REG - Rockhopper Exp plc - Final Results for the Year Ended 31 December 2021
30/05/2022 07:15
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RNS Number : 1648N Rockhopper Exploration plc 30 May 2022
30 May 2022
Rockhopper Exploration plc
("Rockhopper", the "Group" or the "Company")
Full-Year Results for the Year Ended 31 December 2021
Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and
production company with key interests in the North Falkland Basin, is pleased
to announce its audited results for the year ended 31 December 2021.
2021 Highlights
Sea Lion and the Falkland Islands
· Definitive legally binding documents announced and, post-period, signed
with Navitas Petroleum LP ("Navitas") and Harbour Energy plc ("Harbour")
o Navitas to acquire 65% interest in, and become Operator of, Rockhopper's
North Falkland Basin licences
o Harbour to exit the Falklands
· Navitas to fund all of Rockhopper's Phase 1 Sea Lion project costs*
pre FID via 8% loan
· Navitas to fund two-thirds of Rockhopper's Sea Lion Phase 1 project
costs* from FID to one year after first oil, or project completion if earlier,
via interest free loan (for any costs not met by third party debt financing)
· Loans repaid from 85% of Rockhopper's working interest share of Sea
Lion Phase1 project cash flows
(* This excludes licence costs, taxes, abandonment and decommissioning costs
(including the Temporary Dock Facility) and contract termination costs
incurred in connection with Harbour withdrawing)
Corporate and Financial
· Administrative expenses at lowest level since pre-Sea Lion discovery
- G&A US$3.3 million
· Cash of US$4.8 million as at 31 December 2021
Outlook
· Ombrina Mare Arbitration proceedings formally closed on 25 April 2022
- seeking significant monetary damages
o Tribunal has 120 days after closing to issue its Award, extendable by 60
days
· Satisfaction of various conditions precedent to the Navitas and
Harbour transaction required for deal completion, including various regulatory
and other approvals required from the Falkland Islands Government
· Navitas to assume operatorship of Sea Lion and strengthen operating
capability
· Lower upfront cost Sea Lion development to be worked up and financing
sought
· FID targeted 2023/24
Keith Lough, Chairman of Rockhopper, commented:
"We are delighted to have signed legally binding documentation allowing
Harbour a clean exit and bringing Navitas into the Falklands. At current oil
prices and with an increased focus on security of supply, we believe a
responsibly developed Sea Lion presents an exceptional chance to create very
significant value for all stakeholders.
We look forward to working closely with Navitas on a lower cost development
and associated financing plan for the project. With the Ombrina Mare
arbitration result expected later in the year, we hope and believe that 2022
will be the start of a bright new chapter for Rockhopper".
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
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons/Kendall Hill
Tel. +44 (0) 20 7390 0234
Note regarding financial information disclosure
The financial information set out below does not constitute the Group's
statutory accounts for the year ended 31 December 2021, but is derived from
those accounts. References within the document may refer to information in
the statutory accounts and these will be sent to shareholders and published on
the Company's website imminently.
Chairman and Chief Executive Officer's Review
Introduction
2021 saw the build-up to the outbreak of a major conflict in Europe for the
first time in decades, with Russia invading Ukraine early in 2022. The most
significant impact of the invasion has been and continues to be on the people
of Ukraine, for whom Rockhopper's Board express their support. A consequence
of the invasion has been to place an increased focus on energy security of
supply and the volume of oil and gas imported from Russia into Europe in
particular. At the same time the COVID-19 pandemic continues to cause
uncertainty around energy demand with China imposing new lockdowns as cases
spike and economic uncertainty continues across the globe. Against this
backdrop it is perhaps unsurprising that energy prices have seen material
volatility. The price of a barrel of Brent Crude Oil is around $115 as at time
of writing, having risen from a low of $21 per barrel in April 2020.
While worldwide moves to reduce GHG emissions and reduce reliance on
hydrocarbons continue as we journey through energy transition towards net
zero, we believe that responsibly produced oil and gas will continue to form a
meaningful part of global energy supply for many years to come.
With a best estimate of over 500 million barrels of recoverable oil (ERCE 2016
report), Sea Lion represents a potentially secure, highly material source of
supply for those countries seeking to reduce their dependence on Russian oil.
Under Premier Oil plc's ("Premier") development concept, based on hundreds of
millions of dollars and multiple years of engineering efforts, the series of
development phases at Sea Lion were projected to produce in excess of 120,000
barrels per day. At that rate, Sea Lion alone could be capable of replacing a
highly material proportion of the oil by volume imported into the UK from
Russia, all from a politically stable UK Overseas Dependent Territory.
Furthermore, significant UK content is possible within the project and the
regulatory regime in the Falklands will ensure the development is undertaken
with high regard to ESG issues.
Navitas brings renewed energy and proven financing capability to the project
The most significant news related to Sea Lion is the signing of definitive
legally binding documentation relating to the entry of Navitas Petroleum LP
("Navitas") to the Falklands. Navitas brings a new, dynamic energy to Sea Lion
which was significantly delayed following Chrysaor Holdings Limited's
("Chrysaor") merger with Premier and the creation of Harbour Energy plc
("Harbour"). Navitas' senior team's exceptional ability to raise finance for
challenging projects was clearly demonstrated as recently as last year when
they successfully secured a US$1bn project financing for the Shenandoah field
in the Gulf of Mexico. In fact, Navitas has raised in excess of $1.4bn of
equity and debt since 2017 and as we consider financing to be the main hurdle
for Sea Lion's development, we are particularly pleased to be welcoming them
to the basin. Sea Lion will represent Navitas' largest operated development
opportunity, so is highly material to both partners.
Sea Lion
From 2012-2022, we estimate that Premier and Rockhopper spent in excess of
US$300m on engineering and other non-drilling work relating to the Sea Lion
project. Navitas and Rockhopper plan to build on this very significant bank of
knowledge to create a lower cost development, potentially based around a
re-deployed FPSO with fewer wells being drilled pre first oil. Given the
amount of engineering already done, the timing is likely to be driven largely
by interaction with the vendor community, most notably in finding a suitable
FPSO, and the time taken to progress the financing. Having said this, the
target is to reach FID in 2023 or 2024 and to then have formal project
sanction as early in 2024 as possible.
Rockhopper believes it is possible to materially reduce pre first oil capex
from the previously estimated US$1.8bn (assuming a leased FPSO) and overall
project capex by taking actions such as reducing the number of wells drilled
pre first oil and reducing the number of drill centres.
As part of the transaction, Navitas commissioned Netherland, Sewell &
Associates, Inc. ("NSAI") to produce a resource report which used a different
approach to the ERCE 2016 report. NSAI concluded that the 2C for Sea Lion is
significantly larger than the 517mmbbls contained in the ERCE report. As this
report was not produced for Rockhopper we will continue to refer to the ERCE
numbers, but are delighted at this additional third party validation of the
potential of the North Falkland Basin and Sea Lion to produce significant
quantities of oil.
As Navitas have not formally become Operator and licence holder, they are yet
to be in position to have substantive conversations with the contractor
community as part of the working up of the new development plan for Sea Lion.
That said, Rockhopper's Board remain confident that the Sea Lion project will
continue to benefit from robust economics, particularly at current oil prices.
Based on the Premier Oil development from 2019-2020 at a real terms US$75
Brent, Sea Lion phase one only would have a pre-financing project NPV 10 of
over US$5bn at first oil. Whilst the lower cost development concept is likely
to see a lower number, we believe this demonstrates the enormous potential
value represented by Sea Lion for all stakeholders, including the Falkland
Islands Government.
Ombrina Mare arbitration
Having commenced proceedings against the Republic of Italy in 2017 and
completed the first and second hearings during the course of 2019, the
Tribunal confirmed that proceedings had been formally closed on 25 April 2022.
Under ICSID Arbitration Rules, the Tribunal has 120 days after closing to
issue its Award, extendable by a further 60 days (Rule 46). The 120 days rule
means that we should receive the final decision, including the quantum of any
award should we be successful, by 22 August 2022, or 22 October 2022 should
the extension be required. The Company continues to believe it has strong
prospects of recovering significant monetary damages.
Corporate matters
Following eight years at the Company, Stewart MacDonald stepped down from his
role as Executive Director and Chief Financial Officer in January 2022.
Stewart helped Rockhopper agree what we believe is a positive and exciting
framework with Navitas that sees us fully aligned and committed to bringing
Sea Lion to production, and the Board wishes him every success in his future
career. William Perry, who has been working as Rockhopper's Financial
Controller since 2011, has stepped up to become the Company's Interim Chief
Financial Officer.
Following a series of material cost reduction initiatives, the Company's
G&A is now at its lowest level for over a decade. Decisions have included
relocating the office to Salisbury and sub-letting the London office,
materially reducing headcount and moving a number of key technical staff to
part-time working in order to balance a reduction in cash burn whilst
retaining required expertise and specific Sea Lion and Falklands knowledge
within the Company.
ESG
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 produce
hydrocarbons in an environmentally responsible manner.
As noted last year FIG 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 Islands.
Once FID on Sea Lion has been achieved, the Company commits to define
measures, report transparently, and mitigate our own emissions as far as
practicable.
Outlook
With over 500 million barrels of recoverable oil, Sea Lion continues to
represent a development with significant potential value for all stakeholders.
Additionally, recent global developments have highlighted the importance of
security of supply for energy, and hydrocarbons' vital role in that.
The Board believes that the addition of Navitas, a committed and aligned
partner with recent proven ability to access capital for oil field
developments, represents the start of a bright new chapter in the history of
Sea Lion, bringing with it a renewed energy and enthusiasm for the project.
This new joint venture, along with a strong oil price and changing supply
background, provides us with the best possible chance of seeing the project
sanctioned.
Finally, we thank the Government and people of the Falkland Islands for their
continued support as they move towards commemorating the 40(th) anniversary of
the end of the 1982 conflict.
FINANCIAL REVIEW
OVERVIEW
From a finance perspective, the most significant events in the year include:
· Announcement by Harbour in September 2021 that the Sea Lion project
does not fit its corporate strategy and therefore that it will seek to exit
the project and its North Falkland Basin licences
· Detailed Heads of Terms signed with Navitas and Harbour for Harbour
to exit the Falklands and for Navitas to farm-in to 65 per cent interest in
the North Falkland Basin assuming operatorship
· Detailed transaction terms agreed with Premier/Harbour and Navitas in
relation to the Sea Lion project (the "Transaction")
· Finalisation of the corporate cost reduction programmes previously
implemented
Assuming the Transaction completes the arrangements with Navitas ensure that
Rockhopper is funded for all pre-sanction costs related to the Sea Lion Phase
1 development (other than licence fees, taxes and project wind down costs). As
such, the Group believes the above events materially strengthen the Group's
financial position in the short and medium term and significantly enhance the
prospects for a successful project financing for Sea Lion.
RESULTS FOR THE YEAR
For the year ended 31 December 2021, the Group reported revenues of US$0.8
million (2020: US$2.8 million) and loss after tax of US$7.8 million (2020:
US$236.5 million). The significant reduction in loss after tax was driven by
last year's results including non-recurring non-cash impairments associated
with previously incurred exploration costs in the North Falkland Basin. The
decision was made, in line with the operator, to write off historic
exploration costs associated with the resources which will not be developed as
part of the Sea Lion Phase 1 project.
REVENUE AND COST OF SALES
The Group's revenues of US$0.8 million (2020: US$2.8 million) during the year
relate entirely to the sale of natural gas in the Greater Mediterranean
(specifically Italy) region. The reduction in revenues from the comparable
period reflects the completion of the disposal of the Group's Egypt portfolio
in February 2020. The Egyptian portfolio made up US$2.1 million of 2020
revenues. Gas was sold at a price linked to the Italian "PSV" (Virtual
Exchange Point) gas marker price.
Cash operating costs, excluding depreciation and impairment charges, amounted
to US$1.1 million (2020: US$2.1 million). Again, the reduction in operating
costs reflects the disposal of the Group's Egypt portfolio during the prior
period.
Revenue and cost of sales are not expected to be material going forward.
OPERATING COSTS
Exploration and evaluation expenses are not material in the year. The reversal
of impairment in the year relates to impairments against amounts over accrued
in the prior year. As previously mentioned, the prior year expenses was mainly
due to the write off of costs relating to areas of the North Falkland Basin
which will not be developed as part of the Sea Lion Phase 1 project.
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. In light of the sharp reduction in oil prices experienced in
the first half of 2020, initiatives to further reduce corporate costs
commenced in May 2020. The full benefit of these cost reduction initiatives
were realised in 2021 resulting in G&A costs of US$3.3 million in 2021
(2020: US$4.0 million), excluding non-recurring expenses related to
restructuring and acquisitions and divestments.
The foreign exchange gain in the year is US$0.8 million (2020: loss of US$1.4
million). As with last year, this is mainly movements in relation to the tax
arising from the Group's farm-out to Premier in 2012, a GBP£ denominated
balance. Finance expense in the year of US$3.5million (2020: US$nil) also
relate to adjustments in relation to this tax balance. This balance is
discussed further below.
Following the decision in February 2016 by the Italian Ministry of Economic
Development not to award the Group a Production Concession covering the
Ombrina Mare field, in March 2017 the Group commenced international
arbitration proceedings against the Republic of Italy. All of the Group's
costs associated with the arbitration are funded on a non-recourse ("no win -
no fee") basis from a specialist arbitration funder.
CASH MOVEMENTS AND CAPITAL EXPENDITURE
At 31 December 2021, the Group had cash and term deposits of US$4.8 million
(31 December 2020: US$11.7 million).
Cash and term deposit movements during the period:
US$m
Opening cash balance (31 December 2020) 11.7
Revenues 0.8
Cost of sales (1.1)
Falkland Islands (3.2)
Greater Mediterranean (0.2)
Administrative expenses (3.3)
Miscellaneous 0.1
Closing cash balance (31 December 2021) 4.8
During 2021, the Group paid US$3.2 million in relation to Sea Lion costs.
This included the tax liability of US$1.4 million associated with the 2015/16
Falklands drilling campaign accrued for as at the prior year end.
Miscellaneous includes foreign exchange and movements in working capital
during the period.
Impairment of oil and gas assets
The Sea Lion development remains central to the Group's plans. Whilst
Harbour's decision to exit the North Falkland Basin was disappointing, the
Group is excited at the prospect of bringing in a new industry partner, in
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 are seeking licence extensions from the Falkland Island
Government. 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. As such it was concluded that there were no current indicators of
impairment for Phase 1 of the Sea Lion development.
In the prior year a decision was made, in line with the operator, to write off
historic exploration costs associated with the resources which will not be
developed as part of the Sea Lion Phase 1 project. This impairment has no
impact on the Group's long-term strategy for multiple phases of development in
the North Falkland Basin but instead reflects the limited capital which will
be invested outside of the Phase 1 project in the near-term.
MERGERS, ACQUISITIONS AND DISPOSALS
Post year end the Group announced Harbour and Navitas have signed legally
binding definitive documentation in relation to Harbour exiting and Navitas
entering the North Falkland Basin.
Ultimately the Transaction will align working interests across all the
North Falkland Basin petroleum licences - Rockhopper 35% / Navitas 65% -
subject to all necessary consents. The Group and Navitas will jointly develop
and agree a technical and financing plan to enable the development of the Sea
Lion project to achieve first oil on a lower cost and expedited basis post
sanction.
Navitas will provide loan funding to the Group to cover;
(i) 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").
(ii) 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.
Whilst Transaction completion is still subject to receipt of various
agreements, consents and approvals by the Falkland Islands Government , the
Group is optimistic that these will be forthcoming.
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, the outstanding tax liability was
confirmed at £64.4 million and is payable on the earlier of: (i) the first
royalty payment date on Sea Lion; (ii) the date of which Rockhopper disposes
of all or a substantial part of the Group's remaining licence interests in the
North Falkland Basin; or (iii) a change of control of Rockhopper Exploration
plc.
During the first half of 2017, as a result of the Group receiving the full
Exploration Carry from Premier during the 2015/16 drilling campaign, the
Falkland Islands Commissioner of Taxation agreed to reduce the tax liability
in line with the terms of the Tax Settlement Deed. As such, the tax liability
has been revised downwards to £59.6 million. The outstanding tax liability is
classified as non-current and is discounted to a period-end value of US$43.2
million.
Full details of the provisions and undertakings of the Tax Settlement Deed are
disclosed in note 18 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 December 2021, the Group had cash resources of US$4.8 million. As at the
end of April 2022 the Group had cash resources of $US3.4 million and as well
as normal working capital requirements expects a number of non recurring costs
in relation to the Transaction. Going forward projected recurring expenditure
is 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. In April 2022,
the Group signed definitive documentation to bring Navitas into the North
Falkland Basin (the "Transaction"). The Transaction is subject to certain
conditions precedent, the most important of which are certain consents from
FIG which include, but are not limited to, a two year extension on the
Licences being acquired, Navitas being approved as an Operator and certain tax
clearances from FIG. Assuming completion, Navitas will provide loan funding to
the Group for its share of all Sea Lion pre-sanction costs (other than licence
fees, taxes and project wind down costs).
Management believe that the Transaction will complete before the end of the
year. 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.
Even in the case of Transaction completion Management has determined that the
Group will require further funding for working capital and to achieve Sea Lion
FID, with FID estimated to be in early 2024. The Group believes that a funding
solution is achievable, with options including the issue of equity in addition
to the potential award of significant monetary damages with respect to
international arbitration proceedings against the Republic of Italy in
relation to the Ombrina Mare field which declared closed on the 25 April
2022. At the time of writing, the final form and availability of funding is
yet to be determined. Subject to market conditions we anticipate having raised
sufficient funds by the end of Q3 2022.
In the event the Transaction does not complete then as well as working capital
requirements it is possible that this could lead to the acceleration of
Falkland Island infrastructure decommissioning costs currently estimated at
US$4.0million (Group's net share), for which the Group is not funded.
Accordingly, after making enquiries and considering the risks described above,
the Directors have reviewed the Group's overall position and given their
belief, that raising funds will be possible, are of the opinion that the Group
is able to operate as a going concern for at least the next twelve months from
the date of approval of these financial statements.
Given the Directors' confidence in their ability to complete a funding
solution in the near term, the Directors believe that the Group will be
sufficiently funded and believe the use of the going concern basis is
appropriate. Nonetheless, for the avoidance of doubt, in the downside
scenarios in which either the Transaction does not complete or a funding
solution is not completed and in the absence of potential mitigating actions,
a material uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern. The Consolidated and Parent Company
financial statements do not include adjustments that would result if the group
was unable to continue as a going concern.
PRINCIPAL RISK AND UNCERTAINTIES
A detailed review of the potential risks and uncertainties which could impact
the Group are outlined elsewhere in this Strategic Report. The Group
identified its key risks at the end of 2021 as being:
1 oil price volatility;
2 access to capital;
3 joint venture partner alignment; and
4 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.
CONSOLIDATED income statement
for the YEAR ended 31 DeCEMBER 2021
Year Year
ended ended
31 December 2021 31 December 2020
Notes $'000 $'000
Revenue 3 839 2,754
Other cost of sales (1,141) (2,109)
Depreciation and impairment of oil and gas assets (667) (2,692)
Total cost of sales 4 (1,808) (4,801)
Gross loss (969) (2,047)
Other exploration and evaluation expenses (398) (2,431)
Impairment of exploration and evaluation assets 273 (223,280)
Total exploration and evaluation expenses 5 (125) (225,711)
Non recurring restructuring costs - (614)
Recurring administrative costs (3,263) (4,010)
Total administrative expenses 6 (3,263) (4,624)
Charge for share based payments 9 (824) (1,840)
Foreign exchange movement 10 789 (1,438)
Results from operating activities and other income (4,392) (235,660)
Finance income 11 4 44
Finance expense 11 (3,522) (819)
Loss before tax (7,910) (236,435)
Tax 12 151 (69)
LOSS FOR THE YEAR ATTRIBUTABLE TO THE (7,759) (236,504)
EQUITY SHAREHOLDERS OF THE PARENT COMPANY
Loss per share: cents
Basic 13 (1.70) (51.73)
Diluted 13 (1.70) (51.73)
All operating income and operating gains and losses relate to continuing
activities.
CONSOLIDATED statement of comprehensive income
for the YEAR ended 31 DECEMBER 2021
Year Year
ended ended
31 December 2021 31 December 2020
$'000 $'000
Loss for the year (7,759) (236,504)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations 889 (893)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (6,870) (237,397))
The notes on pages 50 to 68 form an integral part of these consolidated
financial statements.
CONSOLIDATED balance sheet
as at 31 DECEMBER 2021
31 December 31 December
2021 2020
Notes $'000 $'000
NON CURRENT ASSETS
Exploration and evaluation assets 14 249,583 244,349
Property, plant and equipment 15 201 1,420
Finance lease receivable 730 462
CURRENT ASSETS
Inventories - 310
Other receivables 16 2,074 2,464
Finance lease receivable 288 187
Restricted cash 579 486
Cash and cash equivalents 4,822 11,680
TOTAL ASSETS 258,277 261,358
CURRENT LIABILITIES
Other payables 17 2,000 3,790
Lease liability 286 567
NON-CURRENT LIABILITIES
Lease liability 842 1,273
Tax payable 18 43,204 40,703
Provisions 19 18,287 15,158
Deferred tax liability 20 39,137 39,300
TOTAL LIABILITIES 103,756 100,791
EQUITY
Share capital 21 7,218 7,218
Share premium 22 3,622 3,622
Share based remuneration 22 4,327 5,973
Own shares held in trust 22 (3,342) (3,342)
Merger reserve 22 74,332 74,332
Foreign currency translation reserve 22 (9,682) (10,571)
Special reserve 22 175,281 188,028
Retained losses 22 (97,235) (104,693)
ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS OF THE COMPANY 154,521 160,567
TOTAL LIABILITIES AND EQUITY 258,277 261,358
These financial statements on pages 46 to 68 were approved by the directors
and authorised for issue on 27 May 2022 and are signed on their behalf by:
Samuel Moody
CHIEF EXECUTIVE OFFICER
Rockhopper Exploration plc
Registered Company number: 05250250
The notes on pages 50x to 68 form an integral part of these consolidated
financial statements.
CONSOLIDATED statement of changes in equity
for the YEAR ended 31 DECEMBER 2021
Foreign
Shares currency
Share Share Share based held Merger translation Special Retained Total
capital Premium remuneration in trust reserve reserve reserve losses Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 31 December 2019 7,212 3,547 4,871 (3,371) 74,332 (9,678) 433,766 (114,565) 396,114
Loss for the year - - - - - - - (236,504) (236,504)
Other comprehensive loss for the year - - - - - (893) - - (893)
Total comprehensive loss for the year
- - - - - (893) - (236,504) (237,397)
Share based payments (see note 9) - - 1,840 - - - - - 1,840
Share issues in relation to SIP 6 75 - (71) - - - - 10
Other transfers - - (738) 100 - - (245,738) 246,377 -
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 - - - - - - - (7,759) (7,759)
Other comprehensive profit for the year - - - - - 889 - - 889
Total comprehensive loss for the year
- - - - - 889 - (7,759) (6,870)
Share based payments (see note 9) - - 824 - - - - - 824
Other transfers - - (2,470) - - - (12,747) 15,217 -
Balance at 31 December 2021 7,218 3,622 4,327 (3,342) 74,332 (9,682) 175,281 (97,235) 154,521
See note 22 for a description of each of the reserves of the Group.
Other transfers relate to amounts transferred from share based remuneration
reserve to retained losses in relation to options that have either not vested
or lapsed and amounts transferred from special reserve utilised to reduce the
amount of losses incurred by the parent company.
CONSOLIDATED STATEMENT OF CASHFLOWS
for the YEAR ended 31 DECEMBER 2021
Year Year
ended ended
31 December 2021 31 December 2020
Notes $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (7,910) (236,435)
Adjustments to reconcile net losses to cash:
Depreciation 15 1,082 808
Share based payment charge 9 824 1,840
Impairment of oil and gas assets 15 - 1,114
Impairment reversal of exploration and evaluation assets 14 (273) 223,280
Profit/(loss) on disposal of property, plant and equipment (156) 4
Finance expense 3,601 816
Foreign exchange (640) 1,315
Operating cash flows before movements in working capital (3,472) (7,282)
Changes in:
Inventories 287 1,289
Other receivables 176 1,904
Payables 420 (1,320)
Movement on other provisions 6 (54)
Cash utilised by operating activities (2,583) (5,439)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised expenditure on exploration and evaluation assets (3,248) (14,570)
Purchase of property, plant and equipment (228) (85)
Disposal of assets held for sale - 14,763
Investing cash flows before movements in capital balances (3,476) 108
Changes in:
Restricted cash (100) -
Cash flow from investing activities (3,576) 108
CASH FLOWS FROM FINANCING ACTIVITIES
Share incentive plan - 10
Lease liability payments (587) (382)
Finance expense - (19)
Cash flow from financing activities (587) (391)
Currency translation differences relating to cash and cash equivalents (112) 179
Net cash flow (6,746) (5,722)
Cash and cash equivalents brought forward 11,680 17,223
CASH AND CASH EQUIVALENTS CARRIED FORWARD 4,822 11,680
Notes to the CONSOLIDATED financial statements
for the Year ended 31 DECEMBER 2021
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 certain exploration licences
for the exploration and exploitation of oil and gas in the Falkland Islands.
In addition, it has operations in the Greater Mediterranean based in Italy.
The registered office of the Company is Warner House, 123 Castle Street,
Salisbury, Wiltshire, SP1 3TB.
1.2 Statement of compliance
The consolidated financial statements of the Group have been prepared on a
going concern basis in accordance with International Financial Reporting
Standards (IFRS) in conformity with the requirements of the Companies Act 2006
and UK-adopted International Accounting Standards. The consolidated financial
statements were approved for issue by the board of directors on 27 May 2022
and are subject to approval at the Annual General Meeting of shareholders on
28 June 2022.
1.3 Basis of preparation
The results upon which these financial statements have been based were
prepared using the accounting policies set out below. These policies have been
consistently applied unless otherwise stated.
These consolidated financial statements have been prepared under the
historical cost convention with the exception of Share Based Payments which
are at fair value.
Items included in the results of each of the Group's entities are measured in
the currency of the primary economic environment in which that entity operates
(the "functional currency"). The consolidated financial statements are
presented in US Dollars ($), which is Rockhopper Exploration plc's functional
currency.
All values are rounded to the nearest thousand dollars ($'000) or thousand
pounds (£'000), except when otherwise indicated.
1.4 change in accounting policy
Changes in accounting standards
In the current year the following new and revised Standards and
Interpretations have been adopted. None of these have a material impact on the
Group's annual results.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate
Benchmark Reform (Phase 2)
New accounting pronouncements
At 31 December 2021, the following Standards, Amendments and Interpretations
were in issue but not yet effective:
IFRS 17: Insurance contracts, IFRS 10 and IAS 28 (amendments): Sale or
contribution of assets between an investor and an associate or joint venture,
Amendments to IAS 1: Classification of liabilities, Amendments to IFRS 3:
Reference to the Conceptual Framework, Amendments to IAS 16: Property, Plant
and Equipment-Proceeds before Intended Use, Amendments to IAS 37: Onerous
Contracts - Cost of Fulfilling a Contract, Annual Improvements to IFRS
Standards: 2018-2020 Cycle, Amendments to IFRS 1: First-time Adoption of
International Financial Reporting Standards, IFRS 9 Financial Instruments,
IFRS 16 Leases, and IAS 41 Agriculture, Amendments to IAS 1 and IFRS Practice
Statement 2: Disclosure of Accounting Policies, Amendments to IAS 8:
Definition of Accounting Estimates, Amendments to IAS 12: Deferred Tax related
to Assets and Liabilities arising from a Single Transaction.
The Directors do not expect that the adoption of the above Standards,
Amendments and Interpretations will have a material impact on the Financial
Statements of the Group in future periods.
1.5 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 December 2021, the Group had cash resources of US$4.8 million. As at the
end of April 2022 the Group had cash resources of $US3.4 million and as well
as normal working capital requirements expects a number of non recurring costs
in relation to the Transaction. Going forward projected recurring expenditure
is 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. In April 2022,
the Group signed definitive documentation to bring Navitas into the North
Falkland Basin (the "Transaction"). The Transaction is subject to certain
conditions precedent, the most important of which are certain consents from
FIG which include, but are not limited to, a two year extension on the
Licences being acquired, Navitas being approved as an Operator and certain tax
clearances from FIG. Assuming completion, Navitas will provide loan funding to
the Group for its share of all Sea Lion pre-sanction costs (other than licence
fees, taxes and project wind down costs).
Management believe that the Transaction will complete before the end of the
year. 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.
Even in the case of Transaction completion Management has determined that the
Group will require further funding for working capital and to achieve Sea Lion
FID, with FID estimated to be in early 2024. The Group believes that a funding
solution is achievable, with options including the issue of equity in addition
to the potential award of significant monetary damages with respect to
international arbitration proceedings against the Republic of Italy in
relation to the Ombrina Mare field which declared closed on the 25 April 2022.
At the time of writing, the final form and availability of funding is yet to
be determined. Subject to market conditions we anticipate having raised
sufficient funds by the end of Q3 2022.
In the event the Transaction does not complete then as well as working capital
requirements it is possible that this could lead to the acceleration of
Falkland Island infrastructure decommissioning costs currently estimated at
US$4.0 million (Group's net share), for which the Group is not funded.
Accordingly, after making enquiries and considering the risks described above,
the Directors have reviewed the Group's overall position and given their
belief, that raising funds will be possible, are of the opinion that the Group
is able to operate as a going concern for at least the next twelve months from
the date of approval of these financial statements.
Given the Directors' confidence in their ability to complete a funding
solution in the near term, the Directors believe that the Group will be
sufficiently funded and believe the use of the going concern basis is
appropriate. Nonetheless, for the avoidance of doubt, in the downside
scenarios in which either the Transaction does not complete or a funding
solution is not completed and in the absence of potential mitigating actions,
a material uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern. The Consolidated and Parent Company
financial statements do not include adjustments that would result if the group
was unable to continue as a going concern.
1.6 Significant accounting policies
(a) Basis of accounting
The Group has identified the accounting policies that are most significant to
its business operations and the understanding of its results. These accounting
policies are those which involve the most complex or subjective decisions or
assessments, and relate to the capitalisation of exploration expenditure. The
determination of this is fundamental to the financial results and position and
requires management to make a complex judgement based on information and data
that may change in future periods.
Since these policies involve the use of assumptions and subjective judgements
as to future events and are subject to change, the use of different
assumptions or data could produce materially different results. The
measurement basis that has been applied in preparing the results is historical
cost.
The significant accounting policies adopted in the preparation of the results
are set out below.
(b) Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its subsidiary undertakings drawn up to 31 December 2021.
Subsidiaries are those entities over which the Group has control. Control is
achieved where the Group has the power over the subsidiary, is exposed, or has
rights to variable returns from the subsidiary and has the ability to use its
power to affect its returns. All subsidiaries are 100 per cent owned by the
Group and there are no non-controlling interests.
The results of subsidiaries acquired or disposed of during the year are
included in the income statement from the effective date of acquisition or up
to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries acquired to
bring the accounting policies used into line with those used by other members
of the Group.
All intercompany balances have been eliminated on consolidation.
(c) Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker as required by IFRS8
Operating Segments. The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating segments, has
been identified as the board of directors.
The Group's operations are made up of three segments, the oil and gas
exploration and production activities in the geographical regions of the
Falkland Islands and the Greater Mediterranean region as well as its corporate
activities centered in the UK.
(d) Oil and Gas Assets
The Group applies the successful efforts method of accounting for exploration
and evaluation ("E&E") costs, having regard to the requirements of IFRS6 -
'Exploration for and evaluation of mineral resources'.
Exploration and evaluation ("E&E") expenditure
Expensed exploration & evaluation costs
Expenditure on costs incurred prior to obtaining the legal rights to explore
an area, geological and geophysical costs are expensed immediately to the
income statement.
Capitalised intangible exploration and evaluation assets
All directly attributable E&E costs are initially capitalised in well,
field, prospect, or other specific, cost pools as appropriate, pending
determination.
Treatment of intangible E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each cost pool are carried forward until
the existence, or otherwise, of commercial reserves have been determined,
subject to certain limitations including review for indicators of impairment.
If commercial reserves have been discovered, the carrying value, after any
impairment loss, of the relevant E&E assets, are then reclassified as
development and production assets within property plant and equipment.
However, if commercial reserves have not been found, the capitalised costs are
charged to expense.
Development and production assets
Development and production assets, classified within property, plant and
equipment, are accumulated generally on a field-by-field basis and represent
the costs of developing the commercial reserves discovered and bringing them
into production, together with the E&E expenditures incurred in finding
commercial reserves transferred from intangible E&E assets.
Depreciation of producing assets
The net book values of producing assets are depreciated generally on a
field-by-field basis using the unit-of-production method by reference to the
ratio of production in the year and the related commercial reserves of the
field, taking into account the future development expenditure necessary to
bring those reserves into production.
Disposals
Net cash proceeds from any disposal of an intangible E&E asset are
initially credited against the previously capitalised costs. Any surplus
proceeds are credited to the income statement.
Decommissioning
Provision for decommissioning is recognised in full when the related
facilities are installed. The amount recognised is the present value of the
estimated future expenditure. A corresponding amount equivalent to the
provision is also recognised as part of the cost of the related oil and gas
property. This is subsequently depreciated as part of the capital costs of the
production facilities. Any change in the present value of the estimated
expenditure is dealt with prospectively as an adjustment to the provision and
the oil and gas property. The unwinding of the discount is included in finance
cost.
(E) Leases
The Group as lessee
The Group assesses whether a contract is, or contains, a lease, at inception
of the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases and leases of low value assets
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. Lease payments included in the measurement of the
lease liability comprise fixed lease payments The lease liability is presented
as a separate line in the consolidated statement of financial position. The
lease liability is subsequently measured by increasing the carrying amount to
reflect interest on the lease liability (using the effective interest method)
and by reducing the carrying amount to reflect the lease payments made.
The Group has not had to remeasure the lease liability (and makes a
corresponding adjustment to the related right-of-use asset).
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the right-of-use asset. The depreciation starts at the
commencement date of the lease. The right-of-use assets are presented as a
separate line in the notes to the financial statements.
Payment associated with short term leases and leases of low value assets are
recognised on a straight-line basis as an expense in profit or loss. Short
term leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT-equipment and small items of office furniture.
The Group as lessor
The Group enters into lease agreements as a lessor with respect to some
sublets on its rented offices. Leases for which the Group is a lessor are
classified as a finance lease as the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee. Finance lease income is
allocated to accounting periods so as to reflect a constant periodic rate of
return on the Group's net investment outstanding in respect of the leases.
(F) Capital commitments
Capital commitments include all projects for which specific board approval has
been obtained up to the reporting date. Projects still under investigation for
which specific board approvals have not yet been obtained are excluded.
(G) Foreign currency translation
Functional and presentation currency:
Items included in the results of each of the Group's entities are measured
using the currency of the primary economic environment in which the entity
operates, the functional currency. The consolidated financial statements are
presented in US$ as this best reflects the economic environment of the oil
exploration sector in which the Group operates. The Group maintains the
financial statements of the parent and subsidiary undertakings in their
functional currency. Where applicable, the Group translates subsidiary
financial statements into the presentation currency, US$, using the closing
rate method for assets and liabilities which are translated at the rate of
exchange prevailing at the balance sheet date and rates at the date of
transactions for income statement accounts. Differences are taken through the
Statement of Comprehensive Income to reserves.
Transactions and balances:
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are expensed in the income
statement, except when deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges.
The year end rates of exchange were:
31 December 2021 31 December 2020
£ : US$ 1.35 1.36
€ : US$ 1.13 1.23
(H) Revenue and income
(i) Revenue
Revenue arising from the sale of goods is recognised when a performance
obligation is satisfied by transferring control over a product or service to a
customer, which is typically at the point that title passes, and the revenue
can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable and represents amounts receivable for
goods provided in the normal course of business, net of discounts, customs
duties and sales taxes.
(ii) Investment income
Investment income consists of interest receivable for the period. Interest
income is recognised as it accrues, taking into account the effective yield on
the investment.
(I) NON-DERIVATIVE Financial instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group has become a party to the contractual provisions
of the instrument.
(i) Other receivables
Other receivables are initially measured at fair value. They are subsequently
measured at amortised cost using the effective interest method, less loss
allowance. A provision for impairment is made where there is objective
evidence that amounts will not be recovered in accordance with original terms
of the agreement. The Group recognises an allowance for expected credit losses
for all debt instruments not held at fair value through profit or loss.
Expected credit losses are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at an approximation of the original
effective interest rate.
(ii) Restricted cash
Restricted cash is disclosed separately on the face of the balance sheet and
denoted as restricted when it is not under the exclusive control of the Group.
All amounts relate to balances held as security in relation to property
leases.
(iii) Cash and cash equivalents
Cash and cash equivalents comprise instant access bank balances as well as a
small amount of cash in hand. They are stated at carrying value which is
deemed to be fair value.
(iv) Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
(v) Account and other payables
Account payables are initially recognised at fair value and subsequently at
amortised cost using the effective interest method.
(vii) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
(J) INCOME TAXES AND DEFERRED TAXATION
The current tax expense is based on the taxable profits for the year, after
any adjustments in respect of prior years. Tax, including tax relief for
losses if applicable, is allocated over profits before tax and amounts charged
or credited to reserves as appropriate.
Deferred taxation is recognised in respect of all taxable temporary
differences that have originated but not reversed at the balance sheet date
where a transaction or events have occurred at that date that will result in
an obligation to pay more, or a right to pay less or to receive more, tax,
with the exception that deferred tax assets are recognised only to the extent
that the directors consider that it is probable that there will be suitable
taxable profits from which the future reversal of the underlying temporary
differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are
expected to apply in the periods in which temporary differences reverse, based
on tax rates and laws enacted or substantively enacted at the balance sheet
date.
(K) Share based remuneration
The Group issues equity settled share based payments to certain employees.
Equity settled share based payments are measured at fair value (excluding the
effect of non market based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity settled share based payments
is expensed on a straight line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest and adjusted for non
market based vesting conditions.
Fair value is measured by use of either Binomial or Monte-Carlo simulation.
The main assumptions are disclosed in note 9.
Cash settled share based payment transactions result in a liability. Services
received and liability incurred are measured initially at fair value of the
liability at grant date, and the liability is remeasured each reporting period
until settlement. The liability is recognised on a straight line basis over
the period that services are rendered.
2 Use of estimates, assumptions and judgements
The Group makes estimates, assumptions and judgements that affect the reported
amounts of assets and liabilities. Estimates, assumptions and judgements are
continually evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances.
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed in the relevant note as is sensitivity
analysis as required. The key areas identified and the relevant note are as
follows:
Carrying value of intangible exploration and evaluation assets (note 14) -
judgements
Tax payable (note 18) - judgements
Decommissioning costs (note 19) - judgement and estimates
3 REVENUE AND SEGMENTAL INFORMATION
The Group's operations are located and managed in three geographically
distinct business units; namely the Falkland Islands, the Greater
Mediterranean, and Corporate (or UK). Some of the business units currently do
not generate any revenue or have any material operating income. The business
is only engaged in one business of upstream oil and gas exploration and
production.
YEAR ENDED 31 DECEMBER 2021
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
Revenue - 839 - 839
Cost of sales - (1,808) - (1,808)
Gross profit - (969) - (969)
Exploration and evaluation reverse/(expenses) 608 (589) (144) (125)
Restructuring costs - - - -
Recurring administrative costs - (823) (2,440) (3,263)
Total administrative expenses - (823) (2,440) (3,263)
Charge for share based payments - - (824) (824)
Foreign exchange (loss)/gain 680 - 109 789
Results from operating activities and other income 1,288 (2,381) (3,299) (4,392)
Finance income - 1 3 4
Finance expense (3,180) (285) (57) (3,522)
Loss before tax (1,892) (2,665) (3,353) (7,910)
Tax - 151 - 151
Loss for year (1,892) (2,514) (3,353) (7,759)
Reporting segments assets 249,211 2,440 6,626 258,277
Reporting segments liabilities 86,341 15,337 2,078 103,756
Depreciation and impairments (608) 1,117 300 809
YEAR ENDED 31 DECEMBER 2020
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
Revenue - 2,754 - 2,754
Cost of sales - (4,801) - (4,801)
Gross profit - (2,047) - (2,047)
Exploration and evaluation expenses (222,593) (2,312) (806) (225,711)
Restructuring costs - - (614) (614)
Recurring administrative costs - (1,096) (2,914) (4,010)
Total administrative expenses - (1,096) (3,528) (4,624)
Charge for share based payments - - (1,840) (1,840)
Foreign exchange (loss)/gain (1,537) 78 21 (1,438)
Results from operating activities and other income (224,130) (5,377) (6,153) (235,660)
Finance income - 6 38 44
Finance expense - (305) (514) (819)
Loss before tax (224,130) (5,676) (6,629) (236,435)
Tax - (69) - (69)
Loss for year (224,130) (5,745) (6,629) (236,504)
Reporting segments assets 243,647 4,643 13,068 261,358
Reporting segments liabilities 79,840 16,301 4,650 100,791
Depreciation and impairments 222,584 1,429 493 224,506
All of the Group's worldwide sales revenues of oil and gas $839 thousand
(2020: $2,754 thousand) arose from contracts to customers. Total revenue
relates to revenue from one customer (2020: two customers each exceeding 10
per cent of the Group's consolidated revenue).
4 Cost of sales
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Other cost of sales 1,141 2,109
Impairment of oil and gas assets (see note 15) - 1,114
Depreciation of oil and gas assets (see note 15) 667 232
Depreciation and impairment on assets held for sale - 1,346
1,808 4,801
5 exploration and evaluation expenses
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Allocated from administrative expenses (see note 6) 143 799
Capitalised exploration costs impaired (see note 14) (273) 223,280
Impairment on assets held for sale - 314
Other exploration and evaluation expenses 255 1,318
125 225,711
6 Administrative expenses
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Directors' salaries and fees, including bonuses (see note 7) 1,114 1,090
Other employees' salaries 930 1,806
National insurance costs 453 483
Pension costs 89 325
Employee benefit costs 45 82
Total staff costs (including group restructuring costs) 2,631 3,786
Amounts reallocated (751) (937)
Total staff costs charged to administrative expenses 1,880 2,849
Auditors' remuneration (see note 8) 161 244
Other professional fees 554 588
Other 867 1,222
Depreciation 149 162
Amounts reallocated (348) (441)
3,263 4,624
The average number of full time equivalent staff employed during the year was
9 (2020: 13). As at the year end the Group employed 12 staff, 8 of which were
in the UK and 4 in Italy
Amounts reallocated relate to the costs of staff and associated overhead in
relation to non administrative tasks. These costs are allocated to exploration
and evaluation expenses or capitalised as part of the intangible exploration
and evaluation assets as appropriate.
7 directors' remuneration
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Executive salaries 725 812
Company pension contributions to money purchase schemes & pension cash 117 120
allowance
Benefits 8 21
Non-executive fees 272 278
1,122 1,231
The total remuneration of the highest paid director was:
Year Year
ended ended
31 December 31 December 2020
2021
£'000 £'000
Annual salary 283 341
Money purchase pension schemes 47 51
Benefits 4 7
334 399
Interest in outstanding share options and SARs, by director, are separately
disclosed in the directors' remuneration report.
8 Auditors' remuneration
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Fees payable to the Company's auditors for the audit of the Company's annual 135 135
financial statements
Fees payable to the Company's auditors and its associates for other services:
Audit of the accounts of subsidiaries 26 58
Half year review - 33
161 226
Amounts in the current year relate to BDO LLP. Amounts in the prior year
related to previous auditor Pricewaterhouse Coopers LLP.
After the completion of the 2019 consolidated financial statements additional
audit fees for subsidiaries amounting to $18,000 were incurred. These were
included in the results for 2020, but are not included in the analysis above.
9 Share based Payments
The charge for share based payments relate to options granted to employees of
the Group.
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Charge for option scheme 257 530
Charge for the long term incentive plan options 567 1,112
Charge for shares issued under the SIP - 198
824 1,840
The models and key assumptions used to value each of the grants and hence
calculate the above charges are set out below:
Option scheme
A one-off equity option package was implemented during the prior year (the
"Option Scheme") to replace the existing long term incentive plan. In place
of the LTIP scheme, executive directors and senior staff received options to
subscribe for Ordinary Shares, exercisable at a price of 6.25 pence per new
Ordinary Share (the "Market Price Options). The Market Price Options will vest
in equal tranches after three, four and five years' further continuous
employment.
Executive directors and staff in lieu of their contractual notice periods also
received options to subscribe for an aggregate new ordinary shares in the
capital of the Company ("Ordinary Shares"), exercisable at a price of 1 pence
per new Ordinary Share (the "1p Options").
The options have been valued using a binomial model the key inputs of which
are summarised below:
Grant date: 19 May 2020 19 May 2020 19 May 2020 19 May 2020 19 May 2020
Vesting date 19 Nov 2020 19 May 2021 19 May 2023 19 May 2024 19 May 2025
Closing share price (pence) 6.25 6.25 6.25 6.25 6.25
Number granted 1,986,972 6,357,616 7,949,997 7,950,000 7,950,003
Weighted average volatility 50.0% 50.0% 50.0% 50.0% 50.0%
Weighted average risk free rate 0.08% 0.07% 0.10% 0.12% 0.14%
Exercise price (pence) 1.00 1.00 6.25 6.25 6.25
Dividend yield 0% 0% 0% 0% 0%
Weighted average volatility has been selected with reference to historic
volatility but taking into account exceptionally high volatility in the year
preceding the grant of the options.
Generally, in calculating the charge a 100% of staff are assumed to be
employed for the vesting period. The departure of an executive director was
known pre year end and so the charge was adjusted to reflect this fact even
though the options did not lapse until after the year end.
The following movements occurred during the year:
At 31 December At 31 December
Issue date Vesting date Expiry date 2020 Lapsed 2021
19 May 2020 19 Nov 2020 18 Nov 2030 1,986,972 - 1,986,972
19 May 2020 19 May 2021 18 Nov 2030 6,357,616 - 6,357,616
19 May 2020 19 May 2023 18 Nov 2030 7,949,997 - 7,949,997
19 May 2020 19 May 2024 18 Nov 2030 7,950,000 - 7,950,000
19 May 2020 19 May 2025 18 Nov 2030 7,950,003 - 7,950,003
32,194,588 32,194,588
Long term incentive plan
LTIP awards vest or become exercisable subject to the satisfaction of a
performance condition measured over a three year period ("Performance Period")
determined by the Remuneration Committee at the time of grant. The performance
condition used is based on Total Shareholder Return ("TSR") measured over a
three-year period against the TSR of a peer group of at least 9 other oil and
gas companies comprising both FTSE 250, larger AIM oil and gas companies and
Falkland Islands focused companies ("Peer Group"). The Peer Group for the
Awards may be amended by the Remuneration Committee at their sole discretion
as appropriate.
Performance measurement for the Awards are based on the average price over the
relevant 90 day dealing period measured against the 90 dealing day period
three years later. Awards vest on a sliding scale from 35% to 100% for
performance in the top two quartiles of the Peer Group. No awards vest for
performance in the bottom two quartiles.
The Awards granted on 8 October 2013 and 10 March 2014 have an additional
performance condition so that no awards will be exercisable unless the
Company's share price exceeds £1.80 based on an average price over any 90 day
dealing period up to 31 March 2023.
The LTIP has been valued using a Monte Carlo model the key inputs of which are
summarised below:
Grant date: 31 July 2019 23 April 2018 16 June 2017
Closing share price 20.75 25.7p 21.25p
Number granted 7,200,000 7,000,000 6,700,000
Weighted average volatility 50.0% 44.4% 53.3%
Weighted average volatility of index 70.0% 64.0% 71.4%
Weighted average risk free rate 0.35% 0.90% 0.18%
Correlation in share price movement with comparator group 5% 13.0% 15.3%
Exercise price 0p 0p 0p
Dividend yield 0% 0% 0%
The following movements occurred during the year:
At 31 December At 31 December
Issue date Expiry date 2020 Lapsed 2021
8 October 2013 8 October 2023 546,145 - 546,145
10 March 2014 10 March 2024 70,391 - 70,391
16 June 2017 16 June 2027 3,216,000 3,216,000
23 April 2018 23 April 2028 7,000,000 (7,000,000) -
31 July 2019* 31 July 2029 7,200,000 - 7,200,000
18,032,536 11,032,536
* Denotes LTIPs that had not completed the Performance Period and as such were
unvested at the year end. After the year end 3,300,001 of the LTIPs vested,
with the balance lapsing.
Share incentive plan
The Group had in place an HMRC approved Share Incentive Plan ("SIP"). The SIP
allowed the Group to award Free Shares to UK employees (including directors)
and to award shares to match Partnership Shares purchased by employees,
subject to HMRC limits. New share awards under the SIP ended in the prior
year.
In the year ended 31 December 2020 the Group issued two Matching Shares for
every Partnership Share purchased and made a free award of £35,999 worth of
Free Shares to eligible employees.
This resulted in the issue of 195,756 Free Shares and 306,606 SIP scheme
matching and partnership shares.
31 December
2020
The average fair value of the shares awarded (pence) 12
Vesting 100%
Dividend yield Nil
Lapse due to withdrawals Nil
Share appreciation rights
A share appreciation right ("SAR") is effectively a share option that is
structured from the outset to deliver, on exercise, only the net gain in the
form of new ordinary shares that would have been made on the exercise of a
market value share option.
On exercise, an option price of 1 pence per ordinary share, being the nominal
value of the Company's ordinary shares, is paid and the relevant awardee will
be issued with ordinary shares with a market value at the date of exercise
equivalent to the notional gain that the awardee would have made, being the
amount by which the aggregate market value of the number of ordinary shares in
respect of which the SAR is exercised, exceeds a notional exercise price,
equal to the market value of the shares at the time of grant (the "base
price"). All SARs have vested and the remuneration committee has discretion to
settle the exercise of SARs in cash.
The following movements occurred during the year:
Exercise price At 31 Dec At 31 Dec
Issue date Expiry date (pence) 2020 Expired 2021
11 January 2011 11 January 2021 372.75 175,048 (175,048) -
14 July 2011 14 July 2021 239.75 43,587 (43,587) -
16 August 2011 16 August 2021 237.00 17,035 (17,035) -
13 December 2011 13 December 2021 240.75 29,594 (29,594) -
17 January 2012* 17 January 2022 303.75 244,541 - 244,541
30 January 2013 30 January 2023 159.00 277,162 - 277,162
786,967 (265,264) 521,703
* Denotes SARs that lapsed post year end.
10 FOREign Exchange
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Foreign exchange gain/(loss) on Falkland Islands tax liability (see note 18) 679 (1,537)
Other foreign exchange movements 110 99
Total net foreign exchange gain/(loss) 789 (1,438)
11 FINANCE INCOME AND EXPENSE
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Bank and other interest receivable 4 44
Total finance income 4 44
Unwinding of discount on Falkland Tax Liability (see note 18) 3,180 -
Unwinding of discount on decommissioning provisions (see note 19) 274 296
Other 68 523
Total finance expense 3,522 819
12 Taxation
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Current tax:
Overseas tax - -
Adjustment in respect of prior years - (10)
Total current tax - (10)
Deferred tax:
Overseas tax (151) 79
Total deferred tax (credit)/charge - note 20 (151) 79
Tax on profit on ordinary activities (151) 69
Loss on ordinary activities before tax (7,910) (236,435)
Loss on ordinary activities multiplied at 26% weighted average rate (31 (2,057) (61,473)
December 2020: 26%)
Effects of:
Income and gains not subject to taxation (248) -
Expenditure not deductible for taxation 827 58,812
Depreciation in excess of capital allowances 281 9
IFRS2 Share based remuneration cost 214 478
Losses carried forward 983 2,349
Effect of tax rates in foreign jurisdictions - (156)
Other - (19)
Adjustments in respect of prior years - (10)
Current tax credit for the year - (10)
The total carried forward losses and carried forward pre trading expenditures
potentially available for relief are as follows:
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
UK 77,393 74,762
Falkland Islands 619,400 618,444
Italy 65,202 64,086
No deferred tax asset has been recognised in respect of temporary differences
arising on losses carried forward, outstanding share options or depreciation
in excess of capital allowances due to the uncertainty in the timing of
profits and hence future utilisation. Losses carried forward in the Falkland
Islands includes amounts held within entities where utilisation of the losses
in the future may not be possible.
13 Basic and diluted loss per share
31 December 2021 31 December 2020
Number Number
Shares in issue brought forward 458,482,117 457,979,755
Shares issued
- Issued under the SIP - 502,362
Shares in issue carried forward 458,482,117 458,482,117
Weighted average number of Ordinary Shares in issue 458,482,117 458,289,239
Shares held in Employee Benefit Trust (3,131,000) (3,131,000)
Weighted average number of Ordinary Shares for the purposes of basic earnings 455,351,117 455,158,239
per share
$'000 $'000
Net loss after tax for purposes of basic and diluted earnings per share (7,759) (236,504)
Loss per share - cents
Basic (1.70) (51.73)
Diluted (1.70) (51.73)
The weighted average number of Ordinary Shares takes into account those shares
which are treated as own shares held in trust. As at the year 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.
14 intangible exploration and evaluation assets
Falkland Greater
Islands Mediterranean Total
$'000 $'000 $'000
At 31 December 2019 464,639 1,181 465,820
Additions 1,592 147 1,739
Written off to exploration costs (222,584) (696) (223,280)
Foreign exchange movement - 70 70
At 31 December 2020 243,647 702 244,349
Additions 4,956 54 5,010
Written back/(off) exploration costs 608 (335) 273
Foreign exchange movement - (49) (49)
At 31 December 2021 249,211 372 249,583
FALKLAND ISLANDS LICENCES
The amounts for intangible exploration and evaluation assets represent active
exploration and evaluation projects. These amounts will be written off to the
income statement as exploration costs unless commercial reserves are
established or the determination process is not completed and there are no
indications of impairment in accordance with the Group's accounting policy.
The additions during the year of $5.0 million relate principally to the Sea
Lion development, with the majority of this movement being non-cash and
relating to the recognition of a provision for decommissioning Falkland
Islands facilities.
Given the quantum of intangible exploration and evaluation assets potential
impairment could have a material impact on the financial statements. As such
whether there are indicators of impairment is a key judgement. Management
looked at a number of factors in making a judgement as to whether there are
any indicators of impairment during the year. In particular with regard to the
carrying value of the Falkland Islands assets, which relates to the Sea Lion
Phase one development these include, but are not limited to;
· The Transaction is bringing on board a new partner with a track
record of funding large offshore developments
· As part of the Transaction a two year license extension is being
sought
· Whilst inflationary pressures exist increasing potential capital
costs, Rockhopper and Navitas plan to use the extensive engineering work
already carried out to create a lower cost development with the target to
reach FID early 2024
· Current market conditions, including oil price and security of
supply, provide stronger prospects for ultimate sanction of Sea Lion
Management concluded that for these reasons, currently for Phase 1 of the Sea
Lion development, there were no indicators of impairment.
In the prior year, management made the judgement that the limited near term
capital being invested outside of the Phase 1 project was an indicator of
impairment in the subsequent phases of the project. Accordingly a decision was
made, in line with the operator, to write off historic exploration costs
associated with the resources which will not be developed as part of the Sea
Lion Phase 1 project. This impairment has no impact on the Group's long‐term
strategy for multiple phases of development in the North Falkland Basin. This
will be re-evaluated when the Phase 1 project has been sanctioned, currently
anticipated in 2024, and investment resumes on the Phase 2 project.
15 property, plant and equipment
Oil and gas Right of use Other
assets assets assets Total
$'000 $'000 $'000 $'000
Cost
At 31 December 2019 24,275 1,555 914 26,744
Additions - 138 84 222
Foreign exchange 2,006 - 14 2,020
Disposals - - (99) (99)
At 31 December 2020 26,281 1,693 913 28,887
Additions 228 - - 228
Foreign exchange (2,006) (22) (11) (2,039)
Disposals - - (497) (497)
Derecognition - (1,264) - (1,264)
At 31 December 2021 24,503 407 405 25,315
Depreciation and impairment
At 31 December 2019 22,565 300 810 23,675
Charge for the year 232 528 48 808
Impairment 1,114 - - 1,114
Foreign exchange 1,960 - 5 1,965
Disposals - - (95) (95)
At 31 December 2020 25,871 828 768 27,467
Charge for the year 667 353 62 1,082
Foreign exchange (2,035) (15) (4) (2,054)
Disposals - - (501) (501)
Derecognition - (880) - (880)
At 31 December 2021 24,503 286 325 25,114
Net book value at 31 December 2020 410 865 145 1,420
Net book value at 31 December 2021 - 121 80 201
All oil and gas assets relate to the Greater Mediterranean region,
specifically producing assets in Italy. Right of use assets relate to rented
offices.
16 OTHER Receivables
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Current
Receivables 478 620
Other 1,596 1,844
2,074 2,464
The carrying value of receivables approximates to fair value. Other
receivables includes US$0.7 million related to deferred considerations in
relation to the disposal of the Group's Egyptian business. This is due to be
received during 2022.
17 Other payables and accrualS
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Accounts payable 608 1,021
Accruals 1,129 2,553
Other creditors 263 216
2,000 3,790
All amounts are expected to be settled within twelve months of the balance
sheet date and so the book values and fair values are considered to be the
same.
18 Tax payable
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Non current tax payable 37,359 40,703
37,359 40,703
On the 8 April 2015, the Group agreed binding documentation ("Tax Settlement
Deed") with the Falkland Island Government ("FIG") in relation to the tax
arising from the Group's farm out to Premier.
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 £59.6 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.
The tax liability is a non current liability and as such has been discounted.
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. Based on previous correspondence with FIG, Management does
not believe that the Transactions completion would constitute a substantial
disposal and therefore will not accelerate the liability. Currently,
therefore, payment is anticipated to be in 5.5 years (2020: 5.0 years).
As at the year end a discount rate of 12% (2020: 15%) has been applied.
Management has made the judgement to reduce the discount rate used at the year
end due to a number of factors including a reduction in market interest rates
of debt issued which in management's view has a similar risk profile. If the
discount rate applied had been increased 2% this would have reduced the
liability by $US4.0 million and if the rate had been decreased by 2% this
would have increased the liability by $US4.5 million.
The impact of changes to these judgements in the year increased the balance by
US$3.2 million (2020: US$nil) and has been treated as a finance expense.
This increase has been offset by a foreign exchange gain of US$0.7 million
(2020: US$1.5 million loss) in the year.
19 Provisions
Decommissioning Other
provision provisions
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000 $'000 $'000
Brought forward 15,067 91 15,158 13,636
Amounts utilized - - - (54)
Amounts arising in the year 4,000 6 4,006 7
Unwinding of discount 274 - 274 296
Foreign exchange (1,144) (7) (1,151) 1,273
Carried forward at year end 18,197 90 18,287 15,158
The decommissioning provision relates to the Group's licences in the Greater
Mediterranean region as well as facilities in the Falkland Islands. The
provision covers both the plug and abandonment of wells drilled as well as
removal of facilities and any requisite site restoration.
Amounts arising in the year relate to the Group's share of the potential costs
arising on the removal of facilities in the Falkland Islands. This has been
recognised during the year as in managements view it is probable that the
facilities will require decommissioning in the future, all be it that
currently our expectation is that following appropriate upgrades they will be
able to be utilised as part of the Sea Lion development.
Judgements are made are made based on the long term economic environment
around appropriate inflation and discount rates to be applied as well as the
timing of any future decommissioning. In the Falkland Islands costs are most
likely to be in $US or GB£ so management consider the UK economic environment
when informing these judgements. In the Greater Mediterranean all assets are
in Italy and so costs are likely to be in Euros and as such management
consider the Italian as well as the broader Eurozone region to inform these
judgements.
Whilst recognising short term inflationary pressures, the Group continues to
believe it appropriate to use an inflation rate of 2 per cent (2020: 2 per
cent) and a discount rate of 2 per cent (2020: 2 per cent).
Decommissioning costs are uncertain and management's cost estimates can vary
in response to many factors, including changes to the relevant legal
requirements, the emergence of new technology or experience at other assets.
The expected timing, work scope and amount of expenditure may also change.
Therefore, significant estimates and assumptions are made in determining the
costs associated with the provision for decommissioning. The estimated
decommissioning costs are reviewed annually, and the results of the most
recent available review used as a basis for the amounts in the Consolidated
Financial Statements. Provision for environmental clean-up and remediation
costs is based on current legal and contractual requirements, technology and
price levels. However, actual decommissioning costs will ultimately depend
upon future market prices for the necessary decommissioning works required
which will reflect market conditions at the relevant time.
The estimated costs associated with the decommissioning works are those that
are likely to have a material impact on the provision. A 10 per cent increase
in these estimates would increase both the provision and the loss in the year
by US$1,420 thousand. Similarly, a 10 per cent reduction in these estimated
costs would decrease both the provision and the loss in the year by US$1,420
thousand.
Other provisions include amounts due to employees for accrued holiday and
leaving indemnity for staff in Italy, that will become payable when they cease
employment.
20 deferred tax liability
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
At beginning of period 39,300 39,221
Foreign exchange (12) -
Movement in period (151) 79
At end of period 39,137 39,300
The deferred tax liability arises due to temporary differences associated with
the intangible exploration and evaluation expenditure. The majority of the
balance relates to historic expenditure on licences in the Falklands, where
the tax rate is 26%, being utilised to minimise the corporation tax due on the
consideration received as part of the farm out disposal during 2012.
Total carried forward losses and carried forward pre-trading expenditures
available for relief on commencement of trade at 31 December 2021 are
disclosed in note 12 Taxation. No deferred tax asset has been recognised in
relation to these losses due to uncertainty that future suitable taxable
profits will be available against which these losses can be utilised.
21 Share capital
Year ended 31 December 2021 Year ended 31 December 2020
$'000 Number $'000 Number
Authorised, called up, issued and fully paid: Ordinary shares of £0.01 each 7,218 458,482,117 7,218 458,482,117
For details of all movements during the year, see note 13.
22 reserves
Set out below is a description of each of the reserves of the Group:
Share premium Amount subscribed for share capital in excess of its nominal value.
Share based remuneration The share incentive plan reserve captures the equity related element of the
expenses recognised for the issue of options, comprising the cumulative charge
to the income statement for IFRS2 charges for share based payments less
amounts released to retained earnings upon the exercise of options.
Own shares held in trust Shares held in trust represent the issue value of shares held on behalf of
participants in the SIP by Capita IRG Trustees Limited, the trustee of the SIP
as well as shares held by the Employee Benefit Trust which have been purchased
to settle future exercises of options.
Merger reserve The difference between the nominal value and the fair value of shares issued
on acquisition of subsidiaries.
Foreign currency translation reserve Exchange differences arising on consolidating the assets and liabilities of
the Group's subsidiaries are classified as equity and transferred to the
Group's translation reserve.
Special reserve The reserve is non distributable and was created following cancellation of the
share premium account on 4 July 2013. It can be used to reduce the amount of
losses incurred by the Parent Company or distributed or used to acquire the
share capital of the Company subject to settling all contingent and actual
liabilities as at 4 July 2013. Should not all of the contingent and actual
liabilities be settled, prior to distribution the Parent Company must either
gain permission from the actual or contingent creditors for distribution or
set aside in escrow an amount equal to the unsettled actual or contingent
liability.
Retained losses Cumulative net gains and losses recognised in the financial statements.
23 CAPITAL COMMITMENTS
Significant capital expenditure contracted for at the end of the reporting
period but not recognised as liabilities is US$0.4million (2020: US$0.4
million) relating to the Group's intangible exploration and evaluation assets.
24 Related Party Transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed.
Subsidiaries are listed in note 3 of the Company financial statements.
The remuneration of directors, who are the key management personnel of the
Group, is set out below in aggregate.
In addition there are deferred salary and bonuses amounts that are contingent
on future events and as such have not been recorded in the accounts. Further
information about the remuneration of individual directors, including deferred
salary and bonus amounts, is provided in the Directors' Remuneration Report on
pages 26 to 35.
Year Year
ended ended
31 December 31 December 2020
2021
$'000 $'000
Short term employee benefits 1,005 1,111
Pension contributions 117 120
Share based payments 447 873
1,569 2,104
In the prior year directors purchased the following ordinary shares of £0.01
each in the Company as follows
Date Number Price (pence)
Sam Moody 15 January 2020 125,000 19.45
Keith Lough 15 January 2020 80,000 19.24
8 June 2020 148,515 8.08
Stewart MacDonald 15 January 2020 80,000 19.24
Alison Baker 8 June 2020 70,000 8.85
John Summers 8 June 2020 74,229 8.08
25 Risk management policies
Risk review
The risks and uncertainties facing the Group are set out in the risk
management report. Risks which require further quantification are set out
below.
Foreign exchange risks: The Group is exposed to foreign exchange movements on
monetary assets and liabilities denominated in currencies other than US$, in
particular the tax liability with the Falkland Island Government which is a
GB£ denominated balance. In addition a number of the Group's subsidiaries
have a functional currency other than US$, where this is the case the Group
has an exposure to foreign exchange differences with differences being taken
to reserves.
The Group's has cash and cash equivalents and restricted cash of US$5.4
million of which US$4.7 million was held in US$ denominations. The Group has
expenditure in GB£ and Euro and accepts that to the extent current cash
balances in those currencies are not sufficient to meet those expenditures
they will need to acquire them. The following table summarises the split of
the Group's assets and liabilities by currency:
Currency denomination of balance $ £ €
$'000 $'000 $'000
Assets
31 December 2021 253,975 1,859 2,443
31 December 2020 253,577 3,115 4,666
Liabilities
31 December 2021 43,352 45,067 15,337
31 December 2020 41,338 43,152 16,301
The following table summarises the impact on the Group's pre-tax profit and
equity of a reasonably possible change in the US$ to GB£ exchange rate and
the US$ to euro exchange:
Pre tax profit Total equity
+10% US$ rate -10% US$ rate +10% US$ rate -10% US$ rate
increase decrease increase decrease
$'000 $'000 $'000 $'000
US$ against GB£
31 December 2021 (4,321) 4,321 (4,321) 4,321
31 December 2020 (4,004) 4,004 (4,004) 4,004
US$ against euro
31 December 2021 (1,289) 1,289 (1,289) 1,289
31 December 2020 (1,164) 1,164 (1,164) 1,164
Capital risk management: the Group manages capital to ensure that it is able
to continue as a going concern whilst maximising the return to shareholders.
The capital structure consists of cash and cash equivalents and equity. The
board regularly monitors the future capital requirements of the Group,
particularly in respect of its ongoing development programme. Further
information can be found in the going concern assessment contained in Note
1.5.
Credit risk; the Group recharges partners and third parties for the provision
of services and for the sale of Oil and Gas. Should the companies holding
these accounts become insolvent then these funds may be lost or delayed in
their release. The amounts classified as receivables as at the 31 December
2021 were $2,306,000 (31 December 2020: $2,079,000). Credit risk relating to
the Group's other financial assets which comprise principally cash and cash
equivalents and restricted cash arises from the potential default of
counterparties. Investments of cash and deposits are made within credit limits
assigned to each counterparty. The risk of loss through counterparty failure
is therefore mitigated by the Group splitting its funds across a number of
banks, two of which are part owned by the British government.
Interest rate risks; the Group has no debt and so its exposure to interest
rates is limited to finance income it receives on cash and term deposits. The
Group is not dependent on its finance income and given the current interest
rates the risk is not considered to be material.
Liquidity risks;
The Group monitors the liquidity position by preparing cash flow forecasts to
ensure sufficient funds are available. Further information can be found in the
going concern assessment contained in Note 1.5.
Maturity of financial liabilities
The table below analyses the Group's financial liabilities, which will be
settled on a gross basis, into relevant maturity groups based on the remaining
period at the balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
At 31 December 2021 Within 1 year 2 to 5 years More than 5 years Total contractual cashflows Carrying amount
$'000 $'000 $'000 $'000 $'000
Other payables 2,000 - - 2,000 2,000
Lease liability 574 860 - 1,434 1,128
Tax payable - - 79,413 79,413 43,204
2,574 860 79,413 82,847 46,532
At 31 December 2020 Within 1 year 2 to 5 years More than 5 years Total contractual cashflows Carrying amount
$'000 $'000 $'000 $'000 $'000
Other payables 3,790 - - 3,790 3,790
Lease liability 608 1,473 - 2,081 1,840
Tax payable - - 81,867 81,867 40,703
4,398 1,473 81,867 87,738 46,333
The tax payable amounts in the current and prior year relate to amounts as
disclosed in note 18.
26 POST BALANCE SHEET EVENTS
On the 19th April 2022 the Group announced that it, Harbour and Navitas have
signed legally binding definitive documentation in relation to Harbour exiting
and Navitas entering the North Falkland Basin (the "Transaction").
The Transaction remains subject to completion pending, inter alia, regulatory
approvals.
Under the Transaction Navitas will acquire Premier Oil Exploration and
Production Limited ("POEPL"), the Company in which Harbour holds all of
its Falkland Islands licences. The group and Navitas will seek to align
working interests across all their North Falkland Basin petroleum licences -
Rockhopper 35% / Navitas 65% - subject to all necessary consents.
The Group and Navitas will jointly develop and agree a technical and financing
plan to enable the development of the Sea Lion project to achieve first oil on
a lower cost and expedited basis post sanction.
Navitas wil provide loan funding to the Group to cover;
(i) 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").
(ii) 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.
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. END FR KZGZKGLRGZZZRecent news on Rockhopper Exploration
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