REG - Rockhopper Exp plc - Half-year Results
29/09/2022 07:00
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RNS Number : 0766B Rockhopper Exploration plc 29 September 2022
29 September 2022
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Half-Year Results for the Six Months Ended 30 June 2022
Rockhopper Exploration plc (AIM: RKH), the oil and gas company with key
interests in the North Falkland Basin, announces its unaudited results for the
six months ended 30 June 2022 ("H1 2022").
Year to date highlights
Sea Lion
· Completion of transaction for Harbour Energy plc ("Harbour") to exit
and Navitas Petroleum LP (through its UK subsidiary) "Navitas" to enter the
North Falkland Basin with a 65% stake in, and operatorship of, all of
Rockhopper's North Falkland Basin licences
· Rockhopper retains material 35% working interest in North Falkland
Basin licences
· Extension of all North Falkland Basin licences to 1 November 2024
· Improved alignment in the Sea Lion Joint Venture, with Rockhopper
benefitting from an attractive funding package from Navitas
Ombrina Mare
· Successful arbitration outcome with unanimous decision in
Rockhopper's favour
· Compensation of €190 million
· Interest at EURIBOR + 4% accruing annually from 29 January 2016
· Temporary four-month pause in interest from date of award
· Italy has 120 days to apply for an annulment of the award, which can
only be annulled in limited circumstances
Corporate and financial
· Successful capital raise of US$10.4 million by way of placing and
open offer
· Warrants issued to provide additional upside to holders and future
potential balance sheet strength
· Continued focus on costs
Outlook
· Lower upfront cost Sea Lion development being worked up and financing
sought
· Arbitration award, after collection, will make a material
contribution towards Rockhopper's share of Sea Lion development costs
· Sea Lion FID targeted 2023/24
Keith Lough, Chairman of Rockhopper, commented:
"Following completion of our transaction with Navitas, the capital raise, and
the successful arbitration outcome, we stand on the cusp of what we believe
will be the most exciting period at Rockhopper for some years, culminating, we
hope, in the development of a material scale energy resource in a British
Overseas Territory.
We have a committed and capable partner with proven financing capability,
which has recruited an exceptional and highly experienced development engineer
to run the Sea Lion project.
Amidst continued global uncertainty and material domestic pressures, we
continue to believe a responsibly developed Sea Lion oilfield could provide
both a meaningful source of financial benefit to the Falkland Islands, and a
strategically and financially important resource to the United Kingdom.
Furthermore, Sea Lion is not a one-off project. We have very material low-risk
exploration upside, providing potential additional benefits to all
stakeholders.
We thank our stakeholders and the Falkland Islands Government for their
continued support as we strive to reach project sanction and unlock material
value for all involved."
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive Officer
Tel. +44 (0) 20 7390 0234 (via Vigo Consulting)
Canaccord Genuity Limited (NOMAD and Joint Broker)
Henry Fitzgerald-O'Connor/Gordon Hamilton
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton/Georgia Langoulant
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons/Kendall Hill
Tel. +44 (0) 20 7390 0234
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Rockhopper's strategy is to create value for all our stakeholders through the
safe and responsible development of our assets in the North Falkland Basin.
The Company has been operating offshore the Falkland Islands since 2004 and
discovered the Sea Lion oilfield in 2010. We are a long-term partner of the
Falkland Islands Government ("FIG"), and our aim has always been to support
the rights of the Falkland Islanders to develop their natural resources.
Sea Lion development
We believe that the Sea Lion oilfield represents a material strategic resource
both for the Falkland Islands and the wider United Kingdom. With more than 500
million barrels of recoverable oil in the Rockhopper ERC audit and some 700
million barrels in the Navitas NSAI CPR, we believe this field alone is larger
than Cambo and Rosebank combined.
Having spent many years as 100% owner and operator exploring and appraising
the field, we have an unrivalled depth of knowledge of both Sea Lion and
operating in the Falklands. In fact, we have carried out more oil and gas
operations in the Falklands than any other company, all with an exemplary HSE
record and strong operational performance. Our track record in the Sea Lion
area includes eight successful wells from ten, which we believe stands in
comparison to many significantly larger companies in the industry and provides
encouragement for the potential for additional discoveries in the region.
The years spent working with Premier Oil (now Harbour) in our Joint Venture
have not been wasted. Hundreds of millions of dollars and tens of thousands of
hours have been spent engineering Sea Lion to a point where we are entirely
confident that a responsible and high-quality project is deliverable using
proven industry technology.
The addition of Navitas, with its exceptional recent track record of financing
offshore developments others believed would never come to fruition, combined
with a favourable oil price outlook and increased focus on security of energy
supply, brings the potential value of the Sea Lion field into sharp focus.
Premier previously confirmed that the field could produce in excess of 120,000
barrels per day over two phases, representing a potential increase of between
10% and 15% in UKCS oil production from Sea Lion alone. Many low-risk near
field prospects have been identified and the potentially large Isobel / Elaine
discovery approximately 30km to the south of Sea Lion provides additional
long-term potential. Shell's well 14/15-1, drilled in 1998, encountered a
large gas column in a low-quality reservoir. Although not without risk, we
have always believed that the potential exists for a multi TCF gasfield in the
Falkland Islands, with associated strategic implications for the Falklands and
the United Kingdom. Significant UK content was planned by Premier in the
development potentially bringing billions of dollars of wider UK benefits.
We look forward to working with Navitas, with whom we have already developed a
strong relationship, as they build on all our existing work and knowledge to
engineer an appropriate development concept and put together a financing
package which could allow FID to be taken at Sea Lion during late 2023 or
2024.
Ombrina Mare arbitration
The successful outcome of the Ombrina Mare arbitration is a vindication of our
belief in the strength of our case, which we have articulated to shareholders
since we commenced the arbitration process back in 2017. The Panel unanimously
decided in Rockhopper's favour and awarded what we believe to be a fair and
equitable compensation for the loss of our asset which, at current oil prices,
would be enormously valuable. Compensation of some €190 million with
appropriate interest has been awarded.
Under the relevant rules, Italy has 120 days to apply for an annulment of the
award; such awards can only be annulled in limited circumstances. At the date
of this report, we have not heard from the Italian Republic regarding its
intentions. For our part, we have written requesting immediate payment and
reminding Italy not only of its obligation to settle the full amount, but of
our rights to pursue all available remedies against Italy and its
representatives in any forum without any further notice should they fail to
fulfil their obligations to us.
We hope and believe Italy will act in accordance with their obligations but we
will have no hesitation in seeking to enforce this award in multiple
jurisdictions should they fail to do so. The entire situation is deeply
regrettable as, had we been allowed to develop the asset in accordance with
Italy's own relevant legislation, not only would we now be producing at high
oil prices, but, perhaps more importantly, Italy would have benefitted from
material local well-paid employment along with taxes and a domestic source of
oil at a challenging time for many. It should be noted that Italy continues to
produce material volumes of hydrocarbons within 12 miles of its coastline.
Costs associated with the arbitration proceedings were funded on a
non-recourse ("no win - no fee") basis from a specialist arbitration funder.
After payments due to the arbitration funder and success fees due to the
Group's legal representation, Rockhopper expects to retain approximately 80%
of the award (assuming full recovery of the award). Further analysis is
required to establish the tax treatment on any payments related to the award.
Corporate Matters
We were delighted to receive the support of our existing and new shareholders
in the US$10.4 million capital raise completed in the early part of the
summer. We undertook the additional cost and effort required to proceed with
an open offer to ensure that existing individual shareholders were given the
opportunity to participate in the capital raise on identical terms as
institutional investors. We offered those participating in the capital raise
warrants, giving them the right to purchase shares at 9p to be exercised at
any point until 31 December 2023, providing them with additional potential
upside and Rockhopper a stronger balance sheet should those warrants be
exercised.
During what has been a difficult and challenging time for the industry and for
our business, we are delighted to have found what we believe is the right way
to balance a very significant cost reduction with retaining the key knowledge
we have accumulated in the Falklands. Recurring G&A is now down over 70%
when compared to 2014, and we believe some further savings are possible as we
continue to run the business in the best interests of all stakeholders.
Environmental, Social and Governance
ESG, and Corporate Responsibility more generally, continues to be a key focus
for Rockhopper.
As an oil and gas exploration and production business our role is to discover
and produce hydrocarbons in an environmentally responsible manner.
As noted previously, the Falkland Islands Government established an
independent environment trust to receive and administer future off-setting
payments from the Sea Lion project and distribute those funds for activities
aimed at ensuring a positive environmental legacy in the Falkland Islands.
Once FID on Sea Lion has been achieved, the Company commits to defining
measures, reporting transparently, and mitigating our own emissions as far as
practicable.
Outlook
Sea Lion is an oilfield with the scale and potential to create very material
value for Rockhopper, its partners, and the Falkland Islands as a whole, in
addition to providing the UK with a secure and significant source of supply
for years to come.
Since the start of this year, we have achieved three major milestones which,
when taken as a whole, puts the Company in the best shape we have been in for
many years.
We thank the Falkland Islands Government for its continued support and we
will continue to work closely with all stakeholders to maximise the chance of
unlocking the value within the project, long-awaited by all stakeholders.
Keith Lough Sam Moody
Chairman Chief Executive Officer
FINANCIAL REVIEW
Overview
From a finance perspective, the most significant events in 2022 to date are:
· Detailed transaction terms agreed with Harbour and Navitas in
relation to the Sea Lion project (the "Transaction") - completed post period
end in September 2022
· Successful fundraising through Placing and Subscription raising net
proceeds of US$6.3 million in June 2022
· Additional US$2.8 million net proceeds raised post period end through
Open Offer in July 2022
· Successful ICSID arbitration award in respect of Ombrina Mare.
Compensation of €190 million plus interest at EURIBOR + 4%, compounded
annually from 29 January 2016 until time of payment
With the Transaction completing post period end the arrangements with Navitas
ensure that Rockhopper is funded going forward for all pre-sanction costs
related to the Sea Lion phase one development (other than licence fees and
taxes). This, combined with the fundraising, materially strengthens the
Group's financial position in the short and medium term and significantly
enhances the prospects for a successful project financing for Sea Lion.
The arbitration award was made in September 2022 and, as such, has no impact
on the results for the period to 30 June 2022. Assuming full recovery of the
award, after payments due to the arbitration funder and success fees due to
the Group's legal representation, the Group expects to retain approximately
80% pre-tax. Further analysis has begun to establish the tax treatment on any
payments received.
Results for the period
For the period ended 30 June 2022, the Group reported revenues of US$0.5
million (H1 2021: US$0.3 million) and a loss after tax of US$0.7 million (H1
2021: loss of US$3.3 million). The reduction in loss after tax was driven
mainly by net foreign exchange gains on GBP denominated balances. In
particular, the weakening of the GBP against the USD resulted in a US$4.4
million gain on the current carrying value of the tax liability with FIG.
Revenue and cost of sales
The Group's revenues of US$0.5 million (H1 2021: US$0.3 million) in H1 2022
relate entirely to the sale of natural gas in the Greater Mediterranean
(specifically Italy) region. Gas was sold at a price linked to the Italian
"PSV" (Virtual Exchange Point) gas marker price.
Revenue and cost of sales are not expected to be material going forward.
Operating costs
The Group continues to manage corporate costs and has achieved significant
reductions in recurring general and administrative ("G&A") costs over the
last five years. The full benefit of these cost reduction initiatives was
realised last year resulting in a relatively stable G&A cost of US$1.5
million in H1 2022 (H1 2021: US$1.6 million).
The foreign exchange gain in the period of US$3.4 million (2021: loss of
US$0.3 million) is mainly in relation to the tax balance arising from the
Group's farm-out to Premier in 2012 offset by a loss on GBP denominated
assets, such as cash and debtors. The finance expense in the year of US$2.0
million (2021: US$nil) also relates, in the main, to adjustments in relation
to this tax balance.
Cash movements and capital expenditure
At 30 June 2022, the Group had cash of US$9.1 million (31 December 2021:
US$4.8 million).
Cash movements during the period:
US$m
Opening cash balance (31 December 2021) 4.8
Revenues 0.5
Cost of sales (0.8)
Falkland Islands (0.9)
Administrative expenses (1.5)
Net proceeds of fundraising 6.3
Miscellaneous 0.7
Closing cash balance (30 June 2022) 9.1
Miscellaneous includes foreign exchange and movements in working capital
during the period.
Oil and gas assets
The Sea Lion development remains central to the Group's plans and we are
excited at the prospect of bringing in a new industry partner, Navitas,
especially given their experience in financing projects of a similar scale to
Sea Lion.
As part of the Transaction to bring Navitas onto the licences we have been
granted a two-year licence extension from FIG. This should allow the newly
formed joint venture to leverage the extensive engineering work carried out to
date and pursue a lower upfront cost development.
The Transaction aligns working interests across all the North Falkland Basin
petroleum licences - Rockhopper 35% / Navitas 65%. Work between the Group and
Navitas had already begun pre completion and will continue with the aim to
jointly develop and agree a technical and financing plan for the Sea Lion
project. Current work targets delivering a project that achieves first oil on
a lower cost and expedited basis post sanction.
Navitas will provide loan funding to the Group to cover the majority of its
share of Sea Lion phase one related costs from Transaction completion up to
Final Investment Decision ("FID") through a loan from Navitas with interest
charged at 8% per annum (the "Pre-FID Loan"). Subject to a positive FID,
Navitas will provide an interest free loan to fund two-thirds of the Group's
share of Sea Lion phase one development costs (for any costs not met by third
party debt financing).
Certain costs, such as licence costs, are excluded in both instances. Funds
drawn under the loans will be repaid from 85% of Rockhopper's working interest
share of free cash flow.
Taxation
On 8 April 2015, the Group agreed binding documentation ("Tax Settlement
Deed") with FIG in relation to the tax arising from the Group's farm-out to
Premier.
The Tax Settlement Deed confirms the quantum and deferment of the outstanding
tax liability and is made under Extra Statutory Concession 16.
As a result of the Tax Settlement Deed and the Group receiving the full
Exploration Carry from Premier during the 2015/16 drilling campaign, the
outstanding tax liability is confirmed at £59.6 million. This is payable on
the earlier of: (i) the first royalty payment date on Sea Lion; (ii) the date
of which Rockhopper disposes of all or a substantial part of the Group's
remaining licence interests in the North Falkland Basin; or (iii) a change of
control of Rockhopper Exploration plc.
The outstanding tax liability is classified as non-current and is discounted
to a period-end value of US$40.7 million (31 December 2021 US$43.2 million).
Full details of the provisions and undertakings of the Tax Settlement Deed are
disclosed in note 7 of these consolidated financial statements and these
include "creditor protection" provisions including undertakings not to declare
dividends or make distributions while the tax liability remains outstanding
(in whole or in part).
Liquidity, counterparty risk and going concern
The Group monitors its cash position, cash forecasts and liquidity on a
regular basis and takes a conservative approach to cash management.
At 31 August 2022, the Group had cash resources of US$10.9 million
(unaudited). While there are still some Transaction costs and the Group's
share of Harbour wind down costs to come, going forward projected recurring
expenditure is currently expected to be around US$4.0 million per year.
Historically, the Group's largest annual expenditure has related to
pre-sanction costs associated with the Sea Lion development. Following the
completion of the Transaction, Navitas will provide loan funding to the Group
for its share of all Sea Lion pre-sanction costs (other than licence fees and
taxes). Based on previous correspondence with FIG, management does not believe
the Transaction completion would constitute a substantial disposal and
therefore will not accelerate the deferred CGT liability related to the 2012
farm-out.
Given the above, the Directors believe that the Group is sufficiently funded
and that the use of the going concern basis is appropriate.
Principal risk and uncertainties
A detailed review of the potential risks and uncertainties which could impact
the Group are outlined in the Strategic Report of the Group's annual
consolidated financial statements. The Group identified its key risks at the
end of 2021 as being:
· oil price volatility;
· access to capital;
· joint venture partner alignment; and
· failure of joint venture partners to secure the requisite funding to
allow a Sea Lion Final Investment Decision.
In 2020, the environmental impact of oil and gas extraction (e.g., climate
change) was added to the risk register, reflecting the increased focus on ESG
issues which could have an adverse impact on investor and lender sentiment
towards the Group and the Sea Lion project.
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
Revenue 2 523 347
Other cost of sales (803) (571)
Depreciation and impairment of oil and gas assets - (440)
Total cost of sales (803) (1,011)
Gross loss (280) (664)
Exploration and evaluation expenses - (131)
Administrative expenses (1,461) (1,578)
Charge for share based payments (314) (637)
Foreign exchange movement 3,356 (262)
Results from operating activities and other income 1,301 (3,272)
Finance income 2 3
Finance expense (2,052) (32)
Loss before tax (749) (3,301)
Tax 3 - -
Loss for the period attributable to the equity shareholders of the parent (749) (3,301)
company
Loss per share attributable to the equity shareholders of the parent company:
cents
Basic 4 (0.16) (0.72)
Diluted 4 (0.16) (0.72)
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
Loss for the period (749) (3,301)
Exchange differences on translation of foreign operations 2,350 394
TOTAL COMPREHENSIVE PROFIT/(Loss) FOR THE period 1,601 (2,907)
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2022
As at As at
30 June 31 December
2022 2021
Unaudited Audited
Notes $'000 $'000
NON CURRENT Assets
Exploration and evaluation assets 5 250,354 249,583
Property, plant and equipment 6 132 201
Finance lease receivable 554 730
CURRENT Assets
Other receivables 2,204 2,074
Finance lease receivable 259 288
Restricted cash 521 579
Cash and cash equivalents 9,082 4,822
Total assets 263,106 258,277
CURRENT Liabilities
Other payables 3,698 2,000
Lease liability 235 286
NON-CURRENT Liabilities
Lease liability 552 842
Tax payable 7 40,701 43,204
Provisions 17,317 18,287
Deferred tax liability 39,137 39,137
Total liabilities 101,640 103,756
Equity
Share capital 8,223 7,218
Share premium 3,742 3,622
Share based remuneration 3,261 4,327
Owns shares held in trust (3,342) (3,342)
Merger reserve 78,237 74,332
Foreign currency translation reserve (7,332) (9,682)
Special reserve 175,281 175,281
Retained losses (96,604) (97,235)
Attributable to the equity shareholders of the company 161,466 154,521
Total liabilities and equity 263,106 258,277
These condensed consolidated interim financial statements were approved by the
directors and authorised for issue on 28 September 2022 and are signed on
their behalf by:
Samuel Moody
Chief Executive Officer
CONDENSED CONSOLIDATED statement of changes in equity
for the six months ended 30 June 2022
Foreign
Shares currency
Share Share Share 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 2021 7,218 3,622 4,327 (3,342) 74,332 (9,682) 175,281 (97,235) 154,521
Loss for the year - - - - - - - (749) (749)
Other comprehensive profit for the year - - - - - 2,350 - - 2,350
Total comprehensive loss for the year
- - - - - 2,350 - (749) 1,601
Shares issued in placing 1,005 120 - - 3,905 - - - 5,030
Share based payments - - 314 - - - - - 314
Other transfers - - (1,380) - - - - 1,380 -
Balance at 30 June 2022 8,223 3,742 3,261 (3,342) 78,237 (7,332) 175,281 (96,604) 161,466
for the six months ended 30 June 2021
Foreign
Shares currency
Share Share Share 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 2020 7,218 3,622 5,973 (3,342) 74,332 (10,571) 188,028 (104,693) 160,567
Loss for the year - - - - - - - (3,301) (3,301)
Other comprehensive profit for the year - - - - - 394 - - 394
Total comprehensive loss for the year
- - - - - 394 - (3,301) (2,907)
Share based payments - - 637 - - - - - 637
Other transfers - - (2,261) - - - - 2,261 -
Balance at 30 June 2021 7,218 3,622 4,349 (3,342) 74,332 (10,177) 188,028 (105,733) 158,297
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months Six months
Ended Ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes $'000 $'000
Cash flows from operating activities
Net loss before tax (749) (3,301)
Adjustments to reconcile net losses to cash:
Depreciation 64 654
Share based payment charge 314 637
Finance expense 2,050 31
Finance income (1) (1)
Foreign exchange (4,213) 208
Operating cash flows before movements in working capital (2,535) (1,772)
Changes in:
Other receivables 1,053 682
Payables 600 (728)
Cash utilised by operating activities (882) (1,815)
Cash Flows from investing activities
Capitalised expenditure on exploration and evaluation assets (877) (2,395)
Purchase of property, plant and equipment - (24)
Interest - 1
Cash flow from investing activities (877) (2,418)
Cash flows from financing activities
Net proceeds of share placing and subscription 6,280 -
Lease liability payments (133) (327)
Finance paid - (3)
Cash flow from financing activities 6,147 (330)
Currency translation differences relating to cash and cash equivalents (128) (24)
Net cash outflow 4,388 (4,563)
Cash and cash equivalents brought forward 4,822 11,680
Cash and cash equivalents carried forward 9,082 7,093
Notes to the condensed CONSOLIDATED group financial statements
for the six months ended 30 June 2022
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ("the Company"), a public limited company quoted on
AIM, incorporated and domiciled in the United Kingdom ("UK"), together with
its subsidiaries (collectively, "the Group") holds interests in the Falkland
Islands and the Greater Mediterranean. 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 2022 were authorised for issue in accordance with a resolution
of the directors on 28 September 2022.
1.2 Statement of compliance and basis of preparation
The interim condensed consolidated financial statements for the six months
ended 30 June 2022 have been prepared in accordance with IAS 34 Interim
Financial Reporting.
The Group has prepared the financial statements on the basis that it will
continue to operate as a going concern. The Directors consider that there are
no material uncertainties that may cast significant doubt over this
assumption. They have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future, and not less than 12 months from the end
of the reporting period.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual consolidated financial
statements as at 31 December 2021.
1.3 New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual consolidated financial statements for the
year ended 31 December 2021, except for the adoption of new standards
effective as of 1 January 2022. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2022, but do not have an impact
on the interim condensed consolidated financial statements of the Group.
1.4 Period end exchange rates
The period end rates of exchange actually used were:
30 June 2022 30 June 2021 31 December 2021
£ : US$ 1.21 1.38 1.35
€ : US$ 1.05 1.19 1.13
2 Revenue and segmental information
Six months ended 30 June 2022 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
Revenue - 523 - 523
Cost of sales - (803) - (803)
Gross profit/(loss) - (280) - (280)
Administrative expenses - (332) (1,129) (1,461)
Charge for share based payments - - (314) (314)
Foreign exchange movement 4,368 - (1,012) 3,356
Results from operating activities and other income 4,368 (612) (2,455) (1,301)
Finance income - - 2 2
Finance expense (1,904) (140) (8) (2,052)
Loss before tax 2,464 (752) (2,461) (749)
Tax - - - -
Loss for period 2,464 (752) (2,461) (749)
Reporting segments assets 249,988 2,298 10,820 263,106
Reporting segments liabilities (83,878) (14,430) (3,332) (101,640)
There are no material additions to segment assets.
Six months ended 30 June 2021 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
Revenue - 347 - 347
Cost of sales - (1,011) - (1,011)
Gross profit/(loss) - (664) - (664)
Exploration and evaluation expenses - (4) (127) (131)
Administrative expenses - (412) (1,166) (1,578)
Charge for share based payments - - (637) (637)
Foreign exchange movement (270) - 8 (262)
Results from operating activities and other income (270) (1,080) (1,922) (3,272)
Finance income - 1 2 3
Finance expense - (3) (29) (32)
Loss before tax (270) (1,082) (1,949) (3,301)
Tax - - - -
Loss for period (270) (1,082) (1,949) (3,301)
Reporting segments assets 244,213 3,120 8,745 256,078
Reporting segments liabilities (80,110) (15,235) (2,436) (97,781)
There are no material additions to segment assets.
All of the Group's worldwide sales revenues of oil and gas US$523 thousand (H1
2021: US$347 thousand) arose from contracts to customers. Total revenue
relates to revenue from one customer (2021: one customer).
3 Taxation
Six months Six months
ended ended
30 June 30 June
2022 2021
$'000 $'000
Unaudited Unaudited
Current tax:
Overseas tax - -
Adjustment in respect of prior periods - -
Total current tax - -
Deferred tax:
Overseas tax - -
Total deferred tax - -
Tax on ordinary activities - -
4 Basic and diluted loss per share
Six months Six months
ended ended
30 June 30 June
2022 2021
Number Number
Unaudited Unaudited
Shares in issue brought forward 458,482,117 458,482,117
Shares issued
- Issued 82,182,776 -
Shares in issue carried forward 540,664,893 458,482,117
Weighted average of Ordinary Shares 463,476,650 458,482,117
Shares held in Employee Benefit Trust (3,131,000) (3,131,000)
Weighted average number of Ordinary Shares for the purposes of basic earnings 460,345,650 455,351,117
per share
$'000 $'000 $'000
Net loss after tax for purposes of basic and diluted earnings per share
(749) (3,301)
Earnings per share - cents
Basic (0.16) (0.72)
Diluted (0.16) (0.72)
Shares issued in the period all relate to the Placing and Subscription
completed just prior to the period end. Numbers do not reflect shares issued
as part of the Open Offer as this complete post period end. Details of the
Open Offer are included in Note 8.
The weighted average number of Ordinary Shares takes into account those shares
which are treated as own shares held in trust. As at the period end the Group
had 3,131,000 Ordinary shares held in an Employee Benefit Trust which have
been purchased to settle future exercises of options. As the Group is
reporting a loss in the year then in accordance with IAS33 the share options
are not considered dilutive because the exercise of the share options would
have the effect of reducing the loss per share.
At the period end, the Group had the following unexercised options and share
appreciation rights in issue.
Six months
ended
30 June
2022
Number
Unaudited
Long term incentive plan 7,132,537
Share appreciation rights 277,162
Share options 23,694,588
Warrants 41,091,388
Warrants were issued as part of the Placing. Each Warrant gives the holder the
right to subscribe for one new Ordinary Share at a price of 9 pence per
Ordinary Share at any time from the issue of the Warrants up to (and
including) 5.00 p.m. on 31 December 2023.
Additional Warrants were issued after the period end as part of the Open
Offer. Details of the number of warrants issued post period end are included
in note 8. These warrants have the same exercise terms as those issued as part
of the Placing.
5 Intangible exploration and evaluation assets
During the period there have not been any material additions. The balance
carried forward is predominantly in relation to the Sea Lion project.
At 30 June 2022, the Group reviewed its intangible exploration/appraisal
assets for indicators of impairment, with no indicators of impairment being
identified. No impairment tests were therefore performed.
6 Property, plant and equipment
During the period there have not been any material additions. The movement in
the period mainly relates to depreciation.
7 Tax payable
Six months ended Year
ended
30 June 31 December
2022 2021
$'000 $'000
Unaudited Audited
Current tax payable - -
Non current tax payable 40,701 43,204
40,701 43,204
On the 8 April 2015, the Group agreed binding documentation ("Tax Settlement
Deed") with FIG in relation to the tax arising from the Group's farm-out to
Premier.
The Tax Settlement Deed confirms the quantum and deferment of the outstanding
tax liability and is made under Extra Statutory Concession 16.
As a result of the Tax Settlement Deed the outstanding tax liability is
confirmed at £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.
Management in reviewing the carrying value of the tax liability have had to
make key judgements about both the timing of the liability and the discount
rate applied. Management believe the most likely timing of payment is in line
with the first royalty payment. As such the tax liability has been classified
as a non current liability and has been discounted. At the period end payment
is anticipated to be in 5.0 years (31 December 2021: 5.5 years) and a discount
rate of 12% (31 December 2021: 12%) has been applied.
As completion of the Transaction happened post period end, no adjustments were
made to the liability in relation to this. Based on correspondence with FIG,
Management does not believe that the Transactions completion would constitute
a substantial disposal under the Tax Settlement Deed and therefore will not
accelerate any liability.
The movement in the balance in the period is made up of a finance expense of
US$1.8 million offset by a foreign exchange gain of US$4.4 million.
8 Post balance sheet events
Results of Open Offer
On 5 July 2022, the Company announced it had received valid acceptances from
Qualifying Shareholders in respect of 39,652,160 Open Offer Units,
representing a take-up of over 69 per cent. of the 57,310,264 available Open
Offer Units. Accordingly, the Open Offer has raised total gross proceeds of
approximately US$3.4 million (£2.8 million).
Each Open Offer Unit subscribed for comprises one Open Offer Share and, for
every two Open Offer Shares subscribed for, one Warrant. Accordingly,
39,652,160 Open Offer Shares and 19,825,849 Open Offer Warrants will be issued
pursuant to the Open Offer.
Successful arbitration outcome
On 24 August 2022, the Company provided the following update on its ICSID
arbitration with the Republic of Italy:
· Successful arbitration award
· Compensation of €190 million
· Plus interest at EURIBOR + 4%, compounded annually from 29 January
2016 until time of payment
· Temporary four-month pause in interest from date of award
The arbitration panel unanimously held that Italy had breached its
obligations under the Energy Charter Treaty entitling Rockhopper to
compensation. The award is final and binding on the parties. Italy has 120
days to apply for an annulment of the award, which can only be annulled in
limited circumstances. Under a legal agreement with the Falkland Island
Government Rockhopper is prevented from making any form of distribution.
Costs associated with the arbitration proceedings were funded on a
non-recourse ("no win - no fee") basis from a specialist arbitration funder.
After payments due to the arbitration funder and success fees due to the
Group's legal representation, Rockhopper expects to retain approximately 80%
of the award (assuming full recovery of the award). Further analysis is
required to establish the tax treatment on any payments related to the award.
Transaction
On 23 September 2022 the Company announced the transaction enabling Harbour to
exit and Navitas to enter the North Falkland Basin with a 65% stake in, and
operatorship of, all of Rockhopper's North Falkland Basin licences, has
completed.
9 Related party transactions
Pursuant to the Subscription, the following Directors subscribed for the
following Units comprising Subscription Shares and Warrants
Number of Ordinary Shares held before the Subscription Number of Subscription Shares being subscribed for Resultant shareholding after the Subscription Percentage of Ordinary Shares at 30 June 2022 Number of Warrants held after the Subscription
Director
Keith Lough 228,515 428,570 657,085 0.12% 214,285
Alison Baker 70,000 142,856 212,856 0.04% 71,428
John Summers 318,329 142,856 461,185 0.09% 71,428
Sam Moody 2,570,729 1,428,570 3,999,299 0.74% 714,285
Total 2,142,852
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