REG - Rockhopper Exp plc - Half-year Results <Origin Href="QuoteRef">RKH.L</Origin> - Part 2
07/09/2017 07:07
- Part 2: For the preceding part double click ID:nRSG0464Qa
issued
- Issued in relation to acquisitions - 159,684,668 159,684,668
- Issued under the SIP 305,906 278,697 394,550
Shares in issue carried forward 456,964,958 456,543,199 456,659,052
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 453,782,925 438,564,580 446,106,108
Effects of dilutive potential Ordinary shares
Contingently issuable shares - current period anti-dilutive - 790,813 -
453,782,925 439,355,393 446,106,108
*Restated
$'000 $'000 $'000
Net (loss)/profit after tax for purposes of basic and diluted earnings per share (4,144) 104,251 98,044
Earnings per share - cents
Basic (0.91) 23.77 21.98
Diluted (0.91) 23.73 21.98
* See details provided in note 1.2 Statement of compliance and basis of
preparation.
As the group is reporting a loss in the current period then in accordance with
IAS33 the share options are not considered dilutive in the current period
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 Six months Year
Ended ended Ended
30 June 30 June 31 December
2017 2016 2016
Number Number Number
Long term incentive plan 20,575,953 18,222,590 17,435,144
Share appreciation rights 1,420,531 1,420,531 1,420,531
5 Intangible exploration and evaluation assets
Additions of $3.2 million during the period relate to the Group's interests in
the Falkland Islands. The majority of the remainder of the movement relates to
the group's interests in the Greater Mediterranean particularly the Abu Sennan
Concession in Egypt where an impairment of $1.6 million was recognised
following confirmation of the Al Jahraa-9 test well being water wet.
6 Tax payable
Six months ended Six months ended Year ended
30 June 30 June 31 December
2017 2016 2016
$'000 $'000 $'000
Current tax payable 10 9 9
Non current tax payable 41,319 46,075 39,115
41,329 46,084 39,124
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 Oil plc ("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 payable on the first royalty payment date on
Sea Lion. Currently the first royalty payment date is anticipated to occur
within six months of first oil production which itself is estimated to occur
three and a half years after project sanction. As such the tax liability has
been discounted at 15%.
The tax liability has been revised downwards in the period ended 30 June 2017
to £59.6 million, due to the full benefit of the exploration carry being
received from Premier on the 2015/16 drilling campaign and the Falkland
Islands Commissioner of Taxation agreeing to reduce the liability on that
basis in line with the terms of the Tax Settlement Deed.
7 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 by the SIP trust represent the issue value of shares held on behalf of participants by Capita IRG Trustees Limited, the trustee of the SIP.
Merger reserve The difference between the nominal value and 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.
8 Disposal group held for sale
On 8 June 2017, the Group announced the disposal of a portfolio of non-core
interests in onshore Italy. The transaction is expected to complete by the
year end 2017 and accordingly the assets and associated liabilities are
presented as a disposal group.
As at 30 June 2017, the disposal group comprised assets of $3.1 million less
liabilities of $9.0 million, detailed as follows.
$'000
Intangible exploration and evaluation assets 837
Property, plant and equipment 2,075
Inventories 206
Provisions (9,006)
(5,888)
9 Acquisition of subsidiaries
Acquisition of Falkland Oil and Gas Limited
In January 2016 Rockhopper completed the acquisition of the entire issued
share capital of Falkland Oil and Gas Limited ("FOGL").
The boards of Rockhopper and FOGL believe that a combination of the Rockhopper
and FOGL Groups (together, the "Combined Group") represents a significant
value opportunity arising from the combination of their highly complementary
portfolios. Specifically, the Combined Group is expected to:
· be the largest North Falkland Basin licence and discovered resource
holder with a material working interest in all key licences;
· have enhanced prospects of progressing the Sea Lion project through
final investment decision;
· have greater exposure to exploration and appraisal upside potential;
and
· benefit from enhanced scale and capabilities creating value in the
current market environment.
Under the terms of the agreement announced on 24 November 2015, shareholders
of FOGL received 0.2993 shares of the Company per FOGL share.
At acquisition FOGL had a portfolio of assets and internal technical resources
and management and administrative processes. In addition it has potential
future outputs through the monetization of its 2C resources as such it is a
business and the transaction has been accounted for by the purchase method of
accounting with an effective date of 18 January 2016 being the date on which
the group gained control of FOGL. Information in respect of the assets and
liabilities acquired and the fair value allocation to the FOGL assets in
accordance with the provisions of "IFRS3 - Business Combinations" has been
determined as follows:
Provisional valuesrecognised on acquisition at 30 June 2016 Final values recognised on acquisition at 31 December 2016
$'000 $'000
Intangible exploration and appraisal assets 216,000 170,000
Property, plant and equipment 58 58
Inventories 162 162
Trade and other receivables 3,231 21,031
Trade and other payables (20,422) (19,222)
Net identifiable assets and liabilities 199,029 172,029
Fair value in excess of consideration (138,842) (111,842)
Satisfied by:
Equity instruments 159,684,668 ordinary shares 65,499 65,499
Less cash acquired (5,312) (5,312)
Total consideration 60,187 60,187
The fair value of equity instruments has been determined by reference to the
closing share price on the trading day immediately prior to the completion of
the acquisition.
Inherently determining fair values, particularly of intangible exploration and
evaluation assets, is subjective. The valuation of intangible assets acquired
was provisionally assessed at the 30 June 2016 and included the value of
exploration costs which were recovered subsequently under an insurance claim.
These amounts when finalised were included as a receivable in the numbers
recognised at 31 December 2016. This represents the main movement between the
provisional and final values recognised.
The final value of the intangible exploration and evaluation assets were based
on the $ per barrel multiples applied in transactions in the market place
involving similar early stage development assets. Not all factors in any
particular transaction may be known and the market provides only a range of
possible values over a relatively small population of analogous transactions.
Analysis of $ per barrel multiples implied a wide range of reasonable possible
outcomes between $1.5 per barrel and $2.5 per barrel although actual
transactions ranged from near zero to values in well in excess of $5 per
barrel. The value above equates to just under $2 per barrel of 2C resource
acquired in the Sea Lion complex and around $1.6 per barrel if managements
view of the additional 2C resource discovered in the Emily, Isobel and Isobel
Deep J fans is included.
For reasonableness, this fair value was compared and supported by both
historic investment in the basin and the net present value of future cashflows
which requires key assumptions and estimates in relation to: commodity prices
that are based on forward curves for a number of years and the long-term
corporate economic assumptions thereafter, discount rates that are adjusted to
reflect risks specific to individual assets, the quantum of commercial
reserves and the associated production and cost profiles.
The fair value in excess of consideration arises due to the difference between
the fair value of the net assets and the consideration transferred and relates
to the fact that the financial position of FOGL had deteriorated due to cost
overruns at the Humpback exploration well as well as merger terms being agreed
prior to the Isobel Elaine well results, which as noted above added additional
2C resource and substantially de-risked the Isobel-Elaine complex.
Acquisition costs of $1,430,000 arose as a result of the transaction in prior
periods. These have been recognised as part of administrative expenses in the
statement of comprehensive income.
As at 31 December 2016, FOGL had contributed $nil to group revenues and added
$873,000 to the group loss. If the acquisition had occurred on 31 December
2015, group revenues and group profit for the period would be materially the
same.
10 Post balance sheet events
Abu Sennan Drilling campaign
Al Jahraa-9
The Al Jahraa-9 well penetrated 5 metres of reservoir sand in the primary Abu
Roash-C ("AR-C") reservoir. Wireline logging and a well test across the
interval confirmed that, while the sand is water wet, the reservoir pressure
is in line with the producing AR-C reservoir in the Al Jahraa and Al Jahraa SE
fields. The well also encountered the deepest known oil shows in the Abu
Roash-D and Abu Roash-E ("AR-E") reservoirs, demonstrating further potential
at these levels elsewhere in the concession.
The results of the Al Jahraa-9 well will now be integrated with existing data
for the Al Jahraa and Al Jahraa SE oil fields to help refine the future
development plans for these fields.
Al Jahraa SE-2X
The Al Jahraa SE-2X well has been successfully side-tracked into the Al Jahraa
SE field and oil pay has been confirmed from wireline logging in both the AR-C
and AR-E reservoirs. The well has recently been completed in the deeper AR-E
reservoir and was put onto production at a tubular and pump constrained rate
of approximately 250 boepd gross.
INDEPENDENT REVIEW REPORT TO ROCKHOPPER EXPLORATION PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly report for the six months ended 30 June 2017
which comprises the group income statement, the group statement of
comprehensive income, the group balance sheet, the group statement of changes
in equity, the group cash flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
report for the six months ended 30 June 2017 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the AIM Rules.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly report and consider
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half-yearly report
in accordance with the AIM Rules.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the condensed
set of financial statements included in the half-yearly financial report in
accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly report based on our review
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work,
for this report, or for the conclusions we have reached.
LYNTON RICHMOND
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
6 September 2017
Glossary:
2C best estimate of contingent resources
2P proven plus probable reserves
3C a high estimate category of contingent resources
AGM Annual General Meeting
Beach Energy Beach Petroleum (Egypt) Pty Limited
Best a best estimate category of Prospective Resources also used as a generic term to describe a best, or mid estimate
Board the Board of Directors of Rockhopper Exploration plc
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
Capex capital expenditure
Company Rockhopper Exploration plc
E&P exploration and production
ERCE ERC Equipoise Limited
Farm-down to assign an interest in a licence to another party
FEED Front End Engineering and Design
FID Final Investment Decision
FIG Falkland Islands Government
FOGL Falkland Oil and Gas Limited
FPSO Floating Production, Storage and Offtake vessel
Group the Company and its subsidiaries
High high estimate category of Prospective Resources also used as a generic term to describe a high or optimistic estimate
IFRS International Financial Reporting Standard
Low a low estimate category of Prospective Resources also used as a generic term to describe a low or conservative estimate
mmbbls million barrels
mmboe million barrels of oil equivalent
MMstb million stock barrels (of oil)
mscf thousand standard cubic feet
net pay the portion of reservoir containing hydrocarbons that through the placing of cut offs for certain properties such as porosity, water saturation and volume of shale determine the productive element of the reservoir
P&A plug and abandon
Premier Premier Oil plc
PSV virtual exchange point
scm standard cubic metre
STOIIP stock-tank oil initially in place
This information is provided by RNS
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