REG - Rockhopper Exp plc - Half-year Report
26/09/2024 07:00
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RNS Number : 7080F Rockhopper Exploration plc 26 September 2024
26 September 2024
Rockhopper Exploration plc
("Rockhopper", the "Group" or the "Company")
Half-Year Results for the Six Months Ended 30 June 2024
Rockhopper Exploration plc (AIM: RKH), the oil and gas company with key
interests in the North Falkland Basin ("NFB"), announces its unaudited results
for the six months ended 30 June 2024 ("H1 2024").
YEAR TO DATE HIGHLIGHTS
Sea Lion and North Falkland Basin
· Rockhopper holds 35% working interest
· Rockhopper benefits from pre and post Final Investment Decision
("FID") loan from the operator Navitas Petroleum Development and Production
Limited (1) ("Navitas" or "Operator")
· Independent Resource Report commissioned by Navitas(2)
o Sea Lion initial development targeting 312mmbbls via two drilling
campaigns
o Sea Lion total 2C resource base 791mmbbls
o Plateau production up to 55 kbbls/d for prolonged period of eight years
o Life of field costs US$25/bbls
o NPV 10 of first 312 mmbbls development > US$4bn gross to the JV pre tax
post Falkland Islands Government royalty at US$77 Brent
· Environmental Impact Statement ("EIS") public consultation period
completed
Ombrina Mare Arbitration Award (the "Award")
· Transaction to monetise the Award completed
· First Tranche payment received - €19m retained by Rockhopper
· Annulment hearing with ICSID convened ad hoc committee (the
"Committee") completed
· Post hearing submissions completed
· Cost submissions made to Committee (by Rockhopper and Italy)
· No formal timetable for outcome, hopeful a decision is possible by
year end 2024
Balance Sheet
· Balance sheet strengthened following completion of Award monetisation
· Period end cash balance US$27.8m
· Cost control maintained
Outlook
· Strong balance sheet
· Work continues on securing all permissions required to launch Sea
Lion financing, including EIS and licence extension
· Ombrina Mare annulment, hopeful a decision is possible by year end
2024
Samuel Moody, CEO, commented:
"Rockhopper is in its strongest position for some time. Monetisation of the
Award delivers increased financial flexibility and allows the Company to focus
on progressing Sea Lion to sanction, which remains our core focus. We also
welcome the news, announced on 24th September, of a new general co-operation
agreement between the Falklands and Argentina.
"I would like to thank our team for their continued commitment to driving
progress at Rockhopper and our shareholders for their continued support at
this exciting time for the Group."
(1) Navitas is the legal entity that holds and operates Sea Lion and our
other NFB licences. The company's ultimate and controlling parent is Navitas
Petroleum LP, a limited partnership established and registered in Israel and
listed on the Tel Aviv Stock Exchange.
(2) Rockhopper is not an addressee and has not been party to the production
of the 2024 NSAI Independent Report. The 2024 NSAI Independent Report has been
produced to PRMS standards. The last independent resource report commissioned
directly by Rockhopper was the ERCE 2016 Report which had an estimated 2C
value of 517 MMbbls. See RNS dated 22 January 2024.
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/Charlie Hammond
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton/Georgia Langoulant
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons/Fiona Hetherington
Tel. +44 (0) 20 7390 0234
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Rockhopper's strategy is to create value for all our stakeholders through the
safe and responsible development of our assets in the NFB. The Company has
been operating offshore the Falkland Islands since 2004 and discovered the Sea
Lion oilfield in 2010. We are a long term partner of the Falkland Islands
Government ("FIG") and our aim has always been to support the rights of the
Falkland Islanders to develop their natural resources.
Sea Lion project
Our view remains unchanged: the Sea Lion oil field and its associated follow
on potential within the NFB, represents a hugely important and valuable
strategic asset for the Falkland Islands, the UK and all of our
stakeholders. Since replacing Harbour Energy in 2022, Navitas, the field's
operator, has increased resources while reducing costs, resulting in a field
with highly attractive and robust economics.
An independent report, commissioned by Navitas, confirms that the first
312mmbbls of the total 791mmbbls of the field (on a 2C basis) has a gross NPV
10 of over US$4bn on a pre tax, post FIG royalty at US$77 Brent. The life of
field cash breakeven is currently estimated to be US$25/bbl making the project
financially attractive at a range of commodity prices.
An updated Environmental Impact Statement was submitted to FIG in July 2024
and the statutory public consultation period has now concluded. The next step
will be for FIG to consider the responses provided by the Operator.
Simultaneously we are engaged with FIG on licence extensions, prior to their
expiry in November 2024.
We continue to engage with the Operator as they look to secure a financing
package for Sea Lion phase 1 and work towards FID. We will inform the market
as and when we receive material updates from the Operator, including
associated timing, in this regard.
Ombrina Mare
As announced on 24 August 2022, the arbitration panel unanimously held that
Italy breached its obligations under the Energy Charter Treaty and awarded
Rockhopper compensation of approximately €190 million plus interest and
EURIBOR + 4% compounded annually from 29 January 2016 until the time of
payment (except for the four month period immediately following the date of
the Award).
Having announced a transaction to monetise the Award in December 2023 (the
"Monetisation"), the Monetisation completed in June 2024 and Rockhopper
received the first payment of €19 million that month. All of Rockhopper's
costs associated with the Award from the date of signature in December 2023
are covered by the new funder ("Specialist Fund").
A hearing was held in Madrid in April 2024 as part of Italy's request to have
the Award annulled following which post hearing submissions were made in
response to questions raised by the Committee. Additionally, during
September 2024 submissions detailing costs incurred both by Rockhopper and
Italy were made to the Committee.
Whilst there is no formal timetable, we continue to be hopeful that a decision
is possible before the end of 2024 but otherwise expected in H1 2025.
Corporate matters
Following completion of the Monetisation, our balance sheet is the strongest
it has been for some time, and we ended the period with approximately US$27.8
million in cash and term deposits.
We maintain a small core team with unparalleled historic knowledge of the Sea
Lion field and its associated Falkland Islands oil and gas operations.
Environmental, Social and Governance ("ESG")
ESG and Corporate Responsibility continue to be a key focus for Rockhopper. As
an oil and gas exploration and production business, our role is to discover
and produce hydrocarbons in an environmentally responsible manner, supporting
energy requirements during the energy transition.
As noted previously, 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 Falkland Islands.
Once FID on Sea Lion has been achieved, the Company commits to defining
measures, reporting transparently, and mitigating our own emissions as far as
practicable.
Outlook
The completion of the Award Monetisation puts our balance sheet in the best
position it has been for a number of years and we now await the outcome of the
annulment request from Italy.
Meanwhile, Navitas continues to progress our core asset, Sea Lion, having not
only completed the EIS public consultation period but also developed the field
development plan to a highly advanced stage. We continue to believe that our
35% interest in the field and all associated upside represents a potentially
hugely valuable asset.
In addition, we continue to focus on ways in which we can strengthen and
protect the Company's balance sheet.
As a result, the coming 12 months could see some of the most exciting
developments at the Company for some considerable time.
FINANCIAL REVIEW
Results for the period
For the period ended 30 June 2024, the Group reported a profit after tax of
US$16.5 million (H1 2023: loss of US$2.6 million).
The Monetisation
From a financial perspective the main event during the period was the
completion of the Monetisation. This has resulted in an after tax profit
contribution of US$18.7 million in the period.
On completion of the Monetisation, the Group received the Tranche 1 payment of
€19 million. Whilst legally Rockhopper has retained the legal and beneficial
ownership of the Award, accounting follows the substance of the transaction
which is akin to a disposal. As such this Tranche 1 payment has been recorded
as other income and expenses of US$20.6 million.
No income has been recorded for the Tranche 2 and Tranche 3 payments as they
are contingent on future events, in particular, successfully contesting the
attempted annulment of the Award
Revenue and cost of sales
The Group's production ceased during 2022, as such there were no revenues in
the period (H1 2023: US$nil). Even though there has been no revenue in the
period there are costs associated with maintaining the various production
concessions whilst potential options for additional development are
investigated.
Operating activities
The decrease in Administrative expenses ("G&A") for the period to
US$1.5million (H1 2023: US$2.1 million) almost entirely relates to legal fees
associated with the Ombrina Mare Arbitration. Since the end of 2023 the cost
associated with the Arbitration have been borne by the Specialist Fund.
Previously the Group made the decision to use existing resources to fund all
legal costs arising from contesting the request by Italy for annulment whilst
it explores all funding possibilities. In the prior period, costs were
incurred contesting Italy's request for a stay of enforcement as well as
initial fees drafting the Group's counter memorial on annulment itself.
Excluding these, G&A costs have remained flat.
The foreign exchange loss in the period is US$0.3 million (H1 2023: gain of
US$0.6 million). These mainly arise on GBP and Euro denominated cash and term
deposit balances in both the current and prior period.
Finance expenses in the period of US$0.2 million (H1 2023: $US0.7 million)
relate to the unwinding of discounts on provisions. The previous period
finance expense included US$0.5 million from fair valuing of derivative
financial liabilities. This related to warrants issued as part of the placing
in 2022 and were all exercised or lapsed in the prior year.
Cash movements and capital expenditure
At 30 June 2024, the Group had cash and term deposits of US$27.8 million (31
December 2023: US$8.0 million).
Cash and term deposit movements during the period:
US$m
Opening cash and term deposit balance (31 December 2023) 8.0
Cost of sales (0.3)
Falkland Islands (0.8)
Administrative expenses (1.6)
Proceeds of warrants 2.1
Ombrina Mare Award monetisation 20.6
Miscellaneous (0.2)
Closing cash and term deposit balance (30 June 2024) 27.8
Miscellaneous includes foreign exchange, interest and movements in working
capital during the period.
Oil and gas assets
The Sea Lion development remains central to the Group's plans and the
additions in the period of US$9.2 million almost entirely relate to this
project. The majority of these costs are covered through a loan from Navitas
and are included in other payables. As part of the transaction to bring
Navitas onto the licences, Navitas agreed to provide loan funding to the Group
to cover the majority of its share of Sea Lion phase one related costs from
Transaction completion, in September 2022, up to FID and has interest charged
at 8% per annum (the "Pre-FID Loan"). Subject to a positive FID, Navitas will
provide a second interest free loan to fund two-thirds of the Group's share of
Sea Lion phase one development costs (for any costs not met by third party
debt financing).
Certain costs, such as licence costs, are excluded in both instances. Funds
drawn under the loans will be repaid from 85% of Rockhopper's working interest
share of free cash flow.
Taxation
The charge in the period of US$1.9 million relates to the estimate of tax due
on the first Tranche of proceeds from the monetisation of the Ombrina Mare
Arbitration Award.
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 30 June 2024, the Group had cash resources of US$27.8 million.
Historically, the Group's largest annual expenditure has related to
pre-sanction costs associated with the Sea Lion development. The Group
benefits from loan funding for its share of all Sea Lion pre-sanction costs
(other than licence fees and taxes).
The Group has prepared the financial statements on the basis that it will
continue to operate as a going concern. The Directors consider that there are
no material uncertainties that may cast significant doubt over this
assumption. They have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future, and not less than 12 months from the end
of the reporting period.
Principal risk and uncertainties
A detailed review of the potential risks and uncertainties which could impact
the Group are outlined in the Strategic Report of the Group's annual
consolidated financial statements. The Group identified its key risks at the
end of 2023 as being:
· oil price volatility;
· availability and access to capital;
· joint venture partner alignment; and
· failure of joint venture partners to secure the requisite funding to
allow a Sea Lion Final Investment Decision
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2024
Six months Six months
Ended Ended
30 June 30 June
2024 2023
Unaudited Unaudited
Notes $'000 $'000
Revenue - -
Cost of sales (275) (378)
Gross loss (275) (378)
Exploration and evaluation expenses - (3)
Administrative expenses (1,553) (2,132)
Charge for share based payments (40) (70)
Foreign exchange movement (279) 586
Results from operating activities (2,147) (1,997)
Other income and expenses 2 20,556 -
Finance income 173 128
Finance expense (200) (739)
Profit/(loss) before tax 18,382 (2,608)
Tax 3 (1,882) -
PROFIT/(Loss) for the period attributable to the equity shareholders of the 16,500 (2,608)
parent company
Profit/(loss) per share attributable to the equity shareholders of the parent
company: cents
Basic 4 2.57 (0.44)
Diluted 4 2.53 (0.44)
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2024
Six months Six months
Ended Ended
30 June 30 June
2024 2023
Unaudited Unaudited
Notes $'000 $'000
Profit/(loss) for the period 16,500 (2,608)
Exchange differences on translation of foreign operations 468 (615)
TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE period 16,968 (3,223)
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2024
As at As at
30 June 31 December
2024 2023
Unaudited Audited
Notes $'000 $'000
NON CURRENT Assets
Exploration and evaluation assets 5 266,488 257,228
Property, plant and equipment 21 29
CURRENT Assets
Other receivables 936 1,241
Finance lease receivable - 235
Restricted cash 494 529
Term deposits 7,006 4,501
Cash and cash equivalents 20,842 3,487
Total assets 295,787 267,250
CURRENT Liabilities
Other payables 15,115 7,716
Tax payable 3 1,882 -
Derivative financial liabilities - 450
Lease liability - 246
NON-CURRENT Liabilities
Tax payable 3 - -
Provisions 19,862 20,121
Deferred tax liability 39,137 39,137
Total liabilities 75,996 67,130
Equity
Share capital 9,455 9,196
Share premium 12,585 10,181
Share based remuneration 2,149 2,109
Owns shares held in trust (1,320) (1,320)
Merger reserve 78,208 78,208
Foreign currency translation reserve (8,033) (8,501)
Special reserve 175,281 175,281
Retained losses (48,534) (65,034)
Attributable to the equity shareholders of the company 219,791 200,120
Total liabilities and equity 295,787 267,250
These condensed consolidated interim financial statements were approved by the
directors and authorised for issue on 25 September 2024 and are signed on
their behalf by:
Samuel Moody
Chief Executive Officer
UNAUDITED CONDENSED CONSOLIDATED statement of changes in equity
for the six months ended 30 June 2024
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 2023 9,196 10,181 2,109 (1,320) 78,208 (8,501) 175,281 (65,034) 200,120
Profit for the period - - - - - - - 16,500 16,500
Other comprehensive profit for the year - - - - - 468 - - 468
Total comprehensive profit for the year
- - - - - 468 - 16,500 16,968
Shares issues (net of expenses) 259 2,404 - - - - - - 2,663
Share based payments - - 40 - - - - - 40
Other transfers - - - - - - - - -
Balance at 30 June 2024 9,455 12,585 2,149 (1,320) 78,208 (8,033) 175,281 (48,534) 219,791
for the six months ended 30 June 2023
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 2022 8,771 6,518 1,492 (1,494) 78,208 (7,999) 175,281 (60,310) 200,467
Loss for the period - - - - - - - (2,608) (2,608)
Other comprehensive loss for the year - - - - - (615) - - (615)
Total comprehensive loss for the year
- - - - - (615) - (2,608) (3,223)
Shares issues (net of expenses) 32 252 - - - - - - 284
Share based payments - - 570 - - - - - 570
Other transfers - - - 174 - - - (174) -
Balance at 30 June 2023 8,803 6,770 2,062 (1,320) 78,208 (8,614) 175,281 (63,092) 198,098
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months Six months
Ended Ended
30 June 30 June
2024 2023
Unaudited Unaudited
Notes $'000 $'000
Cash flows from operating activities
Net profit/(loss) before tax 18,382 (2,608)
Adjustments to reconcile net losses to cash:
Depreciation 8 32
Share based payment charge 40 70
Finance expense 195 735
Finance income - (1)
Foreign exchange (111) (637)
Operating cash flows before movements in working capital 18,514 (2,409)
Changes in:
Other receivables 267 (103)
Payables (502) (405)
Provisions - (45)
Cashflow from operating activities 18,279 (2,962)
Cash Flows from investing activities
Capitalised expenditure on exploration and evaluation assets (766) (680)
Investing activities before movements in capital balances (766) (680)
Changes in:
Term deposits (2,532) 3,478
Cash flow from investing activities (3,298) 2,798
Cash flows from financing activities
Net proceeds of share placing and subscription - -
Exercise of warrants 2,109 284
Net lease payments (11) (10)
Cash flow from financing activities 2,098 274
Currency translation differences relating to cash and cash equivalents 276 28
Net cash flow 17,079 110
Cash and cash equivalents brought forward 3,487 1,059
Cash and cash equivalents carried forward 20,842 1,197
Notes to the condensed CONSOLIDATED group financial statements
for the six months ended 30 June 2024
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ("the Company"), a public limited company quoted on
AIM, incorporated and domiciled in the United Kingdom ("UK"), together with
its subsidiaries (collectively, "the Group") holds interests in the Falkland
Islands and the Greater Mediterranean. The Company's registered office address
is Warner House, 123 Castle Street, Salisbury, SP1 3TB.
The interim condensed consolidated financial statements for the six months
ended 30 June 2024 were authorised for issue in accordance with a resolution
of the directors on 25 September 2024.
1.2 Statement of compliance and basis of preparation
The interim condensed consolidated financial statements have been prepared in
accordance with the measurement principles of UK adopted International
Accounting Standards.
Accounting policies are consistent with those adopted in the last statutory
financial statements of Rockhopper Exploration plc. The information as of 31
December 2023 has been extracted from the audited financial statements of
Rockhopper Exploration plc for the year ended 31 December 2023. These interim
condensed consolidated financial statements do not constitute statutory
financial statements under the Companies Act 2006. The information for the
year ended 31 December 2023 shown in this report does not constitute statutory
accounts for that year as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditor has reported on those accounts. Their
report was unqualified, did include an emphasis of matter but did not contain
a statement under section 498 (2) or (3) of the Companies Act 2006.
There has been no impact on the Group of any new standards, amendments or
interpretations that have become effective in the period. The Group has not
early adopted any new standards, amendments or interpretations.
1.3 Going concern
The Group has prepared the financial statements on the basis that it will
continue to operate as a going concern. Given the receipt of funds from the
Specialist Fund in relation to the Monetisation the Directors consider that
there are no material uncertainties that may cast significant doubt over this
assumption. They have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future, and not less than 12 months from the end
of the reporting period.
1.4 Period end exchange rates
The period end rates of exchange actually used were:
30 June 2024 30 June 2023 31 December 2023
£ : US$ 1.26 1.27 1.27
€ : US$ 1.07 1.09 1.10
2 Other income and expenses
In August 2022, pursuant to an ICSID arbitration which commenced in 2017,
Rockhopper was awarded approximately €190 million plus interest and costs
following a unanimous decision by the ICSID appointed arbitral Tribunal that
Italy had breached its obligations under the Energy Charter Treaty (the
"Award").
Rockhopper submitted a letter to the Italian Republic in September 2022
formally requesting payment of €247 million, representing the Award amount
plus accrued interest from 29 January 2016 to 23 August 2022 and costs.
Interest was paused for four months following the date of the Award (being 23
August 2022) and is now accruing at EURIBOR + 4% which Rockhopper estimates at
between €1.25 million and €1.5 million per calendar month. Interest
compounds annually.
As announced, Italy requested that this Award be annulled in October 2022.
When Italy applied for the Award to be annulled, a provisional Stay of
Enforcement was automatically put in place by ICSID pursuant to the ICSID
Convention and Arbitration Rules.
On 20 December 2023, Rockhopper announced its entry into a funded
participation agreement (the "Agreement") with a regulated specialist fund
with over US$4bn of investments under management that has experience in
investing in legal assets (the "Specialist Fund") to monetise its Award.
In line with the terms of the Agreement, the Specialist Fund will make cash
payments to Rockhopper in up to three tranches:
Having satisfied all precedent conditions on 21 June 2024, Rockhopper received
€19 million of the €45 million Tranche 1 payment. As previously disclosed,
Rockhopper entered into a litigation funding agreement in 2017 under which all
costs relating to the Arbitration from commencement to the rendering of the
Award were paid on its behalf by a separate specialist arbitration funder (the
"Original Arbitration Funder"). That agreement entitles the Original
Arbitration Funder to a proportion of any proceeds from the Award or any
monetisation of the Award. The balance of €26 million has gone to Original
Arbitration Funder in order to fully discharge the Company of all of its
liabilities under the agreement with the Original Arbitration Funder.
The €19 million has been treated as other income and expenses, as whilst
Rockhopper retains legal and beneficial ownership of the Award the substance
of the transaction is a disposal of the Award.
No income was recognised in relation to the Tranche 2 and Tranche 3 payments
as they are contingent upon future events. The terms of these Tranches are
described below.
Tranche 2 - Additional contingent payment of €65 million upon a successful
annulment outcome. Should the Award be partially annulled and the quantum
reduced as a result, then Tranche 2 will be reduced such that the amounts
under Tranche 1 and Tranche 2 shall be adjusted downward on a pro-rata basis.
For example, if the quantum of the Award is reduced by 20%, then the amounts
under Tranche 1 and Tranche 2 shall be reduced by 20%. For the avoidance of
doubt, the amounts under Tranche 1 and Tranche 2 shall not reduce below €45m
in any circumstance.
Tranche 3 - Potential payment of 20% on recovery of amounts in excess of 200%
of the Specialist Fund's total investment including costs.
As previously disclosed, success fees of approximately €4 million are owed
to Rockhopper's legal representatives if Rockhopper win the claim, meaning
liability is established and Italy is required to pay more than a nominal sum
in damages (either by way of award or settlement in an amount equal to or more
than €25 million).
3 Tax payable
Six months ended Six months ended
30 June 31 December
2024 2023
$'000 $'000
Unaudited Unaudited
Current tax payable 1,882 -
Non current tax payable - -
1,882 -
Current tax payable relates to tax arising in the period on the Tranche 1
proceeds as disclosed in Note 2.
On the 8 April 2015, the Group agreed binding documentation ("Tax Settlement
Deed") with FIG in relation to the tax arising from the Group's 2012 farm out.
The Tax Settlement Deed confirms the quantum and deferment of the outstanding
tax liability and is made under Extra Statutory Concession 16. The Tax
Settlement Deed also states that the Group is entitled to make adjustment to
the outstanding tax liability if and to the extent that the Commissioner is
satisfied that any part of the Development Carry becomes irrecoverable.
In September 2022 the transaction enabling Harbour Energy plc to exit and
Navitas to enter the NFB completed. Under the transaction the balance of
Development Carry, approximately US$670 million, has become irrecoverable.
Due to the irrecoverable Development Carry in the Group's judgment no further
amounts are due on the Group's 2012 farm-out. Given the highly material nature
of this judgment professional advice has been sought to confirm that it is
probable that the Group is entitled to adjust the outstanding tax liability
for the Development Carry that has become irrecoverable. As such, in the prior
year, the Group derecognised the tax liability to measure it at the most
likely amount it will be settled for, US$nil. We understand that FIG still
believe that the £59.6 million still to be due. We are currently engaged with
FIG to resolve this matter.
Should it be proven that there is no entitlement to adjustment under the Tax
Settlement Deed then the outstanding tax liability would be £59.6 million and
still 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 NFB; or (iii) a change of
control of Rockhopper Exploration plc. In this improbable instance Management
believes the most likely timing of payment is in line with the first royalty
payment. Based on correspondence with FIG, Management does not believe that
the farmout constitutes a substantial disposal and therefore would not have
accelerated the £59.6 million liability should it be shown to still be
payable.
Separately we have submitted tax returns in relation to the farm out to
Navitas that occurred immediately after their acquisition, from Harbour Energy
plc of the company that holds the North Falkland's Basin licences. The
consideration for this transaction was the provision of loan funding to the
Group to cover the majority of its share of Sea Lion phase 1 related costs
from transaction completion up to FID through a loan from Navitas with
interest charged at 8% per annum (the "Pre-FID Loan"). Subject to a positive
FID, Navitas will provide an interest free loan to fund two-thirds of the
Group's share of Sea Lion phase 1 development costs (for any costs not met by
third party debt financing). Whilst we continue to engage with FIG on the
value of this consideration, we are confident that we have sufficient losses
to ensure no tax liability will arise.
4 Basic and diluted loss per share
Six months Six months
ended ended
30 June 30 June
2024 2023
Number Number
Unaudited Unaudited
Shares in issue brought forward 620,229,436 586,485,319
Shares issued
- Issued 20,349,328 2,532,064
Shares in issue carried forward 640,578,764 589,017,383
Weighted average of Ordinary Shares 644,485,599 593,539,285
Shares held in Employee Benefit Trust (1,304,500) (1,304,500)
Weighted average number of Ordinary Shares for the purposes of basic earnings 643,181,099 592,234,785
per share
Effects of
Share options 8,058,678 n/a
Weighted average number of Ordinary Shares for the purposes of diluted
earnings per share
651,239,777 592,234,785
$'000 $'000 $'000
Net profit/(loss) after tax for purposes of basic and diluted earnings per
share
16,500 (2,608)
Earnings per share - cents
Basic 2.57 (0.44)
Diluted 2.53 (0.44)
Shares issued in the period all relate to the exercise of the warrants.
The weighted average number of Ordinary Shares takes into account those shares
which are treated as own shares held in trust. As at the period end the Group
had 1,304,500 Ordinary shares held in an Employee Benefit Trust which have
been purchased to settle future exercises of options. It also takes into
account those employee options ("LTIPs") which have vested and have a nil
exercise cost as in substance these are similar to a vested ordinary share,
and the entity will receive no further substantive consideration when the
option is exercised. As at the period end the Group had 5,553,501 such LTIPs.
As the Group is reporting a loss in the prior period then in accordance with
IAS33 the share options are not considered dilutive because the exercise of
the share options would have the effect of reducing the loss per share.
At the period end, the Group had the following unexercised options in issue.
Six months
ended
30 June
2024
Number
Unaudited
Vested:
Long term incentive plan 5,553,501
Share options 16,880,982
Unvested:
Share options 9,616,669
5 Intangible exploration and evaluation assets
During the period there were US$9.2 million (2023: US$2.0 million) of
additions. These mainly relate to the Sea Lion Development as does the balance
carried forward. The majority of these costs are covered through a loan from
Navitas and are included in other payables.
At 30 June 2024, the Group reviewed its intangible exploration/appraisal
assets for indicators of impairment, with no indicators of impairment being
identified. No impairment tests were therefore performed.
Licences expire at the end of 2024. A license extension has been requested
across all the licences. Whilst there is no guarantee this will be granted
historically the Falkland Islands Government have been supportive and
Management believe that an extension will be received.
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