the Development Carry from Premier becomes
"irrecoverable".
The Outstanding Tax Liability is payable on the earlier of:
-- First royalty payment date, which is expected to occur within
six months of the date of first oil
-- The date on which Rockhopper disposes of all or a substantial
part of the Company's remaining interest in the Licences, or
otherwise realises value from the Licences
-- A change of control of Rockhopper Exploration plc
As security the Group has provided fixed and floating security
over all assets (with limited carve outs where this would conflict
with applicable law or existing terms). While such security is in
place, restrictions, subject to conventional carve outs, exist on
granting further security. The Group also agreed to maintain a
minimum 20% interest in licence PL032 and not to make dividends or
distributions.
The outstanding tax liability is GBP59.6 million and is expected
to be payable on the first royalty payment date on Sea Lion.
Currently the first royalty payment date is anticipated to occur
within six months of first oil production which itself is estimated
to occur three and a half years after project sanction. As such the
tax liability has been discounted at 15% to GBP31.8 million.
9 Reserves
Set out below is a description of each of the reserves of the
Group:
Share premium Amount subscribed for share capital in excess of its
nominal value.
Share based The share incentive plan reserve captures the equity
remuneration related element of the expenses recognised for the
issue of options, comprising the cumulative charge
to the income statement for IFRS2 charges for share
based payments less amounts released to retained earnings
upon the exercise of options.
Own shares held Shares held by the SIP trust represent the issue value
in trust of shares held on behalf of participants by Capita
IRG Trustees Limited, the trustee of the SIP as well
as shares held by Apex Financial Services (Trust Company)
Limited on behalf of the Employee Benefit Trust which
have been purchased to settle future exercises of
options.
Merger reserve The difference between the nominal value and fair
value of shares issued on acquisition of subsidiaries.
Foreign currency Exchange differences arising on consolidating the
translation assets and liabilities of the Group's subsidiaries
reserve are classified as equity and transferred to the Group's
translation reserve.
Special reserve The reserve is non distributable and was created following
cancellation of the share premium account on 4 July
2013. It can be used to reduce the amount of losses
incurred by the parent company or subject to settling
all contingent and actual liabilities as at 4 July
2013 it can distributed or used to acquire the share
capital of the Company. Should not all of the contingent
and actual liabilities be settled, prior to distribution
the parent company must either gain permission from
the actual or contingent creditors for distribution
or set aside in escrow an amount equal to the unsettled
actual or contingent liability.
Retained losses Cumulative net gains and losses recognised in the
financial statements.
10 Disposal group held for sale
On 23 July 2017, the Group announced the sale of Rockhopper
Egypt Pty Limited. The key asset of Rockhopper Egypt Pty Limited is
a 22% working interest in the Abu Sennan concession. The
transaction is expected to complete by the year end 2019 and
accordingly the assets and associated liabilities are presented as
a disposal group.
As at 30 June 2019, following impairments to intangible
exploration and evaluation assets ($0.2 million) and property,
plant and equipment ($0.7 million) the disposal group comprised
assets of $17.3 million less liabilities of $0.7 million, detailed
as follows.
$'000
------------------------------- -------
Intangible exploration and
evaluation assets 1,810
Property, plant and equipment 12,395
Inventories 60
Other receivables 2,397
Cash 633
Other payables (743)
16,552
------------------------------- -------
11 Post balance sheet events
Sea Lion Project Update
Rockhopper Exploration plc (AIM: RKH), the oil and gas
exploration and production company with key interests in the North
Falkland Basin and the Greater Mediterranean region, is pleased to
provide a progress update regarding its Sea Lion development (the
"Project"), in line with updates being provided today by Premier
Oil plc (Project operator).
Highlights
-- Through the post--FEED optimisation process, the Project has
been substantially de--risked from a technical, cost and schedule
perspective
-- Resources to be developed in Phase 1 of the Project have
increased from 220 to 250 million barrels (gross) with associated
capex to first oil estimated at approximately US$1.8 billion
(gross)
-- Key service and supply contracts are nearing final agreement
in preparation for execution at Project sanction
-- Continued focus on securing senior debt funding ahead of
final investment decision
-- Preliminary Information Memorandum ("PIM") and comprehensive
set of independent expert reports, which formed the basis of a
financing guarantee application package for the senior debt
component of the Project financing, were submitted to potential
senior lenders including export credit agencies in July 2019
Disposal of Abu Sennan, Egypt
Rockhopper Exploration plc (AIM: RKH), the oil and gas company
with key interests in the North Falkland Basin and the Greater
Mediterranean region, is pleased to announce that it has signed a
share purchase agreement ("SPA") with United Oil and Gas plc
("United") for the sale of Rockhopper Egypt Pty Limited for
consideration of US$16 million. The key asset of Rockhopper Egypt
Pty Limited is a 22% working interest in the Abu Sennan concession
("Abu Sennan").
Under the terms of the SPA, the consideration will be satisfied
by a payment by United of not less than US$11 million in cash at
completion.
In order to satisfy the cash component of the consideration,
United has announced a prepayment financing structure of up to US$8
million with BP. In addition, United has announced the intention to
raise capital through the issue of new shares simultaneously to the
proposed acquisition. A proportion of such placement proceeds will
be used to make a further cash payment to Rockhopper shortly after
completion. Any shortfall between the headline consideration of
US$16 million and the cash payments from United will be satisfied
in new United shares being issued to Rockhopper (the "Consideration
Shares"). The Consideration Shares issued to Rockhopper will be
priced at the price at which United issue new shares as part of
their proposed capital raise.
Any Consideration Shares held by Rockhopper in United are
subject to certain lock--up and orderly market disposal provisions
for a period of up to 12 months from completion.
The transaction is subject to satisfaction of customary
conditions precedent including United shareholder approval,
completion of the readmission of United to trading on AIM and
receipt of Egyptian government approvals. The transaction is
expected to complete during Q4 2019 with the effective date being 1
January 2019.
Sea Lion funding update
On 30 July 2019, Rockhopper provided a Sea Lion funding update
which announced that the Preliminary Information Memorandum
("PIM"), which will form the basis of a loan application for the
Sea Lion senior debt project financing, has been submitted to
potential seniors lenders.
The PIM submission is supported by a comprehensive set of
independent expert reports covering the full range of technical,
reservoir, HSSE, legal and tax aspects of the Sea Lion project.
As part of the PIM submission process, lender due diligence
advisers including financial and legal advisors have appointed.
Grant of options under Long Term Incentive Plan
On 1 August 2019, Rockhopper announced that on 31 July 2019,
certain Directors were granted awards in the form of options to
acquire Rockhopper shares under the Company's Long Term Incentive
Plan ("LTIP") which has been operated annually since its approval
by shareholders at the 2013 Annual General Meeting. A summary of
the LTIP is included in the 2013 AGM notice which can be found on
the Company's website and in the 2018 Annual Report.
Details of the awards are shown below:
Name Number of options under award
Sam Moody (CEO) 2,100,000
------------------------------
Stewart MacDonald (CFO) 2,100,000
------------------------------
The awards are structured as nil--cost options and, subject to
meeting specific performance criteria as outlined below, will
normally vest three years after the start of the performance
period. The percentage of awards which will vest will be dependent
on total shareholder return measured against a peer group of 14
other oil and gas companies over a three year period ending on 31
March 2022. Performance measurement for these awards will be based
on the Company's average share price over the 90 day dealing period
to 31 March 2019 measured against the average share price for the
90 day dealing period to 31 March 2022. No awards will vest in the
event that the Company's total shareholder return is below the
median of its peer group over the three year measurement period. In
the event that the awards vest, the vested awards will normally
remain exercisable for a period of seven years subject to the rules
of the LTIP regarding leavers.
Egypt Update
On 7 August 2019, Rockhopper provided an operational update in
relation to the Abu Sennan concession.
Al Jahraa--7
The development well, Al Jahraa--7, was spudded on 25 May 2019,
and reached total depth of 3,970m MD in the Kharita formation on 23
June 2019. Initial petrophysics indicated pay in the following
intervals:
Abu Roash--C Net Pay: 7m
Abu Roash--E Net Pay: 4m
Upper Bahariya Net Pay: 9m
Lower Bahariya_1 Net Pay: 6m
Lower Bahariya_2 Net Pay: 5m
A series of well tests of the Abu Roash--E and Bahariya
reservoirs has commenced, initially with the rig on location and
subsequently following release of the rig. These operations remain
ongoing.
Al Jahraa--12 (formerly WI--1)
The third Al Jahraa field development well (Al Jahraa--12) of
this campaign was spudded on 4 August 2019. The well is being
drilled as a deviated hole to appraise the Abu Roash--C downdip of
the Al Jahraa--3 well and in the water leg. In addition, it will
further explore the potential of the Bahariya reservoirs. The well
is anticipated to take around 55 days to drill, test and complete.
Current production from Abu Sennan is approximately 5,100 boepd
gross (1,120 boepd net to Rockhopper's 22% working interest).
Independent review report to Rockhopper Exploration plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Rockhopper Exploration plc's condensed
consolidated interim financial statements (the "interim financial
statements") in the half-year results of Rockhopper Exploration plc
for the 6 month period ended 30 June 2019. Based on our review,
nothing has come to our attention that causes us to believe that
the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the AIM Rules for Companies.
Emphasis of matter
Without modifying our conclusion on the interim financial
statements, we draw attention to Note 1.4 in the financial
statements, which indicate that in downside forecast scenarios
which adjust for matters outside of the Group's control, and in the
absence of sufficient mitigating actions being able to be taken by
management on a timely basis, the Group may have insufficient funds
to meet its forecast cash requirements during the next 12 months.
These events or conditions, together with the other matters stated
in Note 1.4, indicate the existence of a material uncertainty that
may cast significant doubt on the Group's ability to continue as a
going concern.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 30 June 2019;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated cash flow statement for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-year
results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the AIM Rules for Companies.
As disclosed in note 1.2 to the interim financial statements,
the financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-year results, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the
half-year results in accordance with the AIM Rules for Companies
which require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in
the company's annual financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the half-year results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 September 2019
Glossary:
2C best estimate of contingent resources
2P proven plus probable reserves
3C a high estimate category of contingent resources
AGM Annual General Meeting
Best a best estimate category of Prospective Resources
also used as a generic term to describe a
best, or mid estimate
Board the Board of Directors of Rockhopper Exploration
plc
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
Capex capital expenditure
Company Rockhopper Exploration plc
E&P exploration and production
EGPC Egyptian General Petroleum Company
EIS Environmental Impact Statement
ERCE ERC Equipoise Limited
Farm-down to assign an interest in a licence to another
party
FEED Front End Engineering and Design
FDP Field Development Plan
FID Final Investment Decision
FIG Falkland Islands Government
FOGL Falkland Oil and Gas Limited
FPSO Floating Production, Storage and Offtake
vessel
G&A General and administrative costs
Group the Company and its subsidiaries
High a high estimate category of Prospective Resources
also used as a generic term to describe a
high or optimistic estimate
IFRS International Financial Reporting Standard
kboepd thousand barrels of oil equivalent per day
Low a low estimate category of Prospective Resources
also used as a generic term to describe a
low or conservative estimate
LOI Letter of Intent
mmbbls million barrels (of oil)
mmboe million barrels of oil equivalent
MMstb million stock barrels (of oil)
mscf thousand standard cubic feet
net pay the portion of reservoir containing hydrocarbons
that through the placing of cut offs for
certain properties such as porosity, water
saturation and volume of shale determine
the productive element of the reservoir
P&A plug and abandon
Premier Premier Oil plc
PSV virtual exchange point
scm standard cubic metre
STOIIP stock-tank oil initially in place
SURF Subsea, Umbilicals, Risers and Flowlines
tvdss true vertical depth subsea
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFVSAIIDLIA
(END) Dow Jones Newswires
September 18, 2019 02:00 ET (06:00 GMT)
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