TIDMRKH
RNS Number : 4600N
Rockhopper Exploration plc
30 September 2021
30 September 2021
Rockhopper Exploration plc
("Rockhopper", the "Group" or the "Company")
Half-year results for the six months to 30 June 2021
Rockhopper Exploration plc (AIM: RKH), the oil and gas
exploration and production company with key interests in the North
Falkland Basin, announces its unaudited results for the six months
ended 30 June 2021.
Year to date highlights
Sea Lion
-- Announcement by Harbour Energy plc ("Harbour") in September
2021 that the Sea Lion project does not fit its corporate strategy
and therefore that it will seek to exit the project and its North
Falkland Basin licences
-- Rockhopper to continue to pursue the Sea Lion project with a
handover process to commence shortly
-- Discussions ongoing with Navitas Petroleum LP ("Navitas")
regarding its potential entry to the Sea Lion project
-- Extension of the Company's North Falkland Basin Petroleum
Licences, including the Sea Lion Discovery Area, to 1 November
2022
Corporate and financial
-- Continued focus on corporate costs resulted in reduced
administrative expenses - G&A US$1.6 million in H1 2021 (H1
2020: US$2.7 million)
-- Further corporate cost savings implemented post period end
-- Cash resources of US$7.1 million as at 30 June 2021
Outlook
-- Formal exit by Harbour - Rockhopper expects to regain
operatorship and 100% working interest in Sea Lion and key North
Falkland Basin licences, subject to necessary consents
-- Progress an alternative, lower-cost development scheme for
Sea Lion utilising the existing extensive design and engineering
work undertaken for the project in recent years
-- Potential farm-out of Sea Lion project to Navitas
-- Outcome awaited in relation to Ombrina Mare arbitration -
seeking significant monetary damages
Keith Lough, Chairman of Rockhopper, commented:
"Harbour Energy's decision not to proceed with Sea Lion is both
a disappointment and an opportunity, affording us greater control
through our expected regaining of operatorship and a 100% working
interest.
"Sea Lion is a world-class oil field with the scale and
potential to create very material value for Rockhopper, its
partners and the Falkland Islands as a whole.
"Work will continue on a number of fronts over the coming weeks,
including: (1) progressing Harbour's orderly exit from the
Falklands; (2) advancing plans for an alternative, lower cost,
development of Sea Lion; and (3) progressing discussions with
Navitas Petroleum around their potential entry to the project."
Enquiries:
Rockhopper Exploration plc
Sam Moody - Chief Executive
Stewart MacDonald - Chief Financial Officer
Tel. +44 (0) 20 7390 0234 (via Vigo Communications)
Canaccord Genuity Limited (NOMAD and Joint Broker)
Henry Fitzgerald-O'Connor/James Asensio
Tel. +44 (0) 20 7523 8000
Peel Hunt LLP (Joint Broker)
Richard Crichton
Tel. +44 (0) 20 7418 8900
Vigo Communications
Patrick d'Ancona/Ben Simons
Tel. +44 (0) 20 7390 0234
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
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
world-class Sea Lion oil field in 2010. We are a long-term partner
of the Falklands and our aim has always been to support the rights
of the Falkland Islanders to develop their natural resources.
Sea Lion development
The recent decision by Harbour Energy plc ("Harbour") that Sea
Lion does not fit its strategy and therefore that it will not
proceed with the project is a disappointment. Nonetheless, whilst
this is a difficult moment for Rockhopper it is also a very real
opportunity.
The Sea Lion project (with independently audited 2C resources in
excess of 500 million barrels) was discovered and appraised by
Rockhopper 100% as Operator. The Company has unrivalled knowledge
of Sea Lion and the North Falkland Basin having held the acreage
since 2004 and plans to continue to pursue the development of the
project.
Work has already commenced on an alternative, lower-cost
development scheme utilising the existing extensive design and
engineering work undertaken for the project in recent years.
Rockhopper is in discussions with Navitas Petroleum LP
("Navitas") around its potential entry to the Sea Lion project
following Harbour's decision not to proceed. In August this year,
Navitas and partners raised project financing in excess of US$900
million and have taken final investment decision on the 330 million
barrel deep water Shenandoah project in the US Gulf of Mexico,
demonstrating their ability to raise capital for large-scale
offshore oil developments.
The previously announced Heads of Terms with Harbour and Navitas
expires on 30 September 2021 and as a result Harbour will have an
initial 90 days to elect how to proceed with their exit. Rockhopper
will continue to be funded (excluding licence fees, taxes and
project wind down costs) by Harbour during that period under the
terms announced on 7 January 2020 and 30 April 2020.
Rockhopper has commenced discussions with Harbour and the
Falkland Islands Government ("FIG") to ensure an orderly exit by
Harbour from the Falkland Islands.
Ombrina Mare arbitration
Rockhopper commenced international arbitration proceedings
against the Republic of Italy in relation to the Ombrina Mare field
in March 2017. The hearing took place in early February 2019 in
Paris. In June 2019, the Tribunal rejected Italy's request for the
suspension of the arbitration and Italy's related intra-EU
jurisdictional objections.
Post-hearing briefings were submitted in October and November
2019. The Tribunal confirmed in May 2021 that it anticipated being
in a position to render its award in the course of July 2021. In
late September 2021, Italy made a request, and the Tribunal agreed,
to admit a recent European Court of Justice judgment related to
inter-EU Energy Charter Treaty disputes. The Tribunal has requested
Rockhopper's legal advisers to respond to the European Court of
Justice judgment by 6 October 2021.
Rockhopper continues to believe it has strong prospects of
recovering very significant monetary damages - on the basis of lost
profits - as a result of the Republic of Italy's breaches of the
Energy Charter Treaty. All of Rockhopper's costs associated with
the arbitration to date have been funded on a non-recourse ("no win
- no fee") basis from a specialist arbitration funder.
With the expectation that the Ombrina Mare arbitration is
approaching a conclusion, the Company is considering options to
exit its legacy gas interests in Italy.
Corporate Matters
The Group continues to actively manage its corporate costs and
has reduced G&A by over 50% over the last five years. During
2020 approximately US $2.0 million of recurring annual corporate
costs were identified and removed permanently from the business.
G&A costs decreased to US$1.6 million in H1 2021 (H1 2020:
US$2.7 million) .
Post period end, further actions to preserve the Company's cash
position have been agreed, including:
-- the sub-let of the Company's former London office which is
expected to realise additional cash savings in excess of US$1.0
million over the remaining term of the lease;
-- each of the Executive Directors have agreed to defer all of
their annual base salaries above GBP200,000 until the earlier of
(1) a positive Ombrina Mare arbitration award; or (2) the execution
of a farm-out transaction on Sea Lion. Should neither of these
events occur then that portion of salary will be permanently lost.
This equates to a further 35% reduction for the CEO and a further
20% reduction for the CFO in addition to the permanent 20%
reduction in Executive Director base salaries announced in May
2020;
-- the Chairman has also agreed to defer 25% of his base fee in
addition to a 15% permanent voluntary reduction already taken.
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 produce hydrocarbons in a safe and environmentally
responsible manner.
The Company will in 2022 (delayed from 2021 due to the recent
decision by Harbour to exit the Sea Lion project) be undertaking a
review of its broader ESG framework to ensure it remains
appropriate to its business and increasing stakeholder interest in
this area.
Outlook
Sea Lion is a world-class oil field with the scale and potential
to create very material value for Rockhopper, its partners and the
Falkland Islands as a whole.
Work will continue on a number of fronts over the coming weeks,
including: (1) progressing Harbour's orderly exit from the
Falklands; (2) advancing plans for an alternative, lower cost,
development of Sea Lion; and (3) progressing discussions with
Navitas around their potential entry to the project. Given the
unique characteristics and challenges of progressing an oil field
development in the Falklands, an innovative approach to funding
will likely be required.
While we can make no guarantees, our expectation, based on
communications from the Tribunal in July, is that the Ombrina Mare
arbitration is approaching a conclusion, although precise timing
remains unclear.
We thank the Falkland Islands government for its continuing
support and 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
Following the sale of the Company's interests in Egypt
(completed February 2020), the Group's sole source of revenue is
from the production and sale of limited volumes of natural gas in
Italy.
For the period ended 30 June 2021, the Group reported revenues
of US$0.3 million and loss after tax of US$3.3 million.
CASH MOVEMENTS AND CAPITAL EXPITURE
At 30 June 2021, the Group had cash and term deposits of US$7.1
million (31 December 2020: US$11.7 million).
Cash and term deposit movements during the period:
US$m
---------------------------------------------------------------- ------
Opening cash balance (31 December
2020) 11.7
Revenues 0.3
Cost of sales (0.6)
Falkland Islands - (relating to post
1 January 2020) (1.0)
- (relating to pre 1 January 2020) (1.4)
Greater Mediterranean (0.0)
Administrative expenses (1.6)
Miscellaneous (0.3)
Closing cash balance (30 June 2021) 7.1
---------------------------------------------------------------- ------
Falkland Island spend, relating to the period post 1 January
2020, primarily relates to licence fees and internal costs
associated with the Sea Lion development. During H1 2021, the Group
received and subsequently paid a significantly larger than expected
tax liability of US$1.4 million associated with the 2015/16
Falklands drilling campaign. Limited further costs related to the
period prior to 1 January 2020 are expected.
Administrative expenses of US$1.6 million include US$0.4 million
of corporate and administrative costs directly associated with the
Group's legacy interests in Italy.
Miscellaneous includes non-recurring restructuring costs,
foreign exchange and movements in working capital during the
period.
The previously announced Heads of Terms with Harbour and Navitas
expires on 30 September 2021 and as a result Harbour will have an
initial 90 days to elect how to proceed with their exit. Rockhopper
will continue to be funded (excluding licence fees, taxes and
project wind down costs) by Harbour during that period under the
terms announced on 7 January 2020 and 30 April 2020.
TAXATION
On 8 April 2015, the Group agreed binding documentation ("Tax
Settlement Deed") with FIG in relation to the tax arising from the
Group's farm-out to Premier.
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16.
As a result of the Tax Settlement Deed, the outstanding tax
liability was confirmed at GBP64.4 million and is payable on the
earlier of: (i) the first royalty payment date on Sea Lion; (ii)
the date of which Rockhopper disposes of all or a substantial part
of the Group's remaining licence interests in the North Falkland
Basin; or (iii) a change of control of Rockhopper.
During the first half of 2017, as a result of the Group
receiving the full Exploration Carry from Premier during the
2015/16 drilling campaign, the Falkland Islands Commissioner of
Taxation agreed to reduce the tax liability in line with the terms
of the Tax Settlement Deed. As such, the tax liability has been
revised downwards to GBP59.6 million. The outstanding tax liability
is classified as non-current and is discounted to a period-end
value of US$41.0 million.
Full details of the provisions and undertakings of the Tax
Settlement Deed are disclosed in note 7 of these condensed
consolidated interim 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).
As a result of the recently announced decision by Harbour to
exit the Sea Lion project, Rockhopper has commenced discussions
with FIG as to the impact of such a decision on the Group's
deferred tax liability.
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, with surplus cash held on term deposits with a
number of major financial institutions.
At 30 June 2021, the Group had cash resources of US$7.1 million
(unaudited). Following the sale of Rockhopper Egypt Pty Limited in
2020, the Group generates limited revenue and cash flow from the
sale of oil or gas.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development.
However, following the announcement by Harbour of its intention to
exit the Falklands, the Company will have greater control on the
level and timing of future expenditure on the Sea Lion project.
Management has also considered a number of downside scenarios,
the most significant being one where decommissioning of certain
physical assets (principally the Temporary Dock Facility) in the
Falklands is required. The Group would be liable for its 40% share
of these costs with no funding support from Harbour and/or
Navitas.
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 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 of arbitration award proceeds, deferral of expenditure
or raising additional equity.
Accordingly, after making enquiries and considering the risks
described above, the Directors have assessed that the cash balance
held provides the Group with adequate headroom over forecasted
expenditure for the following 12 months - as a result, the
Directors have adopted the going concern basis of accounting in
preparing these consolidated financial statements.
Nonetheless, these conditions indicate the existence of a
material uncertainty which may cast significant doubt on the
Group's and Company's ability to continue as a going concern. The
financial statements do not include the adjustments that would be
required if the Group and Company were unable to continue as a
going concern.
PRINCIPAL RISK AND UNCERTAINTIES
A detailed review of the potential risks and uncertainties which
could impact the Company are outlined in the Strategic Report of
the Group's 2020 Annual Report. The Company identified its key
risks as being:
-- oil price volatility;
-- access to capital;
-- insufficient funds to meet commitments;
-- failure to secure joint venture partners for the Sea Lion project; and
-- failure 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 Company and the
Sea Lion project.
Stewart MacDonald
Chief Financial
Officer
CONDENSED CONSOLIDATED income statement
for the six months ended 30 June 2021
Six months Six months
Ended Ended
30 June 30 June
2021 2020
Unaudited Unaudited
Notes $'000 $'000
------------------------------------- ------ ----------- -----------
Revenue 2 347 2,467
------------------------------------- ------ ----------- -----------
Other cost of sales (571) (1,283)
Depreciation and impairment of
oil and gas assets (440) (2,598)
Total cost of sales (1,011) (3,881)
------------------------------------- ------ ----------- -----------
Gross loss (664) (1,414)
Exploration and evaluation expenses (131) (223,635)
Administrative expenses (1,578) (2,651)
Charge for share based payments (637) (843)
Foreign exchange movement (262) 2,632
------------------------------------- ------ ----------- -----------
Results from operating activities
and other income (3,272) (225,911)
Finance income 3 36
Finance expense (32) (956)
------------------------------------- ------ ----------- -----------
Loss before tax (3,301) (226,831)
Tax 3 - 8
------------------------------------- ------ ----------- -----------
Loss for the period attributable
to the equity shareholders of the
parent company (3,301) (226,823)
------------------------------------- ------ ----------- -----------
Loss per share: cents
Basic 4 (0.72) (49.81)
Diluted 4 (0.72) (49.81)
------------------------------------- ------ ----------- -----------
CONDENSED CONSOLIDATED statement of comprehensive income
for the six months ended 30 June 2021
Six months Six months
Ended Ended
30 June 30 June
2021 2020
Unaudited Unaudited
Notes $'000 $'000
------------------------------------- ------- ----------- -----------
Loss for the period (3,301) (226,823)
Exchange differences on translation
of foreign operations 394 (28)
---------------------------------------------- ----------- -----------
TOTAL COMPREHENSIVE Loss FOR THE
period (2,907) (226,851)
---------------------------------------------- ----------- -----------
CONDENSED CONSOLIDATED balance sheet
as at 30 June 2021
As at As at
30 June 31 December
2021 2020
Unaudited Audited
----------------------------------------- ------ ---------- ------------
Notes $'000 $'000
NON CURRENT Assets
Exploration and evaluation assets 5 244,907 244,349
Property, plant and equipment 6 784 1,420
Finance lease receivable 381 462
CURRENT Assets
Inventories 300 310
Other receivables 1,934 2,464
Finance lease receivable 190 187
Restricted cash 489 486
Cash and cash equivalents 7,093 11,680
Total assets 256,078 261,358
----------------------------------------- ------ ---------- ------------
CURRENT Liabilities
Other payables 1,437 3,790
Lease liability 570 567
NON-CURRENT Liabilities
Lease liability 856 1,273
Tax payable 7 40,973 40,703
Provisions 14,650 15,158
Deferred tax liability 39,295 39,300
----------------------------------------- ------ ---------- ------------
Total liabilities 97,781 100,791
----------------------------------------- ------ ---------- ------------
Equity
Share capital 7,218 7,218
Share premium 3,622 3,622
Share based remuneration 4,349 5,973
Owns shares held in trust (3,342) (3,342)
Merger reserve 74,332 74,332
Foreign currency translation reserve (10,177) (10,571)
Special reserve 188,028 188,028
Retained losses (105,733) (104,693)
----------------------------------------- ------ ---------- ------------
Attributable to the equity shareholders
of the company 158,297 160,567
----------------------------------------- ------ ---------- ------------
Total liabilities and equity 256,078 261,358
----------------------------------------- ------ ---------- ------------
These condensed consolidated interim financial statements were
approved by the directors and authorised for issue on 30 September
2021 and are signed on their behalf by:
Stewart MacDonald
Chief Financial Officer
CONDENSED CONSOLIDATED statement of changes in equity
for the six months ended 30 June 2021
Own Foreign
shares Currency
Share
Share Share based held Merger Translation Special Retained Total
---------------
in
capital premium remuneration trust Reserve Reserve reserve losses Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ---------- ----------
Balance at 31
December
2019
(audited) 7,212 3,547 4,871 (3,371) 74,332 (9,678) 433,766 (114,565) 396,114
Total
comprehensive
expense for
the
period - - - - - (28) - (226,823) (226,851)
Other
transfers - - (835) - - - 835 -
Share based
payments - - 843 - - - - - 843
Share issues
in
relation to
SIP 6 75 96 29 - - - - 206
Balance at 30
June
2020
(unaudited) 7,218 3,622 4,975 (3,342) 74,332 (9,706) 433,766 (340,553) 170,312
Total
comprehensive
expense for
the
period - - - - - (865) - (9,681) (10,546)
Other
transfers - - 97 100 - - (245,738) 245,541 -
Share based
payments - - 997 - - - - - 998
Share issues
in
relation to
SIP - - (96) (100) - - - - (196)
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ---------- ----------
Balance at 31
December
2020
(audited) 7,218 3,622 5,973 (3,342) 74,332 (10,571) 188,028 (104,693) 160,567
Total
comprehensive
expense for
the
period - - - - - 394 - (3,301) (2,907)
Other
transfers - - (2,261) - - - 2,261 -
Share based
payments - - 637 - - - - - 637
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ---------- ----------
Balance at 30
June
2021
(unaudited) 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 MONTHSED 30 JUNE 2021
Six months Six months
Ended Ended
30 June 30 June
2021 2020
Unaudited Unaudited
Notes $'000 $'000
---------------------------------------- ------ ----------- -----------
Cash flows from operating activities
Net loss before tax (3,301) (226,831)
Adjustments to reconcile net
losses to cash:
Depreciation 654 1,013
Share based payment charge 637 843
Impairment of oil and gas assets 6 - 1,789
Impairment of exploration and
evaluation assets 5 - 223,003
Loss on disposal of property,
plant and equipment - -
Finance expense 31 956
Finance income (1) (36)
Foreign exchange 208 (2,450)
---------------------------------------- ------ ----------- -----------
Operating cash flows before movements
in working capital (1,772) (1,713)
Changes in:
Inventories - 67
Other receivables 682 1,319
Payables (728) (677)
Movement on other provisions 3 3
---------------------------------------- ------ ----------- -----------
Cash utilised by operating activities (1,815) (1,001)
---------------------------------------- ------ ----------- -----------
Cash Flows from investing activities
Capitalised expenditure on exploration
and evaluation assets (2,395) (9,388)
Purchase of property, plant and
equipment (24) (653)
Net proceeds from disposal of
assets held for sale - 8,421
Interest 1 44
Investing cash flows before movements
in capital balances (2,418) (1,576)
Cash flow from investing activities (2,418) (1,576)
---------------------------------------- ------ ----------- -----------
Cash flows from financing activities
Share incentive plan - 12
Lease liability payments (327) (119)
Finance paid (3) (3)
---------------------------------------- ------ ----------- -----------
Cash flow from financing activities (330) (110)
---------------------------------------- ------ ----------- -----------
Currency translation differences
relating to cash and cash equivalents (24) 9
Net cash outflow (4,563) (2,687)
Cash and cash equivalents brought
forward 11,680 17,223
---------------------------------------- ------ ----------- -----------
Cash and cash equivalents carried
forward 7,093 14,545
---------------------------------------- ------ ----------- -----------
Notes to the condensed CONSOLIDATED group financial
statements
for the six months ended 30 June 2021
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ('the Company'), a public limited
company quoted on AIM, incorporated and domiciled in the United
Kingdom ('UK'), together with its subsidiaries (collectively, 'the
Group') holds 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.
1.2 Statement of compliance and basis of preparation
These condensed consolidated interim financial statements of the
Group, as at and for the six months ended 30 June 2021, include the
results of the Company and all subsidiaries over which the Company
exercises control.
The condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
("IAS") 34 Interim Financial The accounting policies applied in the
preparation of the condensed consolidated interim financial
statements are consistent with the policies applied by the Group in
the consolidated financial statements as at and for the year ended
31 December 2020. They do not include all information required for
full annual financial statements, and should be read in conjunction
with the consolidated financial statements of the Company and all
its subsidiaries as at the year ended 31 December 2020.
The comparative figures for the year ended 31 December 2020 are
not the Group's statutory accounts for that financial period. Those
accounts have been reported on by the Group's auditor and delivered
to the registrar of companies. The report of the auditor was: (i)
unqualified and (ii) did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
A number of amended standards became applicable for the current
reporting period. The group did not have to change its accounting
policies or make retrospective adjustments as a result of adopting
these amended standards.
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
December 2020.
The condensed consolidated interim financial statements were
approved by the Board on 30 September 2021.
All values are rounded to the nearest thousand dollars ($'000)
or thousand pounds (GBP'000), except when otherwise indicated.
1.3 Going concern
The Group monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management, with surplus cash held on term deposits with a
number of major financial institutions.
At 30 June 2021, the Group had cash resources of US$7.1 million
(unaudited). Following the sale of Rockhopper Egypt Pty Limited in
2020, the Group generates limited revenue and cash flow from the
sale of oil or gas.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development.
However, following the announcement by Harbour of its intention to
exit the Falklands, the Company will have greater control on the
level and timing of future expenditure on the Sea Lion project.
Management has also considered a number of downside scenarios,
the most significant being one where decommissioning of certain
physical assets (principally the Temporary Dock Facility) in the
Falklands is required. The Group would be liable for its 40% share
of these costs with no funding support from Harbour and/or
Navitas.
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 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 of arbitration award proceeds, deferral of expenditure
or raising additional equity.
Accordingly, after making enquiries and considering the risks
described above, the Directors have assessed that the cash balance
held provides the Group with adequate headroom over forecasted
expenditure for the following 12 months - as a result, the
Directors have adopted the going concern basis of accounting in
preparing these consolidated financial statements.
Nonetheless, these conditions indicate the existence of a
material uncertainty which may cast significant doubt on the
Group's and Company's ability to continue as a going concern. The
financial statements do not include the adjustments that would be
required if the Group and Company were unable to continue as a
going concern.
1.4 Period end exchange rates
The period end rates of exchange actually used were:
30 June 30 June 31 December
2021 2020 2020
----------- -------- -------- ------------
GBP : US$ 1.38 1.31 1.36
EUR : US$ 1.19 1.12 1.23
----------- -------- -------- ------------
2 Revenue and segmental information
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.
Six months ended 30 June 2020 (unaudited)
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
-------------------------------- ---------- -------------- ---------- ----------
Revenue - 2,467 - 2,467
Cost of sales - (3,881) - (3,881)
-------------------------------- ---------- -------------- ---------- ----------
Gross profit/(loss) - (1,414) - (1,414)
Exploration and evaluation
expenses (222,228) (812) (595) (223,635)
Administrative expenses - (514) (2,137) (2,651)
Charge for share based
payments - - (843) (843)
Foreign exchange movement 2,523 78 31 2,632
-------------------------------- ---------- -------------- ---------- ----------
Results from operating
activities and other income (219,705) (2,662) (3,544) (225,911)
Finance income - - 36 36
Finance expense - (30) (926) (956)
-------------------------------- ---------- -------------- ---------- ----------
Loss before tax (219,705) (2,692) (4,434) (226,831)
Tax - 8 - 8
-------------------------------- ---------- -------------- ---------- ----------
Loss for period (219,705) (2,684) (4,434) (226,823)
-------------------------------- ---------- -------------- ---------- ----------
Reporting segments assets 242,856 6,509 20,237 269,602
Reporting segments liabilities (76,370) (14,401) (8,519) (99,290)
There are no material additions to segment assets.
All of the Group's worldwide sales revenues of oil and gas $347
thousand (2020: 2,467 thousand) arose from contracts to customers.
Total revenue relates to revenue from one customer (2020: two
customers each exceeding 10 per cent of the Group's consolidated
revenue).
3 Taxation
Six months Six months
ended ended
30 June 30 June
2021 2020
$'000 $'000
Unaudited Unaudited
-------------------------------- ------------ -----------
Current tax:
Overseas tax - -
Adjustment in respect of prior
periods - 8
-------------------------------- ------------ -----------
Total current tax - 8
-------------------------------- ------------ -----------
Deferred tax:
Overseas tax - -
-------------------------------- ------------ -----------
Total deferred tax - -
-------------------------------- ------------ -----------
Tax on ordinary activities - 8
-------------------------------- ------------ -----------
4 Basic and diluted loss per share
Six months Six months
ended ended
30 June 30 June
2021 2020
Number Number
Unaudited Unaudited
------------------------------------- ------------ ------------
Shares in issue brought forward 458,482,117 457,979,755
Shares issued
- Issued under the SIP - 502,362
------------------------------------- ------------ ------------
Shares in issue carried forward 458,482,117 458,482,120
------------------------------------- ------------ ------------
Weighted average number of Ordinary
Shares
for the purpose of earnings per
share 455,351,117 455,405,626
------------------------------------- ------------ ------------
$'000 $'000 $'000
------------------------------------- ------------ ------------
Net loss after tax for purposes
of basic and diluted earnings per
share (3,301) (226,823)
------------------------------------- ------------ ------------
Earnings per share - cents
Basic (0.72) (49.81)
Diluted (0.72) (49.81)
------------------------------------- ------------ ------------
The weighted average number of Ordinary Shares takes into
account those shares which are treated as own shares held in trust.
As the Group is reporting a loss in each period 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
2021
Number
Unaudited
--------------------------- -----------
Long term incentive plan 11,032,536
Share appreciation rights 611,919
Share options 32,194,588
---------------------------- -----------
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 2021, 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 Year
ended ended
30 June 31 December
2021 2020
$'000 $'000
Unaudited Audited
------------------------- ----------- ------------
Current tax payable - -
Non current tax payable 40,973 40,703
-------------------------- ----------- ------------
40,973 40,703
------------------------- ----------- ------------
On the 8 April 2015, the Group agreed binding documentation
("Tax Settlement Deed") with the Falkland Island Government ("FIG")
in relation to the tax arising from the Group's farm out to Premier
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. The Outstanding Tax Liability is intended to be
binding and final except, subject to the satisfaction of the
Falkland Islands' Commissioner of Taxation, Rockhopper shall be
entitled to make an adjustment to the Outstanding Tax Liability if
any part of the Development Carry from Premier becomes
"irrecoverable".
The Outstanding Tax Liability is payable on the earlier of:
-- First royalty payment date, which is expected to occur within
six months of the date of first oil;
-- The date on which Rockhopper disposes of all or a substantial
part of the Company's remaining interest in the Licences, or
otherwise realises value from the Licences;
-- A change of control of Rockhopper Exploration plc.
As security the Group has provided fixed and floating security
over all assets (with limited carve outs where this would conflict
with applicable law or existing terms). While such security is in
place, restrictions, subject to conventional carve outs, exist on
granting further security. The Group also agreed to maintain a
minimum 20% interest in licence PL032 and not to make dividends or
distributions.
The outstanding tax liability is GBP59.6 million and is expected
to be 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% to a US$ equivalent amount
of US$41.0 million.
No deferred tax asset has been recognised in respect of
temporary differences arising on losses carried forward,
outstanding share options or depreciation in excess of capital
allowances due to the uncertainty in the timing of profits and
hence future utilisation.
8 Post balance sheet events
On the 23 September 2021 Harbour announced that Sea Lion did not
fit its strategy and therefore that it will not proceed with the
project.
The previously announced Heads of Terms with Harbour and Navitas
expires on 30 September 2021 and as a result Harbour will have an
initial 90 days to elect how to proceed with their exit. Rockhopper
will continue to be funded (excluding licence fees, taxes and
project wind down costs) by Harbour during that period under the
terms announced on 7 January 2020 and 30 April 2020.
Rockhopper is in discussions with Navitas around its potential
entry to the Sea Lion project following Harbour's decision not to
proceed. Rockhopper has also commenced discussions with Harbour and
the Falkland Islands Government ("FIG") to ensure an orderly exit
by Harbour from the Falkland Islands.
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END
IR BCGDCCBDDGBC
(END) Dow Jones Newswires
September 30, 2021 02:00 ET (06:00 GMT)
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