TIDMRKH
RNS Number : 9013N
Rockhopper Exploration plc
28 September 2023
28 September 2023
Rockhopper Exploration plc
("Rockhopper", the "Group" or the "Company")
Half-Year Results for the Six Months Ended 30 June 2023
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 2023 ("H1
2023").
YEAR TO DATE HIGHLIGHTS
Sea Lion and North Falkland Basin
-- Reworked base case project reduces costs while increasing total production
o Total barrels developed: 269mmbbls
o Production plateau: 80,000 bbls/d
o Pre first oil capex US$1.3bn, assuming leased FPSO
o Life of field costs less than US$30 per barrel
-- Sea Lion is competitive on a global scale
o Base case gross joint venture NPV10 >US$4bn at $77
Brent
-- Work to refine project phasing and financing plan continues
Ombrina Mare
-- Rockhopper awarded c.EUR190 million plus interest (the
"Award") in August 2022 following successful arbitration
outcome
-- Italy seeking to have the Award annulled; Rockhopper contesting annulment
-- Stay of Enforcement lifted, escrow arrangements in place
-- Rockhopper exploring all avenues to secure value
-- Annulment hearing set for January 2024
Corporate and Financial
-- Continued focus on costs post completion of successful capital raise in July 2022
-- At 30 June 2023, the Group had 53.9 million unexercised 9
pence warrants in issue, with an expiry date of 31 December
2023
-- Cash and term deposit balance at 30 June 2023 of US$6.7 million
-- Highly experienced new Non-Executive Chair (Simon Thomson)
and Non-Executive Director (Paul Mayland) assuming roles from 1
October 2023
Outlook
-- Work continues on refining new lower cost Sea Lion development and financing plan
-- Stay on Enforcement on Award lifted - Rockhopper in a
position to commence legal proceedings against Italy for
non-payment
-- Navitas targeting Sea Lion FID during 2024
Keith Lough, outgoing Chairman of Rockhopper, commented:
"After nine challenging and enjoyable years, John Summers and I
will leave Rockhopper in the strongest position your Company has
seen for some considerable time. We have a committed, focussed, and
capable partner that has already worked up a hugely impressive
lower cost, highly capital efficient project at Sea Lion. In
addition, the Stay of Enforcement on our EUR190million ICSID award
is now lifted and we are working with our advisers on all avenues
to monetise this award. Our 2022 capital raise allowed us to extend
our licences, bring Navitas on board and continue to contest the
Arbitration. Finally, we welcome Simon Thomson and Paul Mayland to
the Board, bringing with them a wealth of directly relevant
experience in the industry and detailed knowledge of Sea Lion.
"I wish the new Board and all holders every success for the
future, and I know your Company remains in the best possible
hands."
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/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 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 PROJECT
It remains our view that Sea Lion, which at the 700mmbbls 2C
audited by Netherland Sewell & Associates ("NSAI")(1) is larger
than Cambo and Rosebank combined, and represents an important and
potentially highly valuable strategic asset for the Falkland
Islands, the UK and all our stakeholders. The work Navitas
Petroleum LP ("Navitas") has done reduces upfront and operating
costs to such an extent that we see the project as being in a
position to compete with almost any currently undeveloped offshore
project in the world.
The base development case is for 269 mmbbls of oil via a leased,
re-deployed FPSO with 23 wells in total, spread over two separate
drilling campaigns. The first campaign comprises 18 wells, of which
11 are drilled pre-first-oil, with the second campaign for a
further five wells to be drilled post-first-oil. Plateau production
is expected to reach approximately 80,000 bbls per day.
Following the exit of Harbour Energy and the formation of the
new Rockhopper-Navitas JV that completed in September 2022 (the
"Transaction"), we have full alignment across our North Falkland
Basin ("NFB") acreage, with Navitas as Operator and holding a 65%
interest, and Rockhopper retaining a 35% working interest.
As a result of the Transaction, Rockhopper benefits from two
loans from Navitas. The first loan covers all Rockhopper's net Sea
Lion Phase 1 working interest costs (other than licence fees and
taxes) at an interest rate of 8% and is available currently,
following transaction completion, through to FID. The second 0%
interest loan covers two-thirds of our net working interest Sea
Lion Phase 1 costs from FID to the earlier of 12 months post-first
oil or project completion (other than licence fees and taxes) for
project costs not covered by third party debt financing. Both loans
are repaid from 85% of Rockhopper's net Sea Lion Phase 1 cash
flows.
As a result of the works undertaken by Navitas, total capex for
the project estimates have been reduced to c.US$2.2bn, with
pre-first oil capex now estimated to be around US$1.3bn, a
significant reduction on previous estimates. Life of field costs
are expected to be less than US$30 per barrel with capex and opex
(including FPSO lease) as previously disclosed.
([1]) Navitas appointed Netherland Sewell & Associates
("NSAI") to review the quantities of oil and gas in the basin and
produce a net present value calculation based on the new
development plan. Whilst Rockhopper was not an addressee of the
report, we endorsed its conclusions. The last independent resource
report commissioned directly by Rockhopper was the ERCE 2016 Report
which had an estimated 2C value of 517 MMbbls. The Navitas
commissioned NSAI Independent Report used an updated approach and
assumptions to the ERCE 2016 report.
Reducing project breakeven from over US$40 to under US$30 per
barrel in a rising cost environment is a hugely impressive
achievement, significantly improving both project economics and the
ability to raise finance. Having established a new base project,
work focuses on project phasing and financing, with Navitas still
targeting FID during 2024.
OMBRINA MARE ARBITRATION
As announced on 24 August 2022, the arbitration panel
unanimously held that Italy had breached its obligations under the
Energy Charter Treaty (the "Award") entitling Rockhopper to
compensation of EUR190 million plus interest at EURIBOR + 4%,
compounded annually from 29 January 2016 until time of payment
(except the four-month period immediately following the date of the
Award).
On 28 October 2022, Italy submitted an application to the
International Centre for Settlement of Investment Disputes
("ICSID") seeking to annul the Award under Article 52 of the ICSID
Convention. Italy also requested a provisional stay of the
enforcement of the Award pursuant to Article 52(5) of the ICSID
Convention. The provisional stay prevented Rockhopper from taking
legal action to enforce the Award in any jurisdiction.
Following a hearing on 6 March 2023, the ad hoc committee (the
"Committee") convened by the ICSID to rule on the annulment issued
the following orders with regard to the provisional stay of
enforcement:
1: that Italy and Rockhopper (together the "Parties") shall
confer - in good faith and using their best efforts to cooperate
and find an effective arrangement - for the mitigation of the risk
of non-recoupment using a first-class international bank outside
the European Union (or as Italy and Rockhopper otherwise agree) to
be put into place in anticipation of the termination of the
provisional stay of enforcement of the Award. This is to mitigate
the perceived risk that, in the event the Award is annulled, Italy
may not be able to recover Italian assets seized or frozen by
Rockhopper (before the ad hoc Committee issues its decision on
annulment) in court enforcement proceedings.
2: that Rockhopper shall, within 30 days of the date of the
decision, apprise the Committee of arrangements agreed with Italy
for the mitigation of the risk of non-recoupment or that
negotiations have failed and, in the latter event, propose concrete
arrangements in accordance with the decision for the mitigation of
the risk of non-recoupment. Italy may then briefly comment on
Rockhopper's proposal within 10 days, constructively highlighting
any areas of disagreement between the Parties.
In line with preceding orders and following failure to agree
arrangements with Italy, Rockhopper submitted its proposed
arrangements (the "Escrow Arrangements") to mitigate the risk of
non-recoupment on 24 May 2023. On 5 June 2023 Italy submitted its
comments on the Escrow Arrangements.
On 11 July 2023, and having received additional comments from
the Parties, the Committee issued the following orders with regard
to the provisional stay of enforcement:
1: That the provisional stay of enforcement shall terminate 5
business days following the provision by Rockhopper to Italy of
documentation that escrow arrangements in the form proposed have
been established, provided that Italy does not within those 5
business days submit a reasoned written objection in these
annulment proceedings that the escrow arrangements established are
not in accordance with the proposed arrangements.
2: Reserves its right to revisit its decision at any time;
and
3: Reserves its decision on costs
Italy submitted no further comments on the Escrow Arrangements
and so the stay of enforcement is now lifted.
Against this background, we are working with our advisers on all
avenues to monetise this award.
CORPORATE MATTERS
Having undertaken a well-supported capital raise during the
summer of 2022, we continue to monitor costs closely and ended the
period with cash and term deposits of US$6.7 million on our balance
sheet, despite higher legal spend as a result of positive
developments on the Ombrina Mare arbitration.
We offered warrants to those participating in the capital raise,
giving them the right to purchase shares at 9p, to be exercised at
any point until 31 December 2023. This provided shareholders with
additional potential upside, and Rockhopper a stronger balance
sheet should those warrants be exercised. As at 30 June 2023 there
were c53.9 million unexercised warrants which if all exercised
would raise an additional GBP4.9 million before expenses.
We retain our core technical and financial knowledge and
capabilities using a low cost, efficient business model and this
continues to be our focus going forwards.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
ESG and Corporate Responsibility more generally 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.
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
The positive momentum we have been building over recent years
continues. The reworked, lower-cost Sea Lion development competes
with almost any undeveloped 500-700 mmbbls field in the world with
returns plainly helped by current oil prices. Work on refining the
phasing and financing of the development continues.
Now the stay of enforcement has been lifted on Ombrina Mare we
are investigating any and all avenues to create value for holders
in the face of continued Italian non-compliance with their
international treaty obligations.
The new Board has direct, relevant, in-depth experience and
knowledge of arbitration processes, and is committed to working
closely with all stakeholders to maximise the chance of unlocking
the value within the Falklands and Ombrina Mare arbitration
award.
FINANCIAL REVIEW
Results for the period
For the period ended 30 June 2023, the Group reported revenues
of US$nil (H1 2022: US$0.5 million) and a loss after tax of US$2.6
million (H1 2022: loss of US$0.7 million). The increase in loss
after tax was driven mainly by a reduction in net foreign exchange
gains on GBP denominated balances. In particular, the weakening of
the GBP against the USD resulted in a prior year US$4.4 million
gain on the carrying value of the tax liability with FIG.
Revenue and cost of sales
The Group's production ceased during the prior year and as such
there were no revenues in the period (H1 2022: US$0.5 million). The
existing portfolio continues to be evaluated for further
opportunities but revenue and cost of sales are not expected to be
material in the immediate future.
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 in 2021. The increase
in G&A cost for the period to US$2.1million (H1 2022: US$1.5
million) almost entirely relates to legal fees associated with the
Ombrina Mare arbitration. 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. 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. We continue to focus on our
cost base and made the decision to close our Rome office in the
period. Whilst accelerating some costs in the short term overall,
this results in a lower cost base moving forward.
The foreign exchange gain in the period of US$0.6 million (2022:
gain of US$3.4 million) mainly arose on GBP denominated cash and
term deposit balances. In previous years, foreign exchange
movements were predominantly in relation to the tax balance arising
from the Group's farm-out to Premier Oil ("Premier"). In the prior
year, subsequent to the Transaction this balance was adjusted to
nil and as a result foreign exchange gains and losses are expected
to be less significant going forward. The tax balance is discussed
in greater detail below and in note 7 of these interim condensed
consolidated financial statements.
Finance expenses in the period of US$0.7 million (H1 2022:
$US2.0 million) relate to the unwinding of discounts on provisions.
The previous period finance expense related mainly to the impact of
discounting the aforementioned Falkland Islands tax liability.
Cash movements and capital expenditure
At 30 June 2023, the Group had cash and term deposits of US$6.7
million (31 December 2022: US$9.8 million).
Cash and term deposit movements during the period:
US$m
--------------------------------------- ------
Opening cash and term deposit balance
(31 December 2022) 9.8
Cost of sales (0.4)
Falkland Islands (0.7)
Administrative expenses (2.1)
Proceeds of warrants 0.3
Miscellaneous (0.2)
Closing cash and term deposit balance
(30 June 2023) 6.7
--------------------------------------- ------
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 the additions in the period of US$2.0 million almost entirely
relate to this project. As part of the transaction to bring Navitas
onto the licences, Navitas agreed to provide loan funding to the
Group to cover the majority of its share of Sea Lion phase one
related costs from Transaction completion, in September 2022, up to
Final Investment Decision ("FID") and has interest charged at 8%
per annum (the "Pre-FID Loan"). Subject to a positive FID, Navitas
will provide a second interest free loan to fund two-thirds of the
Group's share of Sea Lion phase one development costs (for any
costs not met by third party debt financing).
Certain costs, such as licence costs, are excluded in both
instances. Funds drawn under the loans will be repaid from 85% of
Rockhopper's working interest share of free cash flow.
Taxation
On the 8 April 2015, the Group agreed binding documentation
("Tax Settlement Deed") with FIG in relation to the tax arising
from the Group's farm out to Premier.
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16.
The Tax Settlement Deed also states that the Group is entitled
to make adjustments to the outstanding tax liability if and to the
extent that the Commissioner is satisfied that any part of the
Development Carry becomes irrecoverable. Under the Transaction the
balance of Development Carry has become irrecoverable and in the
Group's judgment no further amounts are due on the Group's 2012
farm-out to Premier.
Given the highly material nature of this judgment professional
advice has been sought to confirm that it is probable that if
challenged it would be concluded that the Group is entitled to
adjust the outstanding tax liability for the irrecoverable
Development Carry. As such the Group has derecognised the tax
liability to measure it at the most likely amount that the
liability will be settled for of US$nil. We continue to engage with
FIG to formalise the tax implications of the termination of the
2012 Premier Oil farm down which resulted in an irrecoverable carry
of approximately US$670 million.
Should it be proven that there is no entitlement to adjustment
under the Tax Settlement Deed then the outstanding tax liability
would be GBP59.6 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 North Falkland Basin; or (iii) a
change of control of Rockhopper Exploration plc.
In this unlikely instance, the Group believes 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 Transaction's completion constitutes a substantial
disposal and therefore would not have accelerated the liability
should it be shown to be still payable.
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 2023, the Group had cash resources of US$6.7 million.
Historically, the Group's largest annual expenditure has related to
pre-sanction costs associated with the Sea Lion development.
Following completion of the Transaction, the Group benefits from
loan funding for its share of all Sea Lion pre-sanction costs
(other than licence fees and taxes).
Normal working capital requirements and projected recurring
expenditure is expected to be around US$4.0 million per year and in
addition there are costs associated with maintaining the various
licences and concessions in the Group's Italian portfolio.
In addition to the above requirements, the third-party funding
agreement in place to cover costs in relation to its ICSID
arbitration with the Republic of Italy does not cover any costs
arising past the date of the Award (23 August 2022). A separate
success fee of GBP3.3 million is due to the Company's legal
representatives on establishing liability and an award requiring
Italy to pay at least EUR25 million in damages. This amount is also
not covered by the funding agreement.
Having anticipated Italy might attempt to annul the Award,
Rockhopper had a non-binding offer in place to fund both fighting
the annulment and enforcing the Award. As previously mentioned the
Group has chosen to use existing resources to fund all legal costs
arising from contesting the request by Italy for annulment whilst
it explores all funding possibilities.
At the period end the Group had 53.9 million unexercised 9 pence
warrants in issue with an expiry date of 31 December 2023. Assuming
the share price is in excess of 9 pence, which it is at time of
writing, the Group expects the majority of these warrants to be
exercised providing additional funds of up to GBP4.9 million.
However, in the downside circumstances where these outstanding
warrants are not fully exercised the Group would have to raise
additional funds within the next 12 months to meet both legal costs
in relation to the arbitration and normal working capital
requirements.
In light of this the Group is actively considering all potential
sources of additional funding including but not limited to
collection/monetisation of arbitration award proceeds, deferral of
expenditure or raising additional equity. We continue to monitor
the short, medium and long term funding requirements as we work
towards project sanction of Sea Lion.
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 2022 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.
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2023
Six months Six months
Ended Ended
30 June 30 June
2023 2022
Unaudited Unaudited
Notes $'000 $'000
------------------------------------------- ------ ----------- -----------
Revenue 2 - 523
Cost of sales (378) (803)
------------------------------------------- ------ ----------- -----------
Gross loss (378) (280)
Exploration and evaluation expenses (3) -
Administrative expenses (2,132) (1,461)
Charge for share based payments (70) (314)
Foreign exchange movement 586 3,356
------------------------------------------- ------ ----------- -----------
Results from operating activities and
other income 1,997 1,301
Finance income 128 2
Finance expense (739) (2,052)
------------------------------------------- ------ ----------- -----------
Loss before tax (2,608) (749)
Tax 3 - -
------------------------------------------- ------ ----------- -----------
Loss for the period attributable to
the equity shareholders of the parent
company (2,608) (749)
------------------------------------------- ------ ----------- -----------
Loss per share attributable to the equity
shareholders of the parent company:
cents
------------------------------------------- ------ ----------- -----------
4 (0.44) (0.16)
4 (0.44) (0.16)
------------------------------------------- ------ ----------- -----------
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2023
Six months Six months
Ended Ended
30 June 30 June
2023 2022
Unaudited Unaudited
Notes $'000 $'000
------------------------------------- ------- ----------- -----------
Loss for the period (2,608) (749)
Exchange differences on translation
of foreign operations (615) 2,350
---------------------------------------------- ----------- -----------
TOTAL COMPREHENSIVE PROFIT FOR THE
period (3,223) 1,601
---------------------------------------------- ----------- -----------
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2023
As at As at
30 June 31 December
2023 2022
Unaudited Audited
----------------------------------------- ------ ---------- ------------
Notes $'000 $'000
NON CURRENT Assets
Exploration and evaluation assets 5 253,980 251,970
Property, plant and equipment 6 36 68
Finance lease receivable 248 444
CURRENT Assets
Other receivables 1,532 1,406
Finance lease receivable 270 259
Restricted cash 545 519
Term deposits 5,532 8,736
Cash and cash equivalents 1,197 1,059
Total assets 263,340 264,461
----------------------------------------- ------ ---------- ------------
CURRENT Liabilities
Other payables 6,085 3,383
Lease liability 220 209
NON-CURRENT Liabilities
Lease liability 137 344
Tax payable 7 - -
Provisions 19,663 19,177
Deferred tax liability 39,137 39,137
----------------------------------------- ------ ---------- ------------
Total liabilities 65,242 63,994
----------------------------------------- ------ ---------- ------------
Equity
Share capital 8,803 8,771
Share premium 6,770 6,518
Share based remuneration 2,062 1,492
Owns shares held in trust (1,320) (1,494)
Merger reserve 78,208 78,208
Foreign currency translation reserve (8,614) (7,999)
Special reserve 175,281 175,281
Retained losses (63,092) (60,310)
----------------------------------------- ------ ---------- ------------
Attributable to the equity shareholders
of the company 198,098 200,467
----------------------------------------- ------ ---------- ------------
Total liabilities and equity 263,340 264,461
----------------------------------------- ------ ---------- ------------
These condensed consolidated interim financial statements were
approved by the directors and authorised for issue on 27 September
2023 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 2023
Foreign
Shares currency
Share Share Share held Merger translation Special Retained Total
based
capital Premium remuneration in reserve reserve reserve losses Equity
trust
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
Balance at 31
December
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 issued 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
--------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- ----------
for the six months ended 30 June 2022
Foreign
Shares currency
Share Share Share held Merger translation Special Retained Total
based
capital Premium remuneration in trust reserve reserve reserve losses Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
Balance at 31
December
2021 7,218 3,622 4,327 (3,342) 74,332 (9,682) 175,281 (97,235) 154,521
Loss for the
period - - - - - - - (749) (749)
Other
comprehensive
profit for the
year - - - - - 2,350 - - 2,350
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
Total
comprehensive
profit 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
----------------- -------- -------- ------------- --------- -------- ------------ -------- --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months
Ended Ended
30 June 30 June
2023 2022
Unaudited Unaudited
Notes $'000 $'000
------------------------------------------------ ------- ----------- -----------
Cash flows from operating activities
Net loss before tax (2,608) (749)
Adjustments to reconcile net losses
to cash:
Depreciation 32 64
Share based payment charge 70 314
Finance expense 735 2,050
Finance income (1) (1)
Foreign exchange (637) (4,213)
--------------------------------------------------------- ----------- -----------
Operating cash flows before movements
in working capital (2,409) (2,535)
Changes in:
Other receivables (103) 1,053
Payables (405) 600
Provisions (45) -
Cash utilised by operating activities (2,962) (882)
--------------------------------------------------------- ----------- -----------
Cash Flows from investing activities
Capitalised expenditure on exploration
and evaluation assets (680) (877)
Investing activities before movements
in capital balances (680) (877)
Changes in:
Term deposits 3,478 -
------------------------------------------------ ------- ----------- -----------
Cash flow from investing activities 2,798 (877)
--------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Net proceeds of share placing and subscription - 6,280
Exercise of warrants 284 -
Net lease payments (10) (133)
Cash flow from financing activities 274 6,147
--------------------------------------------------------- ----------- -----------
Currency translation differences relating
to cash and cash equivalents 28 (128)
Net cash flow 110 4,388
Cash and cash equivalents brought forward 1,059 4,822
--------------------------------------------------------- ----------- -----------
Cash and cash equivalents carried forward 1,197 9,082
--------------------------------------------------------- ----------- -----------
Notes to the condensed CONSOLIDATED group financial
statements
for the six months ended 30 June 2023
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ("the Company"), a public limited
company quoted on AIM, incorporated and domiciled in the United
Kingdom ("UK"), together with its subsidiaries (collectively, "the
Group") holds interests in the Falkland Islands and the Greater
Mediterranean. T he Company's registered office address is Warner
House, 123 Castle Street, Salisbury, SP1 3TB.
The interim condensed consolidated financial statements for the
six months ended 30 June 2023 were authorised for issue in
accordance with a resolution of the directors on 27 September
2023.
1.2 Statement of compliance and basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2023 have been prepared in accordance with
IAS 34 Interim Financial Reporting.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development.
Following completion of Navitas coming into the North Falkland
Basin (the "Transaction") the Group benefits from loan funding for
its share of all Sea Lion pre-sanction costs (other than licence
fees and taxes).
Normal working capital requirements and projected recurring
expenditure is expected to be around US$4.0 million per year and in
addition there are costs associated with maintaining the various
licence and concessions in the Group's Italian portfolio.
In addition to the above requirements the third-party funding
agreement in place to cover costs in relation to its ICSID
arbitration with the Republic of Italy does not cover any costs
arising past the date of the Award (23 August 2022). A separate
success fee of GBP3.3 million is due to the Company's legal
representatives on establishing liability and an award requiring
Italy to pay at least EUR25 million in damages. This amount is also
not covered by the funding agreement.
Having anticipated Italy might attempt to annul the Award,
Rockhopper had a non-binding offer in place to fund both fighting
the annulment and enforcing the Award. The Group has instead chosen
to use existing resources to fund all legal costs arising from
contesting the request by Italy for annulment whilst it explores
all funding possibilities.
At the period end the Group had 53.9 million unexercised 9 pence
warrants in issue with an expiry date of 31 December 2023. Assuming
the share price is in excess of 9 pence, which it is at time of
writing, the Group expects the majority of these warrants to be
exercised providing additional funds of up to GBP4.9million.
However, in the downside circumstances where these outstanding
warrants are not fully exercised the Group would have to raise
additional funds within the next 12 months to meet both legal costs
in relation to the arbitration and normal working capital
requirements as we work towards project sanction of Sea Lion.
Under the base case forecast, the Group will have sufficient
financial headroom to meet forecast cash requirements for the 12
months from the date of approval of these interim condensed
consolidated financial statements. However, in the downside
scenarios, in the absence of any mitigating actions, the Group may
have insufficient funds to meet its forecast cash requirements.
Potential mitigating actions, some of which are outside the Group's
control, could include collection/monetisation of arbitration award
proceeds, deferral of expenditure or raising additional equity.
Accordingly, after making enquiries and considering the risks
described above, the Directors have reviewed the Group's overall
position and 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 interim condensed consolidated financial
statements and believe the use of the going concern basis is
appropriate.
Nonetheless, for the avoidance of doubt, in the downside
scenarios in which the remaining warrants are not exercised and
additional funding is not raised and in the absence of potential
mitigating actions indicates the existence of a material
uncertainty that may cast significant doubt upon the Group's
ability to continue as a going concern and the Group may therefore
be unable to realise its assets and discharge its liabilities in
the ordinary course of business. The interim condensed consolidated
financial statements do not include adjustments that would result
if the Group was unable to continue as a going concern.
Accounting policies are consistent with those adopted in the
last statutory financial statements of Rockhopper Exploration plc.
The information as of 31 December 2022 has been extracted from the
audited financial statements of Rockhopper Exploration plc for the
year ended 31 December 2022. 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 2022 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.
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
2022, except for the adoption of new standards effective as of 1
January 2023. 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 2023, 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 2023 30 June 2022 31 December
2022
----------- ------------- ------------- ------------
GBP : US$ 1.27 1.21 1.21
EUR : US$ 1.09 1.05 1.07
----------- ------------- ------------- ------------
2 Revenue and segmental information
Six months ended 30 June 2023 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- --------- -------------- ---------- ---------
Revenue - - - -
Cost of sales - (378) - (378)
-------------------------------- --------- -------------- ---------- ---------
Gross profit/(loss) - (378) - (378)
Exploration and evaluation
expenses - (3) - (3)
Administrative expenses - (1,130) (1,002) (2,132)
Charge for share based
payments - - (70) (70)
Foreign exchange movement - (21) 607 586
-------------------------------- --------- -------------- ---------- ---------
Results from operating
activities and other income - (1,532) (465) (1,997)
Finance income - - 128 128
Finance expense (55) (187) (497) (739)
-------------------------------- --------- -------------- ---------- ---------
Loss before tax (55) (1,719) (834) (2,608)
Tax - - - -
-------------------------------- --------- -------------- ---------- ---------
Loss for period (55) (1,719) (834) (2,608)
-------------------------------- --------- -------------- ---------- ---------
Reporting segments assets 253,557 1,650 8,133 263,340
Reporting segments liabilities (43,592) (17,133) (4,517) (65,242)
There main additions to segment assets in the period are
disclosed in note 5.
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.
All of the Group's prior period worldwide sales revenues of oil
and gas US$523 thousand arose from contracts to customers. Total
revenue relates to revenue from one customer.
3 Taxation
Six months Six months
ended ended
30 June 30 June
2023 2022
$'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
2023 2022
Number Number
Unaudited Unaudited
-------------------------------------------- ------------ ------------
Shares in issue brought forward 586,485,319 458,482,117
Shares issued
- Issued 2,532,064 82,182,776
-------------------------------------------- ------------ ------------
Shares in issue carried forward 589,017,383 540,664,893
-------------------------------------------- ------------ ------------
Weighted average of Ordinary Shares 593,539,285 463,476,650
Shares held in Employee Benefit Trust (1,304,500) (3,131,000)
-------------------------------------------- ------------ ------------
Weighted average number of Ordinary
Shares for the purposes of basic earnings
per share 592,234,785 460,345,650
-------------------------------------------- ------------ ------------
$'000 $'000 $'000
-------------------------------------------- ------------ ------------
Net loss after tax for purposes of basic
and diluted earnings per share (2,608) (749)
-------------------------------------------- ------------ ------------
Earnings per share - cents
Basic (0.44) (0.16)
Diluted (0.44) (0.16)
-------------------------------------------- ------------ ------------
Shares issued in the period all relate to the exercise of the
warrants that were issued in the prior year as part of a Placing
and Subscription as well as an Open Offer.
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 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 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
2023
Number
Unaudited
-------------------------- -----------
Long term incentive plan 5,553,501
Share options 26,497,651
Warrants 53,913,844
--------------------------- -----------
Warrants were issued in the prior year as part of a Placing and
an Open Offer. 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.
5 Intangible exploration and evaluation assets
During the period there were $2.0 million of additions. These
mainly relate to the Sea Lion Development as does the balance
carried forward.
At 30 June 2023, 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 Six months
ended ended
30 June 31 December
2023 2022
$'000 $'000
Unaudited Unaudited
------------------------ ----------- ------------
Current tax payable - -
Non current tax payable - -
------------------------ ----------- ------------
- -
------------------------ ----------- ------------
On the 8 April 2015, the Group agreed binding documentation
("Tax Settlement Deed") with FIG in relation to the tax arising
from the Group's farm-out to Premier. The Tax Settlement Deed
confirms the quantum and deferment of the outstanding tax liability
and is made under Extra Statutory Concession 16.
The Tax Settlement Deed also states that the Group is entitled
to make adjustment to the outstanding tax liability if and to the
extent that the Commissioner is satisfied that any part of the
Development Carry becomes irrecoverable.
On 23 September 2022 the Company announced the Transaction
enabling Harbour to exit and Navitas to enter the North Falkland
Basin with a 65% stake in, and operatorship of, all of Rockhopper's
North Falkland Basin licences, has completed. As a result of the
Transaction the balance of Development Carry has become
irrecoverable and, in the Group's judgment, no further amounts are
due on the Group's 2012 farm-out to Premier.
Given the highly material nature of this judgment, professional
advice has been sought to confirm that it is probable that if
challenged it would be concluded that the Group is entitled to
adjust the outstanding tax liability for the Development Carry that
has become irrecoverable. As such, in the prior year, the Group
derecognised the tax liability to measure it at the most likely
amount that the liability will be settled for of US$nil. We are
currently engaged with FIG in relation to formalising the tax
implications of the termination of the 2012 Premier Oil farm down
which resulted in an irrecoverable carry amount of approximately
US$670 million.
Should it be proven that there is no entitlement to adjustment
under the Tax Settlement Deed then the outstanding tax liability
would be GBP59.6 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 North Falkland Basin; or (iii) a
change of control of Rockhopper Exploration plc.
In this unlikely instance Management believes 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 constitutes a substantial disposal
and therefore would not have accelerated the liability should it be
shown to be still payable.
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END
IR QDLFLXKLEBBQ
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
Rockhopper Exploration (LSE:RKH)
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