TIDMRKH
RNS Number : 0766B
Rockhopper Exploration plc
29 September 2022
29 September 2022
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Half-Year Results for the Six Months Ended 30 June 2022
Rockhopper Exploration plc (AIM: RKH), the oil and gas company
with key interests in the North Falkland Basin, announces its
unaudited results for the six months ended 30 June 2022 ("H1
2022").
Year to date highlights
Sea Lion
-- Completion of transaction for Harbour Energy plc ("Harbour")
to exit and Navitas Petroleum LP (through its UK subsidiary)
"Navitas" to enter the North Falkland Basin with a 65% stake in,
and operatorship of, all of Rockhopper's North Falkland Basin
licences
-- Rockhopper retains material 35% working interest in North Falkland Basin licences
-- Extension of all North Falkland Basin licences to 1 November 2024
-- Improved alignment in the Sea Lion Joint Venture, with
Rockhopper benefitting from an attractive funding package from
Navitas
Ombrina Mare
-- Successful arbitration outcome with unanimous decision in Rockhopper's favour
-- Compensation of EUR190 million
-- Interest at EURIBOR + 4% accruing annually from 29 January 2016
-- Temporary four-month pause in interest from date of award
-- Italy has 120 days to apply for an annulment of the award,
which can only be annulled in limited circumstances
Corporate and financial
-- Successful capital raise of US$10.4 million by way of placing and open offer
-- Warrants issued to provide additional upside to holders and
future potential balance sheet strength
-- Continued focus on costs
Outlook
-- Lower upfront cost Sea Lion development being worked up and financing sought
-- Arbitration award, after collection, will make a material
contribution towards Rockhopper's share of Sea Lion development
costs
-- Sea Lion FID targeted 2023/24
Keith Lough, Chairman of Rockhopper, commented:
"Following completion of our transaction with Navitas, the
capital raise, and the successful arbitration outcome, we stand on
the cusp of what we believe will be the most exciting period at
Rockhopper for some years, culminating, we hope, in the development
of a material scale energy resource in a British Overseas
Territory.
We have a committed and capable partner with proven financing
capability, which has recruited an exceptional and highly
experienced development engineer to run the Sea Lion project.
Amidst continued global uncertainty and material domestic
pressures, we continue to believe a responsibly developed Sea Lion
oilfield could provide both a meaningful source of financial
benefit to the Falkland Islands, and a strategically and
financially important resource to the United Kingdom.
Furthermore, Sea Lion is not a one-off project. We have very
material low-risk exploration upside, providing potential
additional benefits to all stakeholders.
We thank our stakeholders and the Falkland Islands Government
for their continued support as we strive to reach project sanction
and unlock material value for all involved."
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive Officer
Tel. +44 (0) 20 7390 0234 (via Vigo Consulting)
Canaccord Genuity Limited (NOMAD and Joint Broker)
Henry Fitzgerald-O'Connor/Gordon Hamilton
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton/Georgia Langoulant
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons/Kendall Hill
Tel. +44 (0) 20 7390 0234
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Rockhopper's strategy is to create value for all our
stakeholders through the safe and responsible development of our
assets in the North Falkland Basin. The Company has been operating
offshore the Falkland Islands since 2004 and discovered the Sea
Lion oilfield in 2010. We are a long-term partner of the Falkland
Islands Government ("FIG"), and our aim has always been to support
the rights of the Falkland Islanders to develop their natural
resources.
Sea Lion development
We believe that the Sea Lion oilfield represents a material
strategic resource both for the Falkland Islands and the wider
United Kingdom. With more than 500 million barrels of recoverable
oil in the Rockhopper ERC audit and some 700 million barrels in the
Navitas NSAI CPR, we believe this field alone is larger than Cambo
and Rosebank combined.
Having spent many years as 100% owner and operator exploring and
appraising the field, we have an unrivalled depth of knowledge of
both Sea Lion and operating in the Falklands. In fact, we have
carried out more oil and gas operations in the Falklands than any
other company, all with an exemplary HSE record and strong
operational performance. Our track record in the Sea Lion area
includes eight successful wells from ten, which we believe stands
in comparison to many significantly larger companies in the
industry and provides encouragement for the potential for
additional discoveries in the region.
The years spent working with Premier Oil (now Harbour) in our
Joint Venture have not been wasted. Hundreds of millions of dollars
and tens of thousands of hours have been spent engineering Sea Lion
to a point where we are entirely confident that a responsible and
high-quality project is deliverable using proven industry
technology.
The addition of Navitas, with its exceptional recent track
record of financing offshore developments others believed would
never come to fruition, combined with a favourable oil price
outlook and increased focus on security of energy supply, brings
the potential value of the Sea Lion field into sharp focus.
Premier previously confirmed that the field could produce in
excess of 120,000 barrels per day over two phases, representing a
potential increase of between 10% and 15% in UKCS oil production
from Sea Lion alone. Many low-risk near field prospects have been
identified and the potentially large Isobel / Elaine discovery
approximately 30km to the south of Sea Lion provides additional
long-term potential. Shell's well 14/15-1, drilled in 1998,
encountered a large gas column in a low-quality reservoir. Although
not without risk, we have always believed that the potential exists
for a multi TCF gasfield in the Falkland Islands, with associated
strategic implications for the Falklands and the United Kingdom.
Significant UK content was planned by Premier in the development
potentially bringing billions of dollars of wider UK benefits.
We look forward to working with Navitas, with whom we have
already developed a strong relationship, as they build on all our
existing work and knowledge to engineer an appropriate development
concept and put together a financing package which could allow FID
to be taken at Sea Lion during late 2023 or 2024.
Ombrina Mare arbitration
The successful outcome of the Ombrina Mare arbitration is a
vindication of our belief in the strength of our case, which we
have articulated to shareholders since we commenced the arbitration
process back in 2017. The Panel unanimously decided in Rockhopper's
favour and awarded what we believe to be a fair and equitable
compensation for the loss of our asset which, at current oil
prices, would be enormously valuable. Compensation of some EUR190
million with appropriate interest has been awarded.
Under the relevant rules, Italy has 120 days to apply for an
annulment of the award; such awards can only be annulled in limited
circumstances. At the date of this report, we have not heard from
the Italian Republic regarding its intentions. For our part, we
have written requesting immediate payment and reminding Italy not
only of its obligation to settle the full amount, but of our rights
to pursue all available remedies against Italy and its
representatives in any forum without any further notice should they
fail to fulfil their obligations to us.
We hope and believe Italy will act in accordance with their
obligations but we will have no hesitation in seeking to enforce
this award in multiple jurisdictions should they fail to do so. The
entire situation is deeply regrettable as, had we been allowed to
develop the asset in accordance with Italy's own relevant
legislation, not only would we now be producing at high oil prices,
but, perhaps more importantly, Italy would have benefitted from
material local well-paid employment along with taxes and a domestic
source of oil at a challenging time for many. It should be noted
that Italy continues to produce material volumes of hydrocarbons
within 12 miles of its coastline.
Costs associated with the arbitration proceedings were funded on
a non-recourse ("no win - no fee") basis from a specialist
arbitration funder. After payments due to the arbitration funder
and success fees due to the Group's legal representation,
Rockhopper expects to retain approximately 80% of the award
(assuming full recovery of the award). Further analysis is required
to establish the tax treatment on any payments related to the
award.
Corporate Matters
We were delighted to receive the support of our existing and new
shareholders in the US$10.4 million capital raise completed in the
early part of the summer. We undertook the additional cost and
effort required to proceed with an open offer to ensure that
existing individual shareholders were given the opportunity to
participate in the capital raise on identical terms as
institutional investors. We offered those participating in the
capital raise warrants, giving them the right to purchase shares at
9p to be exercised at any point until 31 December 2023, providing
them with additional potential upside and Rockhopper a stronger
balance sheet should those warrants be exercised.
During what has been a difficult and challenging time for the
industry and for our business, we are delighted to have found what
we believe is the right way to balance a very significant cost
reduction with retaining the key knowledge we have accumulated in
the Falklands. Recurring G&A is now down over 70% when compared
to 2014, and we believe some further savings are possible as we
continue to run the business in the best interests of all
stakeholders.
Environmental, Social and Governance
ESG, and Corporate Responsibility more generally, continues to
be a key focus for Rockhopper.
As an oil and gas exploration and production business our role
is to discover and produce hydrocarbons in an environmentally
responsible manner.
As noted previously, the Falkland Islands Government established
an independent environment trust to receive and administer future
off-setting payments from the Sea Lion project and distribute those
funds for activities aimed at ensuring a positive environmental
legacy in the Falkland Islands.
Once FID on Sea Lion has been achieved, the Company commits to
defining measures, reporting transparently, and mitigating our own
emissions as far as practicable.
Outlook
Sea Lion is an oilfield with the scale and potential to create
very material value for Rockhopper, its partners, and the Falkland
Islands as a whole, in addition to providing the UK with a secure
and significant source of supply for years to come.
Since the start of this year, we have achieved three major
milestones which, when taken as a whole, puts the Company in the
best shape we have been in for many years.
We thank the Falkland Islands Government for its continued
support and we will continue to work closely with all stakeholders
to maximise the chance of unlocking the value within the project,
long-awaited by all stakeholders.
Keith Lough Sam Moody
Chairman Chief Executive
Officer
FINANCIAL REVIEW
Overview
From a finance perspective, the most significant events in 2022
to date are:
-- Detailed transaction terms agreed with Harbour and Navitas in
relation to the Sea Lion project (the "Transaction") - completed
post period end in September 2022
-- Successful fundraising through Placing and Subscription
raising net proceeds of US$6.3 million in June 2022
-- Additional US$2.8 million net proceeds raised post period end through Open Offer in July 2022
-- Successful ICSID arbitration award in respect of Ombrina
Mare. Compensation of EUR190 million plus interest at EURIBOR + 4%,
compounded annually from 29 January 2016 until time of payment
With the Transaction completing post period end the arrangements
with Navitas ensure that Rockhopper is funded going forward for all
pre-sanction costs related to the Sea Lion phase one development
(other than licence fees and taxes). This, combined with the
fundraising, materially strengthens the Group's financial position
in the short and medium term and significantly enhances the
prospects for a successful project financing for Sea Lion.
The arbitration award was made in September 2022 and, as such,
has no impact on the results for the period to 30 June 2022.
Assuming full recovery of the award, after payments due to the
arbitration funder and success fees due to the Group's legal
representation, the Group expects to retain approximately 80%
pre-tax. Further analysis has begun to establish the tax treatment
on any payments received.
Results for the period
For the period ended 30 June 2022, the Group reported revenues
of US$0.5 million (H1 2021: US$0.3 million) and a loss after tax of
US$0.7 million (H1 2021: loss of US$3.3 million). The reduction in
loss after tax was driven mainly by net foreign exchange gains on
GBP denominated balances. In particular, the weakening of the GBP
against the USD resulted in a US$4.4 million gain on the current
carrying value of the tax liability with FIG.
Revenue and cost of sales
The Group's revenues of US$0.5 million (H1 2021: US$0.3 million)
in H1 2022 relate entirely to the sale of natural gas in the
Greater Mediterranean (specifically Italy) region. Gas was sold at
a price linked to the Italian "PSV" (Virtual Exchange Point) gas
marker price.
Revenue and cost of sales are not expected to be material going
forward.
Operating costs
The Group continues to manage corporate costs and has achieved
significant reductions in recurring general and administrative
("G&A") costs over the last five years. The full benefit of
these cost reduction initiatives was realised last year resulting
in a relatively stable G&A cost of US$1.5 million in H1 2022
(H1 2021: US$1.6 million).
The foreign exchange gain in the period of US$3.4 million (2021:
loss of US$0.3 million) is mainly in relation to the tax balance
arising from the Group's farm-out to Premier in 2012 offset by a
loss on GBP denominated assets, such as cash and debtors. The
finance expense in the year of US$2.0 million (2021: US$nil) also
relates, in the main, to adjustments in relation to this tax
balance.
Cash movements and capital expenditure
At 30 June 2022, the Group had cash of US$9.1 million (31
December 2021: US$4.8 million).
Cash movements during the period:
US$m
----------------------------------------- ------
Opening cash balance (31 December 2021) 4.8
Revenues 0.5
Cost of sales (0.8)
Falkland Islands (0.9)
Administrative expenses (1.5)
Net proceeds of fundraising 6.3
Miscellaneous 0.7
Closing cash balance (30 June 2022) 9.1
----------------------------------------- ------
Miscellaneous includes foreign exchange and movements in working
capital during the period.
Oil and gas assets
The Sea Lion development remains central to the Group's plans
and we are excited at the prospect of bringing in a new industry
partner, Navitas, especially given their experience in financing
projects of a similar scale to Sea Lion.
As part of the Transaction to bring Navitas onto the licences we
have been granted a two-year licence extension from FIG. This
should allow the newly formed joint venture to leverage the
extensive engineering work carried out to date and pursue a lower
upfront cost development.
The Transaction aligns working interests across all the North
Falkland Basin petroleum licences - Rockhopper 35% / Navitas 65%.
Work between the Group and Navitas had already begun pre completion
and will continue with the aim to jointly develop and agree a
technical and financing plan for the Sea Lion project. Current work
targets delivering a project that achieves first oil on a lower
cost and expedited basis post sanction.
Navitas will provide loan funding to the Group to cover the
majority of its share of Sea Lion phase one related costs from
Transaction completion up to Final Investment Decision ("FID")
through a loan from Navitas with interest charged at 8% per annum
(the "Pre-FID Loan"). Subject to a positive FID, Navitas will
provide an interest free loan to fund two-thirds of the Group's
share of Sea Lion phase one development costs (for any costs not
met by third party debt financing).
Certain costs, such as licence costs, are excluded in both
instances. Funds drawn under the loans will be repaid from 85% of
Rockhopper's working interest share of free cash flow.
Taxation
On 8 April 2015, the Group agreed binding documentation ("Tax
Settlement Deed") with FIG 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 and the Group receiving
the full Exploration Carry from Premier during the 2015/16 drilling
campaign, the outstanding tax liability is confirmed at GBP59.6
million. This 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.
The outstanding tax liability is classified as non-current and
is discounted to a period-end value of US$40.7 million (31 December
2021 US$43.2 million).
Full details of the provisions and undertakings of the Tax
Settlement Deed are disclosed in note 7 of these consolidated
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).
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.
At 31 August 2022, the Group had cash resources of US$10.9
million (unaudited). While there are still some Transaction costs
and the Group's share of Harbour wind down costs to come, going
forward projected recurring expenditure is currently expected to be
around US$4.0 million per year.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development.
Following the completion of the Transaction, Navitas will provide
loan funding to the Group for its share of all Sea Lion
pre-sanction costs (other than licence fees and taxes). Based on
previous correspondence with FIG, management does not believe the
Transaction completion would constitute a substantial disposal and
therefore will not accelerate the deferred CGT liability related to
the 2012 farm-out.
Given the above, the Directors believe that the Group is
sufficiently funded and that the use of the going concern basis is
appropriate.
Principal risk and uncertainties
A detailed review of the potential risks and uncertainties which
could impact the Group are outlined in the Strategic Report of the
Group's annual consolidated financial statements. The Group
identified its key risks at the end of 2021 as being:
-- oil price volatility;
-- access to capital;
-- joint venture partner alignment; and
-- failure of joint venture partners to secure the requisite
funding to allow a Sea Lion Final Investment Decision.
In 2020, the environmental impact of oil and gas extraction
(e.g., climate change) was 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 Group and the
Sea Lion project.
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
------------------------------------------- ------ ----------- -----------
Revenue 2 523 347
------------------------------------------- ------ ----------- -----------
Other cost of sales (803) (571)
Depreciation and impairment of oil
and gas assets - (440)
Total cost of sales (803) (1,011)
------------------------------------------- ------ ----------- -----------
Gross loss (280) (664)
Exploration and evaluation expenses - (131)
Administrative expenses (1,461) (1,578)
Charge for share based payments (314) (637)
Foreign exchange movement 3,356 (262)
------------------------------------------- ------ ----------- -----------
Results from operating activities and
other income 1,301 (3,272)
Finance income 2 3
Finance expense (2,052) (32)
------------------------------------------- ------ ----------- -----------
Loss before tax (749) (3,301)
Tax 3 - -
------------------------------------------- ------ ----------- -----------
Loss for the period attributable to
the equity shareholders of the parent
company (749) (3,301)
------------------------------------------- ------ ----------- -----------
Loss per share attributable to the equity
shareholders of the parent company:
cents
------------------------------------------- --------------------------------
Basic 4 (0.16) (0.72)
Diluted 4 (0.16) (0.72)
------------------------------------------- ------ ----------- -----------
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
--------------------------------------- ------- ----------- -----------
Loss for the period (749) (3,301)
Exchange differences on translation
of foreign operations 2,350 394
------------------------------------------------ ----------- -----------
TOTAL COMPREHENSIVE PROFIT/(Loss) FOR
THE period 1,601 (2,907)
------------------------------------------------ ----------- -----------
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2022
As at As at
30 June 31 December
2022 2021
Unaudited Audited
----------------------------------------- ------ ---------- ------------
Notes $'000 $'000
NON CURRENT Assets
Exploration and evaluation assets 5 250,354 249,583
Property, plant and equipment 6 132 201
Finance lease receivable 554 730
CURRENT Assets
Other receivables 2,204 2,074
Finance lease receivable 259 288
Restricted cash 521 579
Cash and cash equivalents 9,082 4,822
Total assets 263,106 258,277
----------------------------------------- ------ ---------- ------------
CURRENT Liabilities
Other payables 3,698 2,000
Lease liability 235 286
NON-CURRENT Liabilities
Lease liability 552 842
Tax payable 7 40,701 43,204
Provisions 17,317 18,287
Deferred tax liability 39,137 39,137
----------------------------------------- ------ ---------- ------------
Total liabilities 101,640 103,756
----------------------------------------- ------ ---------- ------------
Equity
Share capital 8,223 7,218
Share premium 3,742 3,622
Share based remuneration 3,261 4,327
Owns shares held in trust (3,342) (3,342)
Merger reserve 78,237 74,332
Foreign currency translation reserve (7,332) (9,682)
Special reserve 175,281 175,281
Retained losses (96,604) (97,235)
----------------------------------------- ------ ---------- ------------
Attributable to the equity shareholders
of the company 161,466 154,521
----------------------------------------- ------ ---------- ------------
Total liabilities and equity 263,106 258,277
----------------------------------------- ------ ---------- ------------
These condensed consolidated interim financial statements were
approved by the directors and authorised for issue on 28 September
2022 and are signed on their behalf by:
Samuel Moody
Chief Executive Officer
CONDENSED CONSOLIDATED statement of changes in equity
for the six months ended 30 June 2022
Foreign
Shares currency
Share Share Share held Merger translation Special Retained Total
based
capital Premium remuneration in trust reserve reserve reserve losses Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
Balance
at 31 December
2021 7,218 3,622 4,327 (3,342) 74,332 (9,682) 175,281 (97,235) 154,521
Loss for
the year - - - - - - - (749) (749)
Other
comprehensive
profit
for the
year - - - - - 2,350 - - 2,350
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
Total
comprehensive
loss for
the year - - - - - 2,350 - (749) 1,601
Shares
issued
in placing 1,005 120 - - 3,905 - - - 5,030
Share based
payments - - 314 - - - - - 314
Other transfers - - (1,380) - - - - 1,380 -
Balance
at 30 June
2022 8,223 3,742 3,261 (3,342) 78,237 (7,332) 175,281 (96,604) 161,466
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
for the six months ended 30 June 2021
Foreign
Shares currency
Share Share Share held Merger translation Special Retained Total
based
capital Premium remuneration in reserve reserve reserve losses Equity
trust
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
Balance
at 31
December
2020 7,218 3,622 5,973 (3,342) 74,332 (10,571) 188,028 (104,693) 160,567
Loss for
the year - - - - - - - (3,301) (3,301)
Other
comprehensive
profit
for the
year - - - - - 394 - - 394
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
Total
comprehensive
loss for
the year - - - - - 394 - (3,301) (2,907)
Share based
payments - - 637 - - - - - 637
Other
transfers - - (2,261) - - - - 2,261 -
Balance
at 30 June
2021 7,218 3,622 4,349 (3,342) 74,332 (10,177) 188,028 (105,733) 158,297
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
------------------------------------------------ ------- ----------- -----------
Cash flows from operating activities
Net loss before tax (749) (3,301)
Adjustments to reconcile net losses
to cash:
Depreciation 64 654
Share based payment charge 314 637
Finance expense 2,050 31
Finance income (1) (1)
Foreign exchange (4,213) 208
--------------------------------------------------------- ----------- -----------
Operating cash flows before movements
in working capital (2,535) (1,772)
Changes in:
Other receivables 1,053 682
Payables 600 (728)
Cash utilised by operating activities (882) (1,815)
--------------------------------------------------------- ----------- -----------
Cash Flows from investing activities
Capitalised expenditure on exploration
and evaluation assets (877) (2,395)
Purchase of property, plant and equipment - (24)
Interest - 1
Cash flow from investing activities (877) (2,418)
--------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Net proceeds of share placing and subscription 6,280 -
Lease liability payments (133) (327)
Finance paid - (3)
--------------------------------------------------------- ----------- -----------
Cash flow from financing activities 6,147 (330)
--------------------------------------------------------- ----------- -----------
Currency translation differences relating
to cash and cash equivalents (128) (24)
Net cash outflow 4,388 (4,563)
Cash and cash equivalents brought forward 4,822 11,680
--------------------------------------------------------- ----------- -----------
Cash and cash equivalents carried forward 9,082 7,093
--------------------------------------------------------- ----------- -----------
Notes to the condensed CONSOLIDATED group financial
statements
for the six months ended 30 June 2022
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. T he Company's registered office address is Warner
House, 123 Castle Street, Salisbury, SP1 3TB.
The interim condensed consolidated financial statements for the
six months ended 30 June 2022 were authorised for issue in
accordance with a resolution of the directors on 28 September
2022.
1.2 Statement of compliance and basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2022 have been prepared in accordance with
IAS 34 Interim Financial Reporting.
The Group has prepared the financial statements on the basis
that it will continue to operate as a going concern. The Directors
consider that there are no material uncertainties that may cast
significant doubt over this assumption. They have formed a
judgement that there is a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future, and not less than 12 months from the end of the
reporting period.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual consolidated financial statements as at 31 December
2021.
1.3 New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2021, except for the adoption of new standards effective as of 1
January 2022. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective. Several amendments apply for the first time in 2022, but
do not have an impact on the interim condensed consolidated
financial statements of the Group.
1.4 Period end exchange rates
The period end rates of exchange actually used were:
30 June 2022 30 June 2021 31 December
2021
----------- ------------- ------------- ------------
GBP : US$ 1.21 1.38 1.35
EUR : US$ 1.05 1.19 1.13
----------- ------------- ------------- ------------
2 Revenue and segmental information
Six months ended 30 June 2022 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- --------- -------------- ---------- ----------
Revenue - 523 - 523
Cost of sales - (803) - (803)
-------------------------------- --------- -------------- ---------- ----------
Gross profit/(loss) - (280) - (280)
Administrative expenses - (332) (1,129) (1,461)
Charge for share based
payments - - (314) (314)
Foreign exchange movement 4,368 - (1,012) 3,356
-------------------------------- --------- -------------- ---------- ----------
Results from operating
activities and other income 4,368 (612) (2,455) (1,301)
Finance income - - 2 2
Finance expense (1,904) (140) (8) (2,052)
-------------------------------- --------- -------------- ---------- ----------
Loss before tax 2,464 (752) (2,461) (749)
Tax - - - -
-------------------------------- --------- -------------- ---------- ----------
Loss for period 2,464 (752) (2,461) (749)
-------------------------------- --------- -------------- ---------- ----------
Reporting segments assets 249,988 2,298 10,820 263,106
Reporting segments liabilities (83,878) (14,430) (3,332) (101,640)
There are no material additions to segment assets.
Six months ended 30 June 2021 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- --------- -------------- ---------- ---------
Revenue - 347 - 347
Cost of sales - (1,011) - (1,011)
-------------------------------- --------- -------------- ---------- ---------
Gross profit/(loss) - (664) - (664)
Exploration and evaluation
expenses - (4) (127) (131)
Administrative expenses - (412) (1,166) (1,578)
Charge for share based
payments - - (637) (637)
Foreign exchange movement (270) - 8 (262)
-------------------------------- --------- -------------- ---------- ---------
Results from operating
activities and other income (270) (1,080) (1,922) (3,272)
Finance income - 1 2 3
Finance expense - (3) (29) (32)
-------------------------------- --------- -------------- ---------- ---------
Loss before tax (270) (1,082) (1,949) (3,301)
Tax - - - -
-------------------------------- --------- -------------- ---------- ---------
Loss for period (270) (1,082) (1,949) (3,301)
-------------------------------- --------- -------------- ---------- ---------
Reporting segments assets 244,213 3,120 8,745 256,078
Reporting segments liabilities (80,110) (15,235) (2,436) (97,781)
There are no material additions to segment assets.
All of the Group's worldwide sales revenues of oil and gas
US$523 thousand (H1 2021: US$347 thousand) arose from contracts to
customers. Total revenue relates to revenue from one customer
(2021: one customer).
3 Taxation
Six months Six months
ended ended
30 June 30 June
2022 2021
$'000 $'000
Unaudited Unaudited
--------------------------------------- ----------- -----------
Current tax:
Overseas tax - -
Adjustment in respect of prior periods - -
--------------------------------------- ----------- -----------
Total current tax - -
--------------------------------------- ----------- -----------
Deferred tax:
Overseas tax - -
--------------------------------------- ----------- -----------
Total deferred tax - -
--------------------------------------- ----------- -----------
Tax on ordinary activities - -
--------------------------------------- ----------- -----------
4 Basic and diluted loss per share
Six months Six months
ended ended
30 June 30 June
2022 2021
Number Number
Unaudited Unaudited
-------------------------------------------- ------------ ------------
Shares in issue brought forward 458,482,117 458,482,117
Shares issued
- Issued 82,182,776 -
-------------------------------------------- ------------ ------------
Shares in issue carried forward 540,664,893 458,482,117
-------------------------------------------- ------------ ------------
Weighted average of Ordinary Shares 463,476,650 458,482,117
Shares held in Employee Benefit Trust (3,131,000) (3,131,000)
-------------------------------------------- ------------ ------------
Weighted average number of Ordinary
Shares for the purposes of basic earnings
per share 460,345,650 455,351,117
-------------------------------------------- ------------ ------------
$'000 $'000 $'000
-------------------------------------------- ------------ ------------
Net loss after tax for purposes of basic
and diluted earnings per share (749) (3,301)
-------------------------------------------- ------------ ------------
Earnings per share - cents
Basic (0.16) (0.72)
Diluted (0.16) (0.72)
-------------------------------------------- ------------ ------------
Shares issued in the period all relate to the Placing and
Subscription completed just prior to the period end. Numbers do not
reflect shares issued as part of the Open Offer as this complete
post period end. Details of the Open Offer are included in Note
8.
The weighted average number of Ordinary Shares takes into
account those shares which are treated as own shares held in trust.
As at the period end the Group had 3,131,000 Ordinary shares held
in an Employee Benefit Trust which have been purchased to settle
future exercises of options. As the Group is reporting a loss in
the year then 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
ended
30 June
2022
Number
Unaudited
--------------------------- -----------
Long term incentive plan 7,132,537
Share appreciation rights 277,162
Share options 23,694,588
Warrants 41,091,388
---------------------------- -----------
Warrants were issued as part of the Placing. Each Warrant gives
the holder the right to subscribe for one new Ordinary Share at a
price of 9 pence per Ordinary Share at any time from the issue of
the Warrants up to (and including) 5.00 p.m. on 31 December
2023.
Additional Warrants were issued after the period end as part of
the Open Offer. Details of the number of warrants issued post
period end are included in note 8. These warrants have the same
exercise terms as those issued as part of the Placing.
5 Intangible exploration and evaluation assets
During the period there have not been any material additions.
The balance carried forward is predominantly in relation to the Sea
Lion project.
At 30 June 2022, the Group reviewed its intangible
exploration/appraisal assets for indicators of impairment, with no
indicators of impairment being identified. No impairment tests were
therefore performed.
6 Property, plant and equipment
During the period there have not been any material additions.
The movement in the period mainly relates to depreciation.
7 Tax payable
Six months Year
ended ended
30 June 31 December
2022 2021
$'000 $'000
Unaudited Audited
------------------------- ----------- ------------
Current tax payable - -
Non current tax payable 40,701 43,204
-------------------------- ----------- ------------
40,701 43,204
------------------------- ----------- ------------
On the 8 April 2015, the Group agreed binding documentation
("Tax Settlement Deed") with FIG 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 is confirmed at GBP59.6 million and 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.
Management in reviewing the carrying value of the tax liability
have had to make key judgements about both the timing of the
liability and the discount rate applied. Management believe the
most likely timing of payment is in line with the first royalty
payment. As such the tax liability has been classified as a non
current liability and has been discounted. At the period end
payment is anticipated to be in 5.0 years (31 December 2021: 5.5
years) and a discount rate of 12% (31 December 2021: 12%) has been
applied.
As completion of the Transaction happened post period end, no
adjustments were made to the liability in relation to this. Based
on correspondence with FIG, Management does not believe that the
Transactions completion would constitute a substantial disposal
under the Tax Settlement Deed and therefore will not accelerate any
liability.
The movement in the balance in the period is made up of a
finance expense of US$1.8 million offset by a foreign exchange gain
of US$4.4 million.
8 Post balance sheet events
Results of Open Offer
On 5 July 2022, the Company announced it had received valid
acceptances from Qualifying Shareholders in respect of 39,652,160
Open Offer Units, representing a take-up of over 69 per cent. of
the 57,310,264 available Open Offer Units. Accordingly, the Open
Offer has raised total gross proceeds of approximately US$3.4
million (GBP2.8 million).
Each Open Offer Unit subscribed for comprises one Open Offer
Share and, for every two Open Offer Shares subscribed for, one
Warrant. Accordingly, 39,652,160 Open Offer Shares and 19,825,849
Open Offer Warrants will be issued pursuant to the Open Offer.
Successful arbitration outcome
On 24 August 2022, the Company provided the following update on
its ICSID arbitration with the Republic of Italy:
-- Successful arbitration award
-- Compensation of EUR190 million
-- Plus interest at EURIBOR + 4%, compounded annually from 29 January 2016 until time of payment
-- Temporary four-month pause in interest from date of award
The arbitration panel unanimously held that Italy had breached
its obligations under the Energy Charter Treaty entitling
Rockhopper to compensation. The award is final and binding on the
parties. Italy has 120 days to apply for an annulment of the award,
which can only be annulled in limited circumstances. Under a legal
agreement with the Falkland Island Government Rockhopper is
prevented from making any form of distribution.
Costs associated with the arbitration proceedings were funded on
a non-recourse ("no win - no fee") basis from a specialist
arbitration funder. After payments due to the arbitration funder
and success fees due to the Group's legal representation,
Rockhopper expects to retain approximately 80% of the award
(assuming full recovery of the award). Further analysis is required
to establish the tax treatment on any payments related to the
award.
Transaction
On 23 September 2022 the Company announced the transaction
enabling Harbour to exit and Navitas to enter the North Falkland
Basin with a 65% stake in, and operatorship of, all of Rockhopper's
North Falkland Basin licences, has completed.
9 Related party transactions
Pursuant to the Subscription, the following Directors subscribed
for the following Units comprising Subscription Shares and
Warrants
Director Number of Number of Resultant Percentage Number of
Ordinary Shares Subscription shareholding of Ordinary Warrants held
held before Shares being after the Shares at after the
the Subscription subscribed for Subscription 30 June 2022 Subscription
Keith Lough 228,515 428,570 657,085 0.12% 214,285
Alison Baker 70,000 142,856 212,856 0.04% 71,428
John Summers 318,329 142,856 461,185 0.09% 71,428
Sam Moody 2,570,729 1,428,570 3,999,299 0.74% 714,285
Total 2,142,852
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END
IR KVLFLLKLFBBB
(END) Dow Jones Newswires
September 29, 2022 02:00 ET (06:00 GMT)
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