TIDMHAWK
RNS Number : 2741N
Nighthawk Energy plc
27 September 2012
27 September 2012
NIGHTHAWK ENERGY PLC
("Nighthawk" or the "Company")
Final Results for the year ended 30 June 2012
Nighthawk, the US focused shale oil development and production
company (AIM: HAWK and OTCQX: NHEGY), announces its final results
for the year ended 30 June 2012.
Operational Highlights
-- Acquisition of additional 25% working interest in, and the
operatorship of, the Jolly Ranch shale oil project in Colorado
-- Completion of major work-over program on existing Jolly Ranch
wells combined with extensive new geo-science work significantly
improves understanding of project and informs new drilling
program
-- New drilling program underway with four wells planned
-- Re-organisation and strengthening of Board and Management structure
Financial Highlights
-- Fundamental re-financing of the Company with fund-raising of US$26.1 million
-- Revenues from continuing operations of US$0.97 million (FY2011: US$0.91 million)
-- Gross oil production from Jolly Ranch of 18,466 barrels (FY2011: 30,795 barrels)
-- Non-cash impairment charges of US$27.0 million following
evaluation of Jolly Ranch acquisition price and results of the
work-over program
Post-Period Highlights
-- John Craig 6-2, the first well in the new drilling program,
tests significant commercial oil flows
The audited report and accounts will be available on the
Company's website at www.nighthawkenergy.com later today and will
be posted to Shareholders, as applicable, together with the notice
of Annual General Meeting shortly.
Enquiries:
Nighthawk Energy plc 020 3582 1350
Stephen Gutteridge, Chairman
Richard Swindells, Chief Financial Officer
Westhouse Securities Limited 020 7601 6100
Richard Baty richard.baty@westhousesecurities.com
FTI Consulting 020 7831 3113
Ben Brewerton ben.brewerton@fticonsulting.com
Ed Westropp edward.westropp@fticonsulting.com
Chairman's Statement
During the year ended 30 June 2012, Nighthawk undertook and
completed significant changes in its strategy, asset base,
shareholder and financial structure, and management team. The
result is a stronger, more focused business, with control over its
assets and the resources to implement a new development plan
including the drilling of new wells.
Strategically, Nighthawk is now focused on a single,
large-scale, US shale oil development, the Jolly Ranch project in
the Denver-Julesberg Basin in Colorado. In January 2012, the
Company completed the acquisition of an additional 25% working
interest in the project from Running Foxes Petroleum ("RFP"),
taking Nighthawk's total working interest to 75%. Nighthawk also
became the operator of the project, and immediately began a program
of well work-overs and geo-science work in preparation for the
planned drilling of at least four new wells in the second half of
calendar year 2012.
The Jolly Ranch project comprises approximately 385,000 gross
acres located in the south-east corner of the prolific oil and gas
producing Denver-Julesberg Basin. Prior to this year interest in
the general area had been developing steadily, but development and
drilling activity has accelerated in 2012 with a number of large US
shale players moving into the area, acquiring land and beginning
drilling programs. The strategic focus of Nighthawk and the
acquisition of the additional interest, appear timely, and fit well
with the shift towards liquid shale plays that has been occurring
more widely across the United States.
The first stage of Nighthawk's development plan for Jolly Ranch
was to work-over 15 existing wells and re-evaluate their condition
and potential for a recovery in oil production, which had fallen
sharply during 2011 and was running at around 30 bbls/day when
Nighthawk assumed operatorship in January 2012. A thorough review
of the top-side production facilities was also carried out.
This work-over stage was completed as planned by June 2012, and
uncovered a significant number of problems both sub-surface and
with top-side equipment.
Seven wells that had been hydraulically fractured had
significant formation damage, severely limiting their production
potential. The two salt-water disposal wells both required
extensive clean-up work. On some wells there were failings in the
casing and cement work which required rectification.
On the surface, a variety of problems were encountered with
pumps, engines, heater/treaters, flow-lines and tanks, some due to
poor installation and maintenance, others to wrong design and
specification. Remedial work was also required on electrical
systems and to address environmental concerns.
All of the work required to address these problems was completed
within five months and operationally Jolly Ranch is now in
significantly better shape than under the previous operator.
Production from existing wells has slowly recovered from the 30
bbls/day level and reached an average of 61 bbls/day for the month
of August 2012.
Whilst the operational problems uncovered by the work-over
program have now been dealt with, they have impacted on the
business in two other ways. Firstly, assessment of the potential
from existing wells, relative to the historic costs expended on
them, has resulted in further impairment charges for the year.
These are dealt with more fully in the Chief Financial Officer's
report. However it is important to note that the Board's confidence
in the Jolly Ranch project as a whole has not been affected by
these results, as we believe that they are the result of poor
operational management by the previous operator.
This leads to the second issue, which is that Nighthawk has
raised significant claims on Running Foxes Petroleum, relating
principally to the costs of the remediation work required, and also
to issues of title defect and unpaid operating expenses. Nighthawk
has also invoked its right to audit all billings to Nighthawk by
Running Foxes and its associates over the past two years, when they
were the operator of Jolly Ranch. This audit may result in further
claims. In pursuing these claims, Nighthawk is working closely with
its US counsel.
The Company is now entering the second and most important phase
of its development plan with the drilling of the first new wells at
Jolly Ranch in nearly three years. In planning and permitting the
initial well locations, the Company has adopted a geo-science led
strategy, based on re-evaluation of existing 3D seismic, the
purchase of additional 2D seismic, and extensive well-bore data
from both Nighthawk and third party wells. The first well in the
drilling program, the John Craig 6-2, was spudded in late August
2012 and initial results are highly positive, indicating that this
well will add substantially to production levels.
During the year Nighthawk rationalized its asset base to focus
on the Jolly Ranch project. A key objective was to gain control of
the project through a higher percentage interest and operatorship.
To achieve this Nighthawk required new finance and a shareholder
base which could potentially support further investment in drilling
and development. As a result of a comprehensive refinancing in late
2011 and January 2012, Nighthawk raised US$26.1 million and has
gained strong supportive shareholders.
A reorganization of the board and management structure during
2012 saw Mike Thomsen and Tim Heeley step down from the Board and
Geoff Metzger retire as a Director. Mike and Tim remain members of
the Denver based management team, which was strengthened by the
appointment of Chuck Wilson as Chief Operating Officer in July
2011.
The Company has entered the new financial year in good shape
with a four well drilling program underway, production recovering,
and cash and management resources in place to build on a successful
outcome.
Finally I would like to thank our shareholders, suppliers and my
colleagues for their support during the year.
Stephen Gutteridge
Executive Chairman
Chief Financial Officer's Statement
The financial year ended 30 June 2012 saw considerable
challenges for Nighthawk but nevertheless a major objective was
achieved in January 2012 when it changed from a holder of
non-operated oil and gas exploration and development interests to
the operator of a 75% working interest in the Jolly Ranch shale oil
project, Colorado, USA. Nighthawk successfully acquired an
additional 25% interest in the Jolly Ranch Project from RFP and
became operator of the project at the same time. It also reassigned
its 50% interest in the Cisco Springs Project, Utah, to RFP which
leaves Nighthawk with a sole focus on shale oil.
The initial consideration for the acquisition comprised cash of
$8.5 million and $4 million in Nighthawk shares at a deemed price
of 2.5 pence per share; the total consideration payable
approximated to an acquisition cost of $122 per acre. In the event
of a sale or disposal by the Company of all or a portion of its
working interest in the Jolly Ranch Project to a third party within
five years, the Group will pay RFP a portion of the cash proceeds
(or the fair market value for any non-cash proceeds) which it
receives in connection with such sale or disposal up to a maximum
aggregate amount of $5.0 million. Additionally, the terms of the
acquisition also provided that a further cash amount of $1.0
million may be payable in the event RFP fails to sell its remaining
25% working interest in the Jolly Ranch Project by an extended
deadline of 30 June 2012. RFP chose itself to extend the deadline
for sale beyond this date and with the on-going issues between
Nighthawk and RFP, the Board believes it is highly unlikely this
will be paid.
To finance the acquisition and to provide funds for the further
development of Jolly Ranch, during the year the Group raised a
total of $26.1 million (before expenses) comprising $15.6 million
of unsecured convertible loan notes and $10.5 million through two
placings and an open offer to shareholders.
The second half of the financial year ended 30 June 2012, with
Nighthawk as operator of the Jolly Ranch Project, saw new funds
being invested into the project through workovers, new equipment
and geoscience work. At the financial year end, the Group held cash
balances of $9.2 million.
Revenues
Group revenues from continuing operations for the year ended 30
June 2012 were marginally ahead at $972,631 (FY2011: $912,248).
Production revenues at the Jolly Ranch project during the year
were adversely affected in the first half by a lack of funding for
on-going development and maintenance work and in the second half by
a program of workovers of existing wells that was implemented upon
Nighthawk becoming operator of the Jolly Ranch project in January
2012. Both the lack of funding in the first half and workovers in
the second half resulted in loss of some production from shut-in
wells. As a consequence, gross production for the year ended 30
June 2012 fell to an average of 50.5 bbls/day (FY2011: 84.4
bbls/day). The average sales price per barrel was marginally ahead
at $84.59 per barrel (FY2011: $80.14 per barrel).
Year ended Year ended
30 June 2012 30 June 2011
Produced Produced
-------------------------------- -------------- --------------
Gross barrels 18,466 bbls 30,795 bbls
Net barrels 8,530 bbls 12,318 bbls
Daily average (gross) 50.5 bbls/day 84.4 bbls/day
Average sales price per barrel $84.59 $80.14
-------------------------------- -------------- --------------
From 23 January 2012, the date from which Nighthawk increased
its working interest in the Jolly Ranch Project to 75.0%,
Nighthawk's net revenue interest in Nighthawk production increased
from approximately 40% to approximately 60%.
The balance of Group revenues during the year was accounted for
by royalty income and, since Nighthawk became operator of the Jolly
Ranch Project in January 2012, charges to the joint venture partner
as contributions to overheads in accordance with the joint operator
agreement.
Loss for the year
The Group loss for the year ended 30 June 2012 was $35.9 million
(FY2011: loss $71.7 million). Normalised losses (adjusted for
impairments, depreciation, amortisation, transaction costs,
non-recurring finance charges and discontinued operations) were
$4.8 million (FY2011: loss $2.9 million). The impairments taken
during the year are discussed in more detail below.
On-going administrative expenses rose slightly during the year
to $4.6 million (FY2011: $4.0 million) as a result of staff hires
and increased office and infrastructure costs in Colorado, USA
commensurate with Nighthawk becoming operator of the Jolly Ranch
project. At the same time, Director's salaries and fees were cut by
25% from 1 November 2011, the Board size has been reduced and other
overhead saving measures such as lower cost office space in the UK
were implemented. The Company will continue to manage costs
aggressively.
Impairment
During the year, the Group has taken impairments totaling $27.0
million. At the time of the Group's unaudited interim results for
the half year ended 31 December 2011, an impairment of
approximately $12.6 million relating to Nighthawk's existing 50%
interest in the Jolly Ranch Project at 31 December 2011 was
included in accordance with the required treatment under
International Financial Reporting Standards and which was informed
by the price paid to acquire the additional 25% working interest in
Jolly Ranch. Due to a subsequent, downwards revision to the total
price payable to acquire the additional 25% working interest in
Jolly Ranch, the impairment previously announced has been increased
in these full year audited results to approximately $14.1
million.
Additionally, upon becoming operator of the Jolly Ranch Project
during the second half of the year, Nighthawk gained first hand
access to the existing well set and infrastructure at the Jolly
Ranch Project and carried out a substantial amount of work both at
surface and sub-surface. One significant outcome of these workovers
was the discovery that considerable down-hole and near well bore
damage had been caused in several existing wells through the
drilling and completion techniques employed by the previous
operator. The damage was such that previously uncompleted and
unproduced horizons that otherwise presented as prime geological
horizons on log and other geophysical analyses were rendered
unworkable, and not capable of economic production through
recompletions.
As a result of this discovery process, the Board considered it
prudent to carry out an operational review and has determined that
an additional impairment of approximately $13.0 million should be
included in the year. This impairment relates only to the existing
well set at the Jolly Ranch Project drilled prior to Nighthawk
becoming operator. The Board has not in any way impaired its view
of the potential value of the Jolly Ranch Project as a whole which
it believes is underpinned by the considerable sub-surface
geophysical analysis that Nighthawk has undertaken since becoming
operator, by the initial flow results from the recently completed
John Craig 6-2 well and also by highly successful wells drilled and
produced locally by other operators.
A corresponding impairment has been included in the parent
company financial statements to reduce the net investment in
subsidiaries on the parent company balance sheet and to match the
impaired value of net assets held in those subsidiaries.
All of the Group's other projects have now been fully disposed,
leaving Nighthawk as a focused US shale oil play.
Cashflow, investment and liquidity
Cash outflow from operating activities for the year was
approximately $5.7 million (FY2011: outflow $3.0 million) and
included cash-based administrative expenses of $3.5 million and
transaction related costs of $1.8 million.
Cash flow used in investing activities during the year comprised
capital expenditure of $4.8 million (FY2011: $12.5 million), the
majority of which was spent in the second half of the year since
Nighthawk became operator, and $8.5 million as cash consideration
for the acquisition of the additional 25% working interest in the
Jolly Ranch Project.
Cash flow from financing activities during the year totaled
$26.1 million before expenses (FY2011: $8.3 million) and comprised
two placings and an open offer of, in aggregate, 268,595,918 new
ordinary shares at 2.5p per share raising $10.5 million and, in
addition, an issue of GBP10.0 million unsecured zero coupon
convertible loan notes raising $15.6 million.
At 30 June 2012, the Group held cash balances of $9.2 million
(FY2011: $2.0 million).
Accounting Policies and Restatements
The audited results for the year ended 30 June 2012 include a
change in accounting policy for early stage production revenue.
Prior to 1 July 2011, the Group accounted for all revenue at 100%
margin. However, this approach was not in line with the accounting
treatment of comparable oil and gas companies. The change in
accounting policy means that revenues from wells that are
determined to be pre-commercial are credited to turnover. An amount
based on such revenues is both charged to cost of sales and
credited against appraisal costs so as to record nil-margin on such
production, with the losses effectively capitalized. Prior
accounting periods have been restated for this change in accounting
policy. The change has no impact on the Group statement of cash
flows.
Additionally, a significant proportion of the investment held in
the parent company balance sheet in relation to the US subsidiaries
has been reclassified to reflect the substance of the transactions
as intercompany loans.
Change of accounting period
In order to bring the Group more in line with other oil and gas
companies and in light of the fact that most US companies and the
US Internal Revenue Service account to a calendar year end, the
Board intends to change Nighthawk's accounting period end from 30
June to 31 December. Accordingly, Nighthawk's next audited results
will be for the six-month period to 31 December 2012 and will
follow annually thereafter.
Shareholders' equity
As at 30 June 2012 there were 748,935,420 ordinary shares of
0.25 pence each in issue.
Additionally, a total of up to 546,500,000 new ordinary shares
may be issued pursuant to the exercise of share options, warrants
or convertible loan notes.
Cautionary Statement
This announcement contains certain judgments/assumptions and
forward looking statements and assumptions that are subject to the
normal risks and uncertainties associated with the exploration,
development and production of hydrocarbons. Whilst the Directors
believe that expectations reflected throughout this announcement
are reasonable based on the information available at the time of
approval of this announcement, actual outcomes and results may be
materially different due to factors either beyond the Group's
reasonable control or within the Group's control but, for example,
following a change in project plans or corporate strategy.
Therefore absolute reliance should not be placed on these
judgments/assumptions and forward looking statements.
Richard Swindells
Chief Financial Officer
Consolidated Income Statement
for the year ended 30 June 2012
RESTATED
Notes 2012 2011
US$ US$
Continuing operations:
Revenue 3 972,631 912,248
Cost of sales (1,229,063) (779,726)
Gross profit (256,432) 132,522
Administrative expenses (4,636,184) (4,025,582)
Transaction costs (1,751,075) -
Exceptional administrative expenses 5 (27,321,724) (25,231,036)
Total administrative expenses (33,708,983) (29,256,618)
Operating loss (33,965,415) (29,124,096)
Finance income 69,877 68,015
Finance costs 4 (1,969,132) (251,847)
Profit/(Loss) on sale of available-for-sale investments - 186,324
Loss before taxation (35,864,670) (29,121,604)
Taxation (4,156) (16,599)
Loss for the financial year from continuing operations (35,868,826) (29,138,203)
Discontinued operations:
Loss for the financial year from discontinued operations 11 - (42,535,789)
Loss for the financial year (35,868,826) (71,673,992)
Attributable to:
Equity shareholders of the Company (35,868,826) (71,673,992)
Loss per share from continuing and discontinued operations
Basic and diluted loss per share (cents) 6 (6.43) (20.16)
Loss per share from continuing operations
Basic and diluted loss per share (cents) 6 (6.43) (8.20)
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2012
RESTATED
2012 2011
US$ US$
Loss for the financial year (35,868,826) (71,673,992)
Other comprehensive income
Fair value (loss) / gain on available-for-sale financial assets - (95,270)
Foreign exchange gains / (losses) on consolidation 51,302 290,151
Other comprehensive income for the financial year, net of tax 51,302 194,881
Total comprehensive income for the financial year (35,817,524) (71,479,111)
Consolidated Balance Sheet
as at 30 June 2012
Notes 2012 2011 2010
RESTATED RESTATED
Assets US$ US$ US$
Non-current assets
Property, plant and equipment 7 18,379,962 18,864,573 24,575,543
Intangible assets 8 18,260,664 26,680,170 79,747,166
Available-for-sale financial assets - 1,620,592
36,640,626 45,544,743 105,943,301
Current assets
Inventory 499,049 - -
Trade and other receivables 1,208,064 287,053 701,169
Cash and cash equivalents 9,152,355 2,004,259 7,217,285
-------------- ------------- ------------
10,859,468 2,291,312 7,918,454
Total Assets 47,500,094 47,836,055 113,861,755
Equity and liabilities
Capital and reserves attributable to the Company's equity
shareholders
Share capital 3,127,524 1,675,167 1,480,731
Share premium account 140,123,474 127,360,122 119,252,765
Foreign exchange translation reserve (3,604,661) (3,655,963) (3,946,114)
Retained earnings (115,361,100) (79,492,274) (7,723,012)
Share-based payment reserve 2,813,926 1,230,435 889,972
Equity option on convertible loans 4,497,641 - -
Merger reserve 180,533 180,533 180,533
Total equity 31,777,337 47,298,020 110,134,875
Current liabilities
Trade and other payables 937,253 538,035 3,726,880
Non-current liabilities
Convertible loan notes 11,785,504 - -
Provisions 3,000,000 - -
Total non-current liabilities 14,785,504 - -
Total liabilities 15,722,757 538,035 3,726,880
Total equity and liabilities 47,500,094 47,836,055 113,861,755
Consolidated Statement of Changes in Equity
for the year ended 30 June 2012
Foreign Share Equity
Share exchange based option on
Share premium translation Retained payment convertible Merger
capital account reserve earnings reserve loans reserve Total
US$ US$ US$ US$ US$ US$ US$ US$
Balance at 1 July
2011 1,675,167 127,360,122 (3,655,963) (79,492,274) 1,230,435 - 180,533 47,298,020
For the year ended
30 June 2012
Loss for the year - - - (35,868,826) - - - (35,868,826)
Other comprehensive income:
Foreign exchange
gain on
consolidation - - 51,302 - - - - 51,302
---------- ------------ ------------ -------------- ---------- ------------ -------- -------------
Total comprehensive
income - - 51,302 (35,868,826) - - - (35,817,524)
Issue of
convertible loans - - - - - 4,497,641 - 4,497,641
Share-based
payments - - - - 1,583,491 - ` 1,583,491
Issue of share
capital 1,452,357 13,071,209 - - - - - 14,523,566
Issue costs - (307,857) - - - - - (307,857)
Balance at 30 June
2012 3,127,524 140,123,474 (3,604,661) (115,361,100) 2,813,926 4,497,641 180,533 31,777,337
---------- ------------ ------------ -------------- ---------- ------------ -------- -------------
RESTATED
Balance at 1 July
2010 1,480,731 119,252,765 (3,946,114) (7,723,012) 889,972 - 180,533 110,134,875
For the year ended
30 June 2011
Loss for the year - - - (71,673,992) - - - (71,673,992)
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 (71,769,262) - - - (71,479,111)
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) (79,492,274) 1,230,435 - 180,533 47,298,020
---------- ------------ ------------ -------------- ---------- ------------ -------- -------------
Consolidated Cash Flow Statement
for the year ended 30 June 2012
Notes 2012 2011
US$ US$
Cash outflow from operating activities 10 (5,641,173) (3,022,507)
Cash flow from investing activities
Purchase of intangible assets (756,990) (10,412,110)
Purchase of property, plant and equipment (4,020,472) (2,122,914)
Acquisition of business (8,500,000) -
Proceeds on disposal of property, plant and equipment 40,210 -
Proceeds on disposal of financial assets - 1,758,935
Dividend received - 30,131
Interest received 69,877 37,884
Net cash used in investing activities (13,167,375) (10,708,074)
Cash flow from financing activities
Proceeds on issue of new shares 10,545,061 8,301,794
Expenses of new share issue (307,857) -
Issue of convertible loan notes 15,604,889 -
Net cash generated from financing activities 25,842,093 8,301,794
Net (decrease)/increase in cash and cash equivalents 7,033,545 (5,428,787)
Cash and cash equivalents at beginning of financial year 2,004,259 7,217,285
Effects of exchange rate changes 114,551 215,761
Cash and cash equivalents at end of financial year 9,152,355 2,004,259
Notes
1. Basis of Accounting and Presentation of Financial Information
Whilst the financial information included in this announcement
has been prepared in accordance with International Financial
Reporting Standards (IFRS), it does not contain sufficient
information to comply with IFRS. Full financial statements that
comply with IFRS will be available to be downloaded from the
Company's website at www.nighthawkenergy.com in shortly.
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the year ended 30
June 2012 or the year ended 30 June 2011. The financial information
for the year ended 30 June 2012 and the year ended 30 June 2011 are
extracted from the statutory accounts of Nighthawk Energy plc. The
Company's auditors reported on those accounts and their report was
unqualified.
The Annual Report for the year ended 30 June 2012, including the
auditors' report, and the notice of Annual General Meeting will be
posted to shareholders, as applicable, shortly and will be
available from the Company's website at www.nighthawkenergy.com
2. Change in accounting policy and prior period restatement - Revenue recognition
Following a review of the Group's accounting policies, the
accounting treatment of test production revenue has been changed to
make it more comparable with other oil & gas companies.
Previously test production revenue was recognised at a profit
with the associated costs included within intangible exploration
costs.
Under the revised policy, test production revenue is recognised
at a zero margin and a corresponding deduction made against
intangible exploration costs. The impact of this change in
accounting policy is detailed below:
Loss before taxation Assets
US$ US$
Year to 30 June 2011 (751,186) (751,186)
Periods ending on or before 30
June 2010 (837,322) (837,322)
-------------------- -----------
TOTAL (1,588,508) (1,588,508)
There is no impact on the Group statement of Cash flows.
3. Revenue
An analysis of the Group's revenue for the year (excluding
finance income) from both continuing and discontinued operations is
as follows:
2012 2011
US$ US$
Continuing operations
Sales revenue 759,130 866,749
Charges to Joint Venture partner 118,166 -
Royalty income 95,335 45,499
972,631 912,248
Discontinued operations
Sales revenue - 543,639
972,631 1,455,887
4. Finance Costs
2012 2011
US$ US$
Share warrants issued under Darwin agreement - 251,847
Share warrants issued with convertible loan notes 1,288,814 -
Imputed interest on convertible loan notes 678,256 -
Bank charges 2,084 -
1,969,154 251,847
5. Exceptional administrative expenses
2012 2011
US$ US$
Impairment informed by fair value of Jolly Ranch 25% acquisition 14,086,435 -
Impairment resulting from Operating Review 12,962,244 -
Impairment of Cisco project - 23,223,394
Cisco expenses post-impairment 273,045 -
Impairment of Cliffs project - 2,007,642
27,321,724 25,231,036
As a result of the acquisition on 23 January 2012 of an
additional 25% interest in, and operatorship of, the Jolly Ranch
project, an impairment was recognised in the results to revalue the
Group's existing 50% interest down to the valuation informed by the
fair value of the acquisition.
At the end of the financial year, an operating review was
carried out which informed a further reduction in the value of the
project assets and an additional impairment was recognised as a
result. Each well was modelled on current production using expected
decline rates at a long term oil price of US$ 80/boe and a discount
rate of 10%.
6. 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.
Basic loss per share
RESTATED
2012 2011
US cents US cents
Loss per share from continuing operations (6.43) (8.20)
Loss per share from discontinued operations - (11.96)
Total basic loss per share (6.43) (20.16)
The earnings and weighted average number of ordinary shares used
in the calculation of basic earnings per share are as follows:
RESTATED
2012 2011
US$ US$
Earnings used in the calculation of total basic and diluted earnings per
share (35,868,826) (71,673,992)
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 (35,868,826) (29,138,203)
2012 2011
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per
share 557,524,288 355,560,678
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 203,008,880 6,710,274
Weighted average number of ordinary shares for the purposes of diluted earnings per
share 760,533,168 362,270,952
7. Property, Plant and Equipment
Leasehold Plant and Office Production
land equipment equipment assets Total
US$ US$ US$ US$ US$
Cost
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
Additions 1,766,975 326,277 151,912 6,041,958 8,287,123
Transfers from intangible assets (126,004) (1,385,501) - 2,514,218 1,002,713
Disposals - - (40,210) - (40,210)
Foreign exchange variance - - (1,508) - (1,508)
At 30 June 2012 31,159,457 7,707,454 169,307 8,995,962 48,032,180
Accumulated Depreciation
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
Charge 2,923,929 309,118 9,819 494,250 3,737,116
Disposals - - - -
Impairment 733,345 1,362,873 - 3,900,646 5,996,864
Foreign exchange variance - - (1,251) - (1,251)
At 30 June 2012 21,031,463 4,162,522 57,586 4,400,647 29,652,218
Net book value
At 30 June 2012 10,127,994 3,544,932 111,721 4,595,315 18,379,962
At 30 June 2011 12,144,296 6,276,147 10,095 434,035 18,864,573
As a result of the acquisition on 23 January 2012 of an
additional 25% interest in, and operatorship of, the Jolly Ranch
project, an impairment was recognised in the results to revalue the
Group's existing 50% interest down to the valuation informed by the
fair value of the acquisition.
At the end of the financial year, an operating review was
carried out which informed a further reduction in the value of the
project assets and an additional impairment was recognised as a
result as disclosed in note 5.
8. Intangible Assets
Exploration Royalty Total
costs interests
US$ US$ US$
Cost
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
Additions 18,420,259 - 18,420,259
Transfers (5,529,840) - (5,529,840)
At 30 June 2012 56,291,561 1,153,391 57,444,952
Amortisation and impairment
At 30 June 2010 RESTATED 1,227,563 18,340 1,245,903
Charge - 4,035 4,035
Contribution to match revenue 751,186 - 751,186
Impairment 15,873,238 - 15,873,238
At 30 June 2011 RESTATED 17,851,987 22,375 17,874,362
Charge - 151,035 151,035
Contribution to match revenue 107,075 - 107,075
Impairment 21,051,816 - 21,051,816
At 30 June 2012 39,010,879 173,410 39,184,289
Net book value
At 30 June 2012 17,280,682 979,981 18,260,664
At 30 June 2011 RESTATED 25,549,154 1,131,016 26,680,170
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.
As a result of the acquisition on 23 January 2012 of an
additional 25% interest in, and operatorship of, the Jolly Ranch
project, an impairment was recognised in the results to revalue the
Group's existing 50% interest down to the valuation informed by the
fair value of the acquisition.
At the end of the financial year, an operating review was
carried out which informed a further reduction in the value of the
project assets and an additional impairment was recognised as a
result. These impairments are disclosed in note 5.
At the balance sheet date there were no further indications of
impairment in respect of any of the projects.
9. Acquisition of Business Interests
On 23 January 2012, the Group acquired from Running Foxes
Petroleum an additional 25% interest in, and operatorship of, the
Jolly Ranch project.
Fair value of net assets acquired 2012
US$
Non-current assets:
* Intangible assets 15,223,637
* Property, plant and equipment 67,898
15,291,535
Current assets:
* Inventory 202,760
Net assets acquired 15,494,295
Consideration 2012
US$
Cash 8,500,000
Shares in the Company 3,978,505
Share Warrants in the Company 15,790
Contingent Consideration 3,000,000
15,494,295
Under the Contingent Consideration arrangement, the Group is
required to pay additional sums to Running Foxes Petroleum up to a
maximum of US$5.0 million in the event of a sale or all or part of
the Jolly Ranch project within 5 years from the acquisition
date.
A probability calculation has been performed by the Group to
estimate the likely consideration payable under this arrangement
and an appropriate provision has been made.
10. Cash Flow from Operating Activities
RESTATED
2012 2011
US$ US$
Loss before tax (35,864,670) (71,657,393)
Tax paid (4,156) (16,599)
Finance income (69,877) (68,015)
Finance costs 1,969,131 251,847
Share-based payment 276,825 88,617
(Profit)/loss on disposal of available-for-sale investments - (186,325)
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 21,051,816 15,873,238
Impairment of property, plant and equipment 5,996,864 9,288,838
Depreciation 533,195 27,874
Amortisation 258,110 755,221
Net foreign exchange (gain)/loss (62,992) 25,582
(5,915,754) (3,397,771)
Changes in working capital
(Increase) / decrease in inventory (296,289) -
(Increase) / decrease in trade and other receivables (189,254) 414,116
Increase / (decrease) in trade and other payables 760,124 (38,852)
Net cash outflow from operating activities (5,641,173) (3,022,507)
11. Prior year disposal of business interests and loss from
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 $294,000.
Analysis of profit for the year from discontinued operations
2012 2011
US$ US$
Sales - 543,639
------
Profit before tax - 543,639
------
Loss on disposal of Revere group of projects
(see note 15) - (43,079,428)
Loss for the year from discontinued operations - (42,535,789)
Cash flows from discontinued operations 2012 2011
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)
Book value of net assets sold 2012 2011
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 from disposal - 294,000
Loss on disposal - 43,079,428
Consideration on disposal 2012 2011
US$ US$
Royalty asset received in consideration - 294,000
- End-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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