TIDMHAWK
RNS Number : 4421O
Nighthawk Energy plc
19 September 2011
19 September 2011
NIGHTHAWK ENERGY PLC
("Nighthawk" or the "Company")
Results for the year ended 30 June 2011
Nighthawk, the US focused oil development and production company
(AIM: HAWK and OTCQX: NHEGY), announces its final results for the
year ended 30 June 2011.
Financial Highlights
-- Revenues from continuing operations of US$0.91 million (2010:
US$2.15 million)
-- Reduction of 59% in capital expenditure to US$12.5 million
(2010: US$30.4 million)
-- Loss on disposal of Revere project of US$43.1 million plus
impairment charges totalling US$25.2 million on Cliffs and Cisco
Springs projects
-- GBP25 million equity draw down facility entered into with
Darwin Strategic
Operational Highlights
-- Strategic review completed resulting in focus on Jolly Ranch
shale oil project
-- Recompletion operations at Jolly Ranch Project increase
production and better the understanding of optimal completion
techniques
-- Schlumberger report confirms increased estimates of Oil
Initially in Place over part of the Jolly Ranch Project
-- Gaffney, Cline & Associates reserves report defines first
reserves over a small part of the Jolly Ranch Project
-- Board and senior management significantly strengthened with
new appointments
-- Deriving further value from and increasing operational
exposure to the Jolly Ranch Project continues to be a key focus
The audited report and accounts will be available on the
Company's website shortly and will be posted to Shareholders, as
applicable, together with the notice of Annual General Meeting in
due course.
Enquiries:
Nighthawk Energy plc
Tim Heeley, Chief Executive
Richard Swindells, Chief Financial
Officer 020 3405 1982
Westhouse Securities Limited 020 7601 6100
Tim Feather tim.feather@westhousesecurities.com
Matthew Johnson matthew.johnson@westhousesecurities.com
----------------------------------------
Financial Dynamics 020 7831 3113
Ben Brewerton ben.brewerton@fd.com
Ed Westropp edward.westropp@fd.com
----------------------------------------
CEO's Statement
Nighthawk holds a 50% interest in the Jolly Ranch Group Project
("Jolly Ranch"), covering 410,000 gross acres in Lincoln, Elbert
and Washington Counties, Colorado. Jolly Ranch has multiple
conventional and non-conventional oil bearing horizons. The primary
targets are the Pennsylvanian age Cherokee and Atoka shales.
Following the management changes of 29 September 2010, the first
objective was to set clear attainable objectives for the Group in
order to restore shareholder confidence and create value. The
immediate focus was to shore up finances so that the changes
required to orientate the Group for moving forward could be made
from a sound footing.
This led to the Board arranging the Equity Drawdown Facility
with Darwin Strategic, part of Evolution Group, in October 2010.
The structure of the Darwin equity facility allows the Company to
draw down at its discretion to support the Balance Sheet.
At the same time, a Strategic Review was initiated, and in late
November 2010 this concluded that only projects with strong
potential for returning value to shareholders, on the basis of
on-going capital requirement versus return, should be the Group's
focus. To this end, the Group resolved to reduce materially or
eliminate its future capital commitments on all projects except the
Jolly Ranch Shale Oil project in the Denver Basin. This was
achieved by reassigning its interests in such projects to the
operator whilst retaining either an over-riding royalty interest
and/or a share in any potential future sale within certain specific
time frames.
The focus on the Jolly Ranch project, reflecting the outcome of
the Strategic Review, was to ensure as much value and - more
importantly given the early stage of development - knowledge, was
extracted from the existing wells on the project. Subsequently, a
low-cost work-over programme was therefore initiated by the
operator to complete in zones not previously opened, with a
particular focus on the Cherokee, and also to look at recompleting
in zones previously undertaken with a view to maximising production
from the existing wells. This has led to an improvement in the
production rates seen at the field, and has also led to a number of
conclusions about future completion and stimulation practices to
apply.
Following the period of review and consolidation, the ongoing
strategy was to build for growth, and to put in place a team which
would be able to provide a more operationally focused outlook. To
this end, the Group - in June and August 2011 respectively - hired
Richard Swindells as Chief Financial Officer and Chuck Wilson as
Chief Operating Officer. Richard brings over 15 years of investment
banking experience and Chuck over 30 years of drilling and
completions experience, much of it focused on tight reservoirs in
the Rocky Mountains.
In addition to the new appointments on the Executive Team,
Stephen Gutteridge was appointed on 8 September 2011 as
Non-Executive Chairman, with Michael Thomsen remaining Executive
Director and President of US Operations. Stephen has extensive
senior management and board experience in the oil and gas sector
and his appointment brings an additional layer of corporate
governance and commercial experience as Nighthawk continues its
growth.
The Directors firmly believe that the Jolly Ranch Project
represents a highly promising, albeit early stage, shale oil
project with significant value potential for shareholders. The
Directors recognise the importance to the USA's energy demands of
domestic, onshore shale oil production and note that there has been
significant, recent acquisition activity in early stage shale oil
acreage in the USA, often involving acreage at a significantly
earlier stage than the Jolly Ranch Project.
Progress has been made in terms of identifying the correct
completion and stimulation practice required to extract as much oil
in as economical fashion as possible from the target horizons. The
task going forward is to refine this technique, ascertain why
certain formations are good producers and how these "sweet spots"
can be identified and then exploited.
We continue to position the Company with a view to increasing
the operational input into the Jolly Ranch project. The Board is
reviewing a number of financing options, including raising equity,
to achieve the corporate and strategic objectives of the Group.
CFO's Statement
The financial results for the year ended 30 June 2011 have begun
to reflect the changes to the operations of the Group, due to the
instigation of our Strategic Review and consequently restructured
asset base following the management changes announced on 29
September 2010.
Revenues and costs
As a result of the restructuring announced in November 2010, the
Group exited certain projects during the year that reduced revenues
from continuing activities 58% to US$0.91 million (2010: US$2.15
million). However, the corresponding cost reductions as a result of
actions taken by the Board also saw capital expenditure reduced by
59% in the year to US$12.5 million (2010: US$30.4 million).
During the year, two wells at the Jolly Ranch Project, the Craig
16-32 and the Craig 4-4, either achieved or are approaching 20,000
bbls of cumulative production over their life to date. As a result,
investments in these wells were reassigned from intangible
Exploration Costs to Production Assets under Plant and Equipment in
the Balance Sheet, leading to a depreciation charge arising for
these wells going forward over their estimated remaining useful
lives. This treatment is industry standard and will be applied
going forward to all wells meeting these criteria.
The Operating loss figure of US$28.4 million includes a number
of cost items that are unrelated to the on-going operations of the
business, including US$2.01 million of charges relating to the
impairment of the Cliffs project in Illinois, and US$23.22 million
impairment of Cisco Springs in Utah - which has now been fully
impaired.
Financing
The Darwin facility, which was signed in October 2010, was used
twice during the financial period, drawing down a total of GBP5.175
million; GBP3.275 million in November 2010 and GBP1.90 million in
February 2011. As a result, the number of warrants granted to
Darwin under this facility to subscribe for new shares is capped at
a maximum of 3,000,000 ordinary shares, such warrants to be
exercisable at a price of 20 pence per share at any time prior to
13 October 2013.
At the period end the Group held cash balances of US$2.0 million
and had no debt.
Group financial control and processes
As part of the strengthening of the Group's management and
control processes, a review of financial reporting procedures and
processes has been undertaken, resulting in the Group implementing
new financial control and reporting procedures and processes, with
a focus on quality and the timely supply of information for
management decision making.
Nighthawk is focused on ensuring full value from its assets and
recognises that controlling costs is essential to maximise returns.
The Group continues to focus on managing expenditure and ensuring
that the Group's resources are appropriately allocated to deliver
value.
Operational Overview
Jolly Ranch Group
Nighthawk holds a 50% interest in the Jolly Ranch Group Project
("Jolly Ranch"), covering 410,000 gross acres in Lincoln, Elbert
and Washington Counties, Colorado. Jolly Ranch has multiple
conventional and non-conventional oil bearing horizons. The primary
targets are the Pennsylvanian age Cherokee and Atoka shales.
Modern drilling, historic logs and multiple third party
verification by Schlumberger and Gaffney, Cline and Associates have
demonstrated the areal extent and continuity of the shale horizons.
Other macro properties such as mineralogy, organic content,
hydrocarbon composition and thermal maturity have been
established.
Progress has been made in terms of identifying the correct
completion and stimulation practice required to extract as much oil
in as economical fashion as possible from the target horizons. The
task going forward is to refine this technique, ascertain why
certain formations are good producers and how these "sweet spots"
can be identified and then exploited.
The injection of capital into the project at this stage is not
proportionate to the level of reserves that will be generated. That
being said, the value creation from increasing production and the
wider de-risking of the project are of considerable value.
During the year two independent reports were published as
highlighted below.
Schlumberger
The Schlumberger report published in January 2011 focused on a
small area around the core Craig Ranch area where the sustained
production has been seen.
Schlumberger reported on Oil in Place within this area, but also
simulated potential recovery and field performance with
implications, given the uniformity of shale plays, for the wider
field development.
The report not only concluded an approximate fourteen fold
uplift in the Oil in Place within the shale horizons on the acreage
studied, but also gave an initial assessment of the potential
recovery from the shales. The Oil in Place is compared with the
July 2009 Schlumberger study below:
Interval OOIP (Barrels per Acre)
July
2009 January 2011
Total Cherokee (including
Shale and Tebo) 638 14,219
Total Atoka 1,515 15,625
Total Marmaton
(conventional) 3,726 5,313
Total 5,879 35,157
A recovery rate was assessed on the basis of a number of
prediction scenarios with various well and economic parameters and
cut offs, and is presented for each of the horizons below for the
modelled area based on vertical wells on 40-acre well spacing.
OOIP Recovery
(Barrel per Water:Oil Rate (% of
Interval Acre) (BBL) OOIP)
Marmaton 2,344 17.4:1 0%
Marmaton B 2,969 4.7:1 0%
Cherokee 5,781 1.7:1 4.9%
Shale 5,000 3.3:1 2.6%
Tebo 6,250 6.5:1 17.3%
Upper/Lower
Atoka 7,813 7.8:1 10.6%
Lower Atoka
/Morrow 7,969 5.5:1 7.4%
Average
Model
Area 7.5%
Gaffney, Cline and Associates
At the end of April 2011 Gaffney, Cline and Associates (GCA)
concluded its study of reserves on the Jolly Ranch Project.
The declaration of Proved Reserves by GCA was limited to wells
that are projected to recover 20,000 barrels or more. The
declaration is based on Decline Curve Analysis, assigning reserves
as defined by the SPE Petroleum Resources Management System
("PRMS"). Therefore, proved reserves were only attributed, at this
stage, to two wells with continuous production from the Cherokee
formation, namely the Craig 4-4 and Craig 16-32.
Furthermore, it should be noted that these reserves are limited
to discrete interbedded Cherokee intervals within these wells.
Other horizons, especially within the Atoka formation, have been
excluded due to the current lack of adequate production data or the
absence of data in the case of uncompleted horizons. The current
and future work programme will focus on determining the correct
method and optimum target within these other horizons to build
value.
All of the reserves quoted below are gross, representing 100% of
the working interest in the project.
Proved Reserves
The Craig 4-4 is completed in two Cherokee horizons; the Tebo
between 6,644 ft and 6,664 ft and the Tebo 'B', between 6,705 ft
and 6,711 ft. The Craig 16-32 is completed in the Cherokee 'A'
between 6,526 ft and 6,530 ft.
The following table shows the predicted Estimated Ultimate
Recovery for these wells from initial production, cumulative
production, and Proved Reserves as at 19 March 2011. The decline
curve analysis uses an exponential decline for Proved Reserves.
Estimated Ultimate
Recovery (Decline Cumulative
Curve Analysis) Production 19 Mar Reserves (Proved)
Well (Mbbl) 2011 (Mbbl) Mbbl
Craig 4-4 28 24 4
-------------------- --------------------- ------------------
Craig 16-32 33 13 20
-------------------- --------------------- ------------------
Total 61 37 24
-------------------- --------------------- ------------------
Probable Reserves
Incremental Probable Reserves have been estimated utilising a
hyperbolic decline curve analysis for the Craig 16-32 well.
Estimated Ultimate
Recovery (Decline Curve Cumulative Production
Well Analysis) (Mbbl) 19 Mar 2011 (Mbbl) Reserves (Mbbl)
Proved Probable
------- ---------
Craig
16-32 64 13 20 31
------------------------ ---------------------- ------- ---------
Inclusion of Contingent and Prospective Resources requires
working interest lands to be developed and further wells to be
drilled, which are likely to be both vertical and horizontal.
Future production is estimated based on the projected recovery from
the decline curves of analogous wells derived from the results of
pilot projects.
The Jolly Ranch Cherokee/Atoka shale oil project is in the early
stages of development, and is still in the process of determining
the optimum completion and stimulation technique and the optimum
intervals on which to apply these techniques. Given the low number
of wells drilled to date compared to the potential development
programme, the current set of wells with estimated ultimate
recovery of 20,000 barrels or more (considered to be the economic
minimum) is too small to extrapolate across the wider project area
with statistical confidence.
In addition, as directly analogous plays are rare, the type
curves are unique to each play and it will take more wells to fully
develop confident projections of ultimate recovery.
Additional recompletions and further drilling/stimulation have
to be undertaken to increase and confirm the body of knowledge such
that it can be consistently and prudently applied to a wider area.
As such, it would be misleading to generate a resource estimate at
this time without more wells with successful completions, as well
as further production track record.
Production
Production volumes from the project continue to be a focus as
Initial Production ("IP") rates and long-term production profiles
are a key factor in determining value in the shale play.
Ongoing test production means that wells are producing as the
performance of the acidisation and fracturing method applied is
observed. It can take many weeks for an acidised or fracced well to
settle into stabilised flow and the type curve, a profile of a
"typical" well, can be developed.
Shale wells are developed by drilling wells as the work needed
to understand the completion methodology has to be undertaken in
the well bore; the more wells that are drilled, the greater the
confidence and understanding of the shale leading to a greater
number of wells that can be brought into production.
The total net production for the financial year reported on,
with applicable Colorado State Taxes and Royalty payments to the
landowners was 12,190 bbl and Q2 production as below.
Q2 2011
Bbls net to
Month Nighthawk
------------
April 831
------------
May 1,225
------------
June 1,023
------------
Total 3,079
------------
Strategic Review
The conclusion of the Strategic Review, undertaken in October
2010, was to focus primarily on the Jolly Ranch project, exit the
Revere and Cliffs projects and actively consider disposal options
for the Cisco Springs project. The accounting effect of these
actions is reflected in these full year results as follows:
Revere Project
The project was disposed of to the Operator with effect from 31
December 2010, and the Group no longer has any liability associated
with the project. The Group has recorded a loss on disposal of
US$43.08 million in relation to the disposal of the asset whilst
retaining an asset in the Balance Sheet for the Over Riding Royalty
of 5% of gross production for three years.
The Group will also receive 25% of any future sale undertaken
before 31 December 2013.
Cisco Springs
The Cisco Springs Project was impaired in the 2011 interim
accounts by US$21.26 million; a further US$1.96 million has been
impaired at 30 June 2011 as the asset does not contribute to the
ongoing business. Methods to dispose of the asset continue to be
actively appraised.
Cliffs
No wells have been drilled on the Cliffs project and the leases
were allowed to lapse following the Strategic Review. Costs of
US$2.01 million have been written down with respect to this
project.
Consolidated Income Statement
for the year ended 30 June 2011
Notes 2011 2010
US$ US$
Continuing operations:
Revenue 2 912,248 2,148,689
Cost of sales (28,540) -
Gross profit 883,708 2,148,689
Administrative expenses (4,025,582) (3,699,775)
Exceptional administrative expenses 7 (25,231,036) -
Total administrative expenses 3 (29,256,618) (3,699,775)
Operating loss 3 (28,372,910) (1,551,086)
Finance income 5 68,015 269,257
Finance costs 6 (251,847) -
Profit/(Loss) on sale of
available-for-sale investments 186,325 (1,263)
Loss before taxation (28,370,418) (1,283,092)
Taxation 8 (16,599) -
Loss for the financial year from
continuing operations (28,387,017) (1,283,092)
Discontinued operations:
Loss for the financial year from
discontinued operations 9 (42,535,789) -
Loss for the financial year (70,922,806) (1,283,092)
Attributable to:
Equity shareholders of the Company (70,922,806) (1,283,092)
Loss per share from continuing and
discontinued operations
Basic and diluted loss per share (cents) 10 (19.95) (0.40)
Loss per share from continuing
operations
Basic and diluted loss per share (cents) 10 (7.98) (0.40)
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2011
2011 2010
US$ US$
Loss for the financial year (70,922,806) (1,283,092)
Other comprehensive income
Fair value (loss) / gain on available-for-sale
financial assets (95,270) 35,821
Foreign exchange gains / (losses) on
consolidation 290,151 (1,247,565)
Other comprehensive income for the financial
year, net of tax 194,881 (1,211,744)
Total comprehensive income for the financial
year (70,727,925) (2,494,836)
Consolidated Balance Sheet
as at 30 June 2011
Notes 2011 2010
Assets US$ US$
Non-current assets
Property, plant and equipment 11 18,864,573 24,575,543
Intangible assets 12 28,268,678 80,584,488
Available-for-sale financial assets 14 - 1,620,592
47,133,251 106,780,623
Current assets
Trade and other receivables 15 287,053 701,169
Cash and cash equivalents 17 2,004,259 7,217,285
2,291,312 7,918,454
Total Assets 49,424,563 114,699,077
Equity and liabilities
Capital and reserves attributable
to the Company's equity shareholders
Share capital 18 1,675,167 1,480,731
Share premium account 127,360,122 119,252,765
Foreign exchange translation reserve (3,655,963) (3,946,114)
Retained earnings (77,903,766) (6,885,690)
Share-based payment reserve 1,230,435 889,972
Merger reserve 180,533 180,533
Total equity 48,886,528 110,972,197
Current liabilities
Trade and other payables 24 538,035 3,726,880
Total liabilities 538,035 3,726,880
Total equity and liabilities 49,424,563 114,699,077
Consolidated Statement of Changes in Equity
for the year ended 30 June 2011
Foreign
Share exchange Share-based
Share premium translation Retained payment Merger
capital account reserve earnings reserve reserve Total
US$ US$ US$ US$ US$ US$ US$
Balance at 1 July
2010 1,480,731 119,252,765 (3,946,114) (6,885,690) 889,972 180,533 110,972,197
For the year ended
30 June 2011
Loss for the year - - - (70,922,806) - - (70,922,806)
Other comprehensive income:
Fair value loss on
available-for-sale
financial assets - - - (95,270) - - (95,270)
Foreign exchange
gain on
consolidation - - 290,151 - - - 290,151
---------- ------------ ------------ ------------- ------------ -------- -------------
Total comprehensive
income - - 290,151 (71,018,076) - - (70,727,925)
Share-based
payments - - - - 340,463 - 340,463
Issue of share
capital 194,436 8,107,357 - - - - 8,301,793
Balance at 30
June 2011 1,675,167 127,360,122 (3,655,963) (77,903,766) 1,230,435 180,533 48,886,528
========== ============ ============ ============= ============ ======== =============
Balance at 1 July
2009 1,219,415 84,546,504 (2,698,549) (5,638,419) 815,639 180,533 78,425,123
For the year ended
30 June 2010
Loss for the year - - - (1,283,092) - - (1,283,092)
Other comprehensive income:
Fair value gain on
available-for-sale
financial assets - - - 35,821 - - 35,821
Foreign exchange
losses on
consolidation - - (1,247,565) - - - (1,247,565)
---------- ------------ ------------ ------------- ------------ -------- -------------
Total comprehensive
income - - (1,247,565) (1,247,271) - - (2,494,836)
Share-based
payments - - - - 74,333 - 74,333
Issue of share
capital 261,316 36,322,869 - - - - 36,584,185
Issue costs - (1,616,608) - - - - (1,616,608)
Balance at 30
June 2010 1,480,731 119,252,765 (3,946,114) (6,885,690) 889,972 180,533 110,972,197
========== ============ ============ ============= ============ ======== =============
Consolidated Cash Flow Statement
for the year ended 30 June 2011
Notes 2011 2010
US$ US$
Cash outflow from operating activities 29 (3,022,507) (2,400,327)
Cash flow from investing activities
Purchase of intangible assets (10,412,110) (15,500,861)
Purchase of property, plant and
equipment (2,122,914) (14,871,429)
Proceeds on disposal of financial
assets 1,758,935 84,526
Dividend received 30,131 78,775
Interest received 37,884 190,482
Net cash used in investing activities (11,708,074) (30,018,507)
Cash flow from financing activities
Proceeds on issue of new shares 8,301,794 36,584,185
Expenses of new share issue - (1,616,608)
Net cash generated from financing
activities 8,301,794 34,967,577
Net (decrease)/increase in cash and
cash equivalents (5,428,787) 2,548,743
Cash and cash equivalents at beginning
of financial year 7,217,285 5,932,315
Effects of exchange rate changes 215,761 (1,263,773)
Cash and cash equivalents at end of
financial year 17 2,004,259 7,217,285
Notes to the Consolidated Financial Information
for the year ended 30 June 2011
1 Segmental Reporting
Operating segments
The Group has only one operating segment: the production of,
exploration for and investment in hydrocarbons in one geographical
area, the United States of America.
The Group has one main customer, representing 100% respectively
of the sales revenue.
2 Revenue
An analysis of the Group's revenue for the year (excluding
finance income - see note 5) from both continuing and discontinued
operations is as follows:
2011 2010
US$ US$
Continuing operations
Sales revenue 866,749 2,102,374
Royalty income 45,499 46,315
912,248 2,148,689
Discontinued operations
Sales revenue 543,639 -
1,455,887 2,148,689
3 Operating Loss 2011 2010
Operating loss is stated after
charging/(crediting): US$ US$
Fees payable to the Company's auditor
for the audit of the annual statements 76,542 85,857
Fees payable to the Company's auditors
for other services supplied pursuant to
such legislation - 5,777
Fees payable to the Company's auditor
for other services:
- other services relating to taxation 6,697 10,152
Depreciation 27,795 52,852
Amortisation 4,035 4,141
Equity settled share-based payments 88,617 74,333
Foreign exchange 25,582 (157,498)
(Gain) / loss on sale of available-for-sale
investments (186,325) 1,263
4 Directors and Employees
The aggregate payroll costs of the employees, including both
management and executive directors, were as follows:
2011 2010
US$ US$
Staff costs
Wages and salaries 1,087,598 1,468,785
Social security costs 70,637 110,740
Pension costs 51,275 188,793
1,209,510 1,768,318
Equity settled share-based payments 38,187 53,947
1,247,697 1,822,265
Average monthly number of persons employed by the Group during
the year was as follows:
2011 2010
No. No.
United Kingdom 5 6
United States 1 1
6 7
2011 2010
US$ US$
Remuneration of directors
Emoluments for qualifying services 1,050,290 1,139,259
Company pension contributions 51,275 188,793
Social security costs 68,030 110,740
1,169,595 1,438,792
4 Directors and Employees (continued)
The number of directors accruing benefits under money purchase
pension scheme arrangements was three (2010: two).
Details of each director's remuneration and share options granted
are included in the Report of the Directors.
2011 2010
US$ US$
Highest paid director
Remuneration 468,930 469,679
Pension contributions - 105,497
Share-based payments 14,495 17,982
483,425 593,158
5 Finance Income 2011 2010
US$ US$
Bank interest 37,884 190,482
Dividends receivable 30,131 78,775
68,015 269,257
6 Finance Costs 2011 2010
US$ US$
Share warrants issued under Darwin agreement 251,847 -
251,847 -
7 Exceptional administrative expenses 2011 2010
US$ US$
Impairment of Cisco project 23,223,394 -
Impairment of Cliffs project 2,007,642 -
25,231,036 -
During the year, the land leases for the Cliffs project were
allowed to lapse, resulting in an impairment for that project,
and the Cisco project has been written off as commercially
unviable.
8 Taxation
There was a small current tax charge of US$16,599 paid by a
US subsidiary in the year, but no other current tax charge
for the year due to the loss incurred (2010: US$nil).
Reconciliation of the effective tax charge 2011 2010
US$ US$
Loss before taxation (70,906,207) (1,283,092)
Loss before tax multiplied by standard
rate of corporation tax in the UK of 27%
(2010: 28%) (19,144,676) (359,266)
Tax effects of:
Other expenses not deductible for tax
purposes 9,940,787 91,501
Tax adjustments, reliefs and transfers (14,807) (14,886)
Tax losses not utilised within the year 9,202,097 282,651
Tax expense and effective tax rate (16,599) -
The amount of unrecognised deferred tax is
as follows:
2011 2010
US$ US$
Unutilised trading losses 2,383,656 1,625,451
Tax relief on share-based payments 200,887 265,586
A deferred tax asset in respect of trading losses has not been
recognised due to the uncertainty over timing of future profits.
The unprovided deferred tax asset is recoverable against suitable
future trading profits.
9 Discontinued Operations
On 31 December 2010 Nighthawk disposed of its interest in the
Revere group of projects to the operator, Running Foxes Petroleum
LLC, receiving in consideration a royalty asset yielding a
royalty stream of 5% of total project revenues, valued at $294,000.
Analysis of profit for the year from discontinued operations
2011 2010
US$ US$
Sales 543,639 -
Profit before tax 543,639 -
Loss on disposal of Revere group of projects (43,079,428) -
(see note 15)
Loss for the year from discontinued operations (42,535,789) -
Cash flows from discontinued operations 2011 2010
US$ US$
Net cash flows from operating activities (316,445) -
Net cash flows from investing activities (3,842,584) -
Net cash flows (4,159,029) -
10 Loss Per Share
Basic loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year. Given the
Group's reported loss for the year share options and warrants are
not taken into account when determining the weighted average
number of ordinary shares in issue during the year and therefore
the basic and diluted earnings per share are the same.
10 Loss Per Share (continued)
Basic loss per share
2011 2010
US cents US cents
Loss per share from continuing operations (7.98) (0.40)
Loss per share from discontinued operations (11.97) -
Total basic loss per share (19.95) (0.40)
The earnings and weighted average number of ordinary shares
used in the calculation of basic earnings per share are as
follows:
2011 2010
US$ US$
Earnings used in the calculation of total
basic and diluted earnings per share (70,922,806) (1,283,092)
Loss for the year from discontinued operations
used in the calculation of basic and diluted
earnings per share from discontinued operations (42,535,789) -
Earnings used in the calculation of basic
earnings per share from
continuing operations (28,387,017) (1,283,092)
2011 2010
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 355,560,678 321,210,436
If the Company's share options and warrants were taken into
consideration in respect of the Company's weighted average
number of ordinary shares for the purposes of diluted earnings
per share, it would be as follows:
Number of shares
Potential dilutive effect of share options
and warrants 6,710,274 6,250,000
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 362,270,952 327,460,436
11 Property, Plant and Equipment
Leasehold Plant and Office Production
land equipment equipment assets Total
US$ US$ US$ US$ US$
Cost
At 1 July 2009 2,296,190 9,834,018 51,597 - 12,181,805
Transfers from
intangible assets - - - 1,116,590 1,116,590
Additions 4,361,407 9,758,268 4,150 339,730 14,463,555
Transfers to
intangible assets - - - (1,456,320) (1,456,320)
Foreign exchange
variance - - (4,700) - (4,700)
At 30 June 2010 6,657,597 19,592,286 51,047 - 26,300,930
Additions 489,378 361,322 4,658 - 855,358
Transfers from
intangible assets 22,371,511 1,489,564 - 439,785 24,300,860
Disposals - (12,676,494) - - (12,676,494)
Foreign exchange
variance - - 3,408 - 3,408
At 30 June 2011 29,518,486 8,766,678 59,113 439,785 38,784,062
Accumulated
Depreciation
At 1 July 2009 - 394,458 17,961 - 412,419
Charge 566,777 735,847 11,981 10,825 1,325,430
Transfers to
intangible assets - - - (10,825) (10,825)
Foreign exchange
variance - - (1,637) - (1,637)
At 30 June 2010 566,777 1,130,305 28,305 - 1,725,387
Charge 1,642,316 338,431 18,823 5,750 2,005,320
Transfer of
historic
depreciation to
intangible
assets 7,373,276 89,931 - - 7,463,207
Disposals - (565,153) - - (565,153)
Impairment 7,791,821 1,497,017 - - 9,288,838
Foreign exchange
variance - - 1,890 - 1,890
At 30 June 2011 17,374,190 2,490,531 49,018 5,750 19,919,489
Net book
value
At 30 June 2011 12,144,296 6,276,147 10,095 434,035 18,864,573
At 30 June 2010 6,090,820 18,461,981 22,742 - 24,575,543
12 Intangible Assets
Exploration Royalty
costs interests Total
US$ US$ US$
Cost
At 1 July 2009 61,456,478 859,391 62,315,869
Transfers to property, plant
and equipment (1,116,590) - (1,116,590)
Additions 18,348,295 - 18,348,295
Transfers from property, plant
and equipment 1,445,495 - 1,445,495
At 30 June 2010 80,133,678 859,391 80,993,069
Additions 10,507,119 294,000 10,801,119
Transfers to property, plant
and equipment (23,861,075) - (23,861,075)
Transfer of historic depreciation
from property, plant and
equipment 7,463,207 - 7,463,207
Disposals (30,402,003) - (30,402,003)
Transfers to production assets (439,785) - (439,785)
At 30 June 2011 43,401,141 1,153,391 44,554,532
Amortisation and impairment
At 1 July 2009 390,241 14,199 404,440
Charge - 4,141 4,141
At 30 June 2010 390,241 18,340 408,581
Charge - 4,035 4,035
Impairment 15,873,238 - 15,873,238
At 30 June 2011 16,263,479 22,375 16,285,854
Net book value
At 30 June 2011 27,137,662 1,131,016 28,268,678
At 30 June 2010 79,743,437 841,051 80,584,488
Management review each exploration project for indication
of impairment at each balance sheet date.
Such indications would include written off wells and relinquishment
of development acreage.
During the year, the land leases for the Cliffs project were
allowed to lapse, resulting in an impairment for that project,
and the Cisco project has been written off as commercially
unviable.
At the balance sheet date there were no further indications
of impairment in respect of any of the projects.
13 Investment in Jointly Controlled Operations
The Group has entered into the following unincorporated jointly
controlled operations, which are consolidated, in accordance
with the accounting policy on jointly controlled operations,
within the Group's financial information:
Name of project Principal activities Group interest
Jolly Ranch Oil and gas development 50%
Cisco Springs Oil and gas development 50%
The Group also has one 50% Jointly Controlled Entity in Nightfox
Drilling LLC. The principal activity of this entity is to provide
equipment and machinery as part of the exploration activities.
The total cost included within property, plant and equipment
was US$1,114,705 (2010: US$1,114,705).
At the balance sheet dates there were no contingent liabilities
or contingent assets in respect of any of the jointly controlled
operations.
At the balance sheet dates there were no capital commitments
in respect of any of the jointly controlled operations.
14 Available-for-Sale Financial Assets 2011 2010
US$ US$
Available-for-sale financial assets - 1,620,592
The available-for-sale financial assets consist of listed investments
and the fair value is based on bid quoted market prices at
the balance sheet date.
The following table shows the aggregate movement in the Group's
financial assets during the year:
2011 2010
US$ US$
At 1 July 1,620,592 1,497,941
Disposals (1,572,611) (85,789)
Foreign exchange differences 47,289 172,619
Fair value (loss) / gain on available-for-sale
financial assets (95,270) 35,821
At 30 June - 1,620,592
15 Trade and Other Receivables 2011 2010
US$ US$
Trade receivables 205,710 557,130
Other receivables 19,180 73,881
Prepayments and accrued income 62,163 70,158
287,053 701,169
The directors consider the carrying value of trade and other
receivables are approximate to their fair value.
All of the Group's trade and other receivables have been reviewed
for indicators of impairment. None of the trade receivables
were found to be impaired as at 30 June 2011 (2010: US$nil).
No unimpaired trade receivables are past due as at the reporting
date (2010: US$nil).
16 Disposal of Business Interests
The Group disposed of its investments in the Revere group of
projects to Running Foxes Petroleum LLP on 31 December 2010.
Book value of net assets sold 2011 2010
US$ US$
Non-current assets:
Intangible assets 31,262,087 -
Property, plant and equipment 12,111,341 -
Net assets disposed 43,373,428 -
5% Royalty intangible asset resulting 294,000 -
from disposal
Loss on disposal 43,079,428 -
Consideration on disposal 2011 2010
US$ US$
Royalty asset received in consideration 294,000 -
17 Cash and Cash Equivalents 2011 2010
US$ US$
Cash at bank (GBP) 1,527,343 6,073,168
Cash at bank (USD) 476,916 1,142,166
Cash on hand (GBP) - 1,951
2,004,259 7,217,285
18 A) Share Capital 2011 2010
GBP GBP
Authorised
500,000,000 shares of 0.25 pence 1,250,000 1,250,000
US$ US$
Allotted, issued and fully paid
378,103,080 shares (2010: 329,639,480
shares) of 0.25 pence 1,675,167 1,480,731
Allotments during the year
During the year ended 30 June 2011 the Company issued a total
48,463,600 ordinary shares (2010: 64,095,857) for a premium,
net of issue costs, of US$8,107,358 (2010: US$34,706,261)
Total
Price per Number of shares consideration
Date share (Sterling) issued received US$
16 November 2010 11.51p 28,463,600 5,238,462
1 February 2011 9.5p 20,000,000 3,063,332
18 B) Share-Based Payments - Options and Warrants
The Company has a share option scheme for all directors and
senior management. Options are exercisable at a price equal
to the average market price of the Company's shares on the
date of grant. The vesting period is three years. The options
are settled in equity once exercised.
If the options remain unexercised after a period of 10 years
from the date of grant, the options expire. Options are forfeited
if the employee leaves the Company before the options vest,
unless otherwise agreed by the Board of Directors.
The Company has also issued share warrants in the year as part
of the conditions of the Darwin drawdown agreement, which are
exercisable immediately.
If the warrants remain unexercised after a period of 3 years
from the date of grant, the warrants expire.
Details of the number of share options and warrants and the
weighted average exercise price (WAEP) outstanding during the
year are as follows:
2011
Number
Number of WAEP of WAEP
options GBP warrants GBP
Outstanding at the
beginning of the
year 6,250,000 0.166 - -
Issued 4,500,000 0.080 3,000,000 0.20
Outstanding at the
year end 10,750,000 0.130 3,000,000 0.20
Number exercisable
at 30 June 2011 6,250,000 0.166 3,000,000 0.20
2010
Number of WAEP
options GBP
Outstanding at the beginning of the year 6,250,000 0.166
Outstanding at the year end 6,250,000 0.166
Number of options exercisable at 30 June
2010 6,250,000 0.166
The fair values of share options issued in previous financial
years were calculated using the binomial pricing model. The
inputs into the model are as follows:
18 B) Share-Based Payments - Options and Warrants (continued)
25 11
15 August September December 1 November
Date of grant 2006 2006 2006 2007
Number granted 4,500,000 500,000 500,000 1,250,000
Share price at
date of grant 6.5p 6.5p 11.4p 52.5p
Exercise price 7.0p 7.0p 12.0p 53.0p
Expected volatility 31.0% 31.0% 33.4% 69.9%
Expected life 3 years 3 years 3 years 5 years
Risk free rate 4.70% 4.70% 5.75% 4.93%
Expected dividend
yield 0% 0% 0% 0%
Fair value of
options granted at
date of grant 2.73p 2.73p 5.17p 22.37p
Exit rate 0% 0% 0% 5%
Earliest vesting 15 August 25 11 1 November
date 2009 September December 2007
2009 2009
Expiry date 15 August 25 11 1 November
2016 September December 2012
2016 2016
Expected volatility was determined based on the historic volatility
of four comparator companies as suggested by management. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The fair values of share options and warrants issued in the
current financial year were calculated using the Black Scholes
model. The inputs into the model are as follows:
Warrants Share options
13 October 20 May
Date of grant 2010 2011
Number granted 3,000,000 4,500,000
Share price at date of grant 15.8p 5.9p
Exercise price 20.0p 8.0p
Expected volatility 85% 85%
Expected life 1.5 years 6.5 years
Risk free rate 1.75% 2.40%
Expected dividend yield 0% 0%
Fair value at date of grant 5.26p 4.13p
Earliest vesting date 13 October 20 May 2014
2010
Expiry date 13 October 20 May 2021
2013
Expected volatility was determined based on the historic volatility
of the Company. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects
of non-transferability, exercise restrictions and behavioural
considerations.
The Group recognised total expenses of US$88,617 (2010 US$74,333)
related to share options accounted for as equity-settled share-based
payment transactions during the year, and US$251,847 (2010
US$nil) related to warrants accounted for as equity-settled
share-based payment transactions during the year.
19 Financial Instruments
Classification of financial instruments
The tables below set out the Group's accounting classification
of each class of its financial assets and liabilities.
Financial assets
Loans and other Total carrying
At 30 June 2011 Available-for-sale receivables value
US $ US $ US $
Trade receivables - 205,710 205,710
Other receivables - 19,180 19,180
Cash and cash
equivalents - 2,004,259 2,004,259
- 2,229,149 2,229,149
Loans and
other Total carrying
At 30 June 2010 Available-for-sale receivables value
US $ US $ US $
Available-for-sale
financial assets 1,620,592 - 1,620,592
Trade receivables - 557,130 557,130
Other receivables - 73,881 73,881
Cash and cash equivalents - 7,217,285 7,217,285
1,620,592 7,848,296 9,468,888
All of the above financial assets' carrying values are approximate
to their fair values, as at 30 June 2011 and 2010, given their
nature and short times to maturity.
Under IFRS 7 Financial Instruments: Disclosures, the available-for-sale
assets are classified under the fair value hierarchy as level
1.
Financial liabilities
Measured
at amortised Total carrying
At 30 June 2011 cost value
US$ US$
Trade payables 430,876 430,876
Accruals 107,159 87,978
538,035 518,854
19 Financial Instruments (continued)
Measured
at
amortised Total carrying
At 30 June 2010 cost value
US$ US$
Trade payables 3,624,428 3,624,428
Accruals 102,452 102,452
3,726,880 3,726,880
All of the above financial liabilities' carrying values approximate
to their fair values, as at 30 June 2011 and 2010, given their
nature and short times to maturity.
20 Financial Instrument Risk Exposure and Management
The principal financial risks to which the Group is exposed
are: foreign currency exchange rate risk; interest rate risk;
liquidity risk and credit risk. This note describes the Group's
objectives, policies and process for managing those risks and
the methods used to measure them. Further quantitative information
in respect of these risks is presented in notes 15, 19 and
21.
There have been no substantive changes to the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from the previous year.
Liquidity risk
Liquidity risk is dealt with in note 21 of this financial information.
Credit risk
The Group's credit risk is primarily attributable to its cash
balances, available-for-sale financial assets and trade receivables.
The Group does not have a significant concentration of risk,
with exposure spread over a number of third parties.
The credit risk on liquid funds is limited because the third
parties are large international banks. The trade receivables
amount presented in the balance sheet is after allowance for
impairment. Impairment is made where there is an identified
event, which based on previous experience, is evidence of a
likely reduction in cash flows.
The Group's total credit risk amounts to the total of the sum
of the receivables, available-for-sale financial assets and
cash and cash equivalents. At the year end this amounts to
US$2,229,149 (2010: US$9,468,888).
20 Financial Instrument Risk Exposure and Management (continued)
Interest rate risk and sensitivity analysis
The Group's only exposure to interest rate risk is the interest
received on the cash held on deposit. The Group does not have
any interest bearing borrowings.
The following table indicates the impact of a change in interest
rate on the interest received during the year, and with all
other variables being held constant, on the Group's loss before
tax and equity.
Interest rate risk and sensitivity analysis (continued)
Change Change
in interest 2011 in interest 2010
rate US$ rate US$
Sterling +0.5% 19,001 +0.5% 16,879
+1.0% 38,003 +1.0% 33,757
+1.5% 57,004 +1.5% 50,636
-0.5% (19,001) -0.5% (16,879)
-1.0% (38,003) -1.0% (33,757)
-1.5% (57,004) -1.5% (50,636)
Dollars +0.5% 4,048 +0.5% 15,985
+1.0% 8,095 +1.0% 31,970
+1.5% 12,143 +1.5% 47,955
-0.5% (4,048) -0.5% (15,985)
-1.0% (8,095) -1.0% (31,970)
-1.5% (12,143) -1.5% (47,955)
Market risk and sensitivity analysis
Market risk arises when the fair value or cash flows of a financial
instrument fluctuates from the level where a long or short
position was established. These financial instruments are subject
to equity price risk.
Equity price risk
The Group's available-for-sale financial assets are subject
to equity price risk. For financial instruments held, the Group
uses a sensitivity analysis technique that measures the changes
in fair value of the Group's financial instruments to hypothetical
changes in market price. A 5% increase in the market value
of positions held at 30 June 2011 traded on recognised exchanges
would increase the value of the financial assets and equity
by US$nil (2010: US$81,030). A 5% decrease in the value of
positions held on at 30 June 2011 would decrease the value
of the financial assets and equity by US$nil (2010: US$81,030).
The analysis has been produced on the same basis for 2010.
20 Financial Instrument Risk Exposure and Management (continued)
Foreign exchange risk
The Group's principal exposure to foreign exchange risk is
in relation to the United States Dollar and Sterling exchange
rates, due to the concentration of available-for-sale assets
and cash and cash equivalents that are held in Sterling.
The following table indicates the impact of a change in foreign
exchange rate on the value of the available-for-sale assets
and cash and cash equivalents at the balance sheet date, and
with all other variables being held constant, on the Group's
equity.
Change in Change in
US $/GBP US$/GBP
exchange 2011 exchange 2010
rate US$ rate US$
Sterling +5.0% 80,707 +5.0% 389,455
-5.0% (80,707) -5.0% (389,455)
21 Liquidity Risk
In managing liquidity risk, the main objective of the Group is to
ensure that it has the ability to pay all of its liabilities as they
fall due. The Group monitors its levels of working capital to ensure
that it can meet its debt repayments as they fall due. The table
below shows the undiscounted cash flows on the Group's financial
liabilities as at 30 June 2011 on the basis of their earliest
possible contractual maturity.
Greater
Within Within 6 - 12 than 12
Total 2 months 2 -6 months months months
US$ US$ US$ US$ US$
At 30 June
2011
Trade payables 430,876 430,876 - - -
Accruals 107,159 - 107,159 - -
538,035 430,876 107,159 - -
At 30 June
2010
Trade payables 3,624,428 3,624,428 - - -
Accruals 102,452 - 102,452 - -
3,726,880 3,624,428 102,452 - -
22 Capital Management
The Group's objectives when managing capital are to safeguard the
Group's ability to continue as a going concern, to provide returns for
shareholders and to maintain an optimal capital structure to reduce the
cost of capital. The Group defines capital as being share capital plus
reserves. The Board of Directors monitor the level of capital as
compared to the Group's commitments and adjusts the level of capital as
is determined to be necessary by issuing new shares. The Group is not
subject to any externally imposed capital requirements.
23 Financial Commitments
The Group had no financial commitments at 30 June 2011 (2010:
US$nil).
24 Trade and Other Payables 2011 2010
US$ US$
Trade payables 430,876 3,624,428
Accruals 107,159 102,452
538,035 3,726,880
25 Related Party Transactions
The only related party transactions during the year were with
the directors and key management.
Prior to his appointment as CEO, Mr Tim Heeley was key management.
Short-term benefits
2011 2010
US$ US$
Remuneration:
Mr T. Heeley 305,637 -
Mr R. Swindells 14,155 -
Mr D. Bramhill 110,962 469,679
Mr J. O'Farrell 82,171 339,332
Mr. G. Metzger 55,812 92,318*
Mr. M. Thomsen 468,930 237,930
Mr S. Eaton 79,066** -
Social security costs 68,030 110,740
1,184,763 1,250,000
25 Related Party Transactions (continued)
In addition to the remuneration shown above, the Company incurred
share-based payment charges of US$38,187 (2010: US$53,947)
and pension contributions of US$51,275 (2010: US$188,793) in
respect of the above named directors.
*Included in Mr G Metzger's salary and fees for 2010 is a catch-up
relating to previous years.
**Included in Mr S Eaton's salary and fees for 2011 is a catch-up
relating to previous years.
26 Investment in Subsidiaries
The Group's Parent Company holds the issued share capital of
the following subsidiary undertakings, which are incorporated
in the USA and have been included in this consolidated financial
information.
Company Principal activities Class Percentage hold
Nighthawk Royalties
LLC Oil and gas development Ordinary 100%
Nighthawk Production Oil and gas development Ordinary (indirectly)
LLC 100%
OilQuest USA LLC Oil and gas development Ordinary (indirectly)
100%
27 Contingent Liabilities
The directors are not aware of any contingent liabilities within
the Group or the Company at 30 June 2011.
28 Ultimate Controlling Party
As at 30 June 2011, Nighthawk Energy plc had no ultimate controlling
party.
2011 2010
29 Cash Flow from Operating Activities US$ US$
Loss for the financial year (70,922,806) (1,283,092)
Finance income (68,015) (269,257)
Finance costs 251,847 -
Share-based payment 88,617 74,333
(Profit)/loss on disposal of available-for-sale
investments (186,325) 1,263
Loss on discontinued operations 42,535,789 -
Revenue received from discontinued
operations 543,639 -
Costs of disposing of discontinued
operations (860,084) -
Impairment of intangible assets 15,873,238 -
Impairment of property, plant and
equipment 9,288,838 -
Depreciation 27,874 52,852
Amortisation 4,035 4,141
Net foreign exchange loss/(gain) 25,582 (157,498)
(3,397,771) (1,577,258)
Changes in working capital
Decrease / (increase) in trade and other
receivables 414,116 (521,345)
Decrease in trade and other payables (38,852) (301,724)
Net cash outflow from operating activities (3,022,507) (2,400,327)
30 Events After the Balance Sheet
Date
There were no significant events after the balance sheet date.
31 Basis of Preparation
This announcement has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU") applied in accordance with the provisions of the
Companies Act 2006.
IFRS is subject to amendment and interpretation by the International
Accounting Standards Board ("IASB") and the IFRS Interpretations
Committee and there is an ongoing process of review and endorsement
by the European Commission. These accounting policies comply
with each IFRS that is mandatory for accounting periods ending
on 30 June 2011.
32 Publication of non-statutory accounts
The financial information set out in this announcement does not comprise
the Group's statutory accounts for the years ended 30 June 2011 or 30
June 2010. The financial information has been extracted from the
statutory accounts of the Company for the year ended 30 June 2010, which
have been delivered to the Registrar of Companies, and from the
statutory accounts of the Company for the year ended 30 June 2011. The
auditors' opinion on those accounts was unqualified and did not contain
a statement under section 498 (2) or section 498 (3) Companies Act 2006
and did not include references to any matters to which the auditor drew
attention by the way of emphasis. The statutory accounts for the year
ended 30 June 2011 have been finalised on the basis of the financial
information presented by the directors in this announcement and will be
delivered to the Registrar of Companies following the company's annual
general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFSFLWFFSELU
Nighthawk Energy (LSE:HAWK)
Historical Stock Chart
From Sep 2024 to Oct 2024
Nighthawk Energy (LSE:HAWK)
Historical Stock Chart
From Oct 2023 to Oct 2024
