TIDMRKH
RNS Number : 1648N
Rockhopper Exploration plc
30 May 2022
30 May 2022
Rockhopper Exploration plc
("Rockhopper", the "Group" or the "Company")
Full-Year Results for the Year Ended 31 December 2021
Rockhopper Exploration plc (AIM: RKH), the oil and gas
exploration and production company with key interests in the North
Falkland Basin, is pleased to announce its audited results for the
year ended 31 December 2021.
2021 Highlights
Sea Lion and the Falkland Islands
-- Definitive legally binding documents announced and,
post-period, signed with Navitas Petroleum LP ("Navitas") and
Harbour Energy plc ("Harbour")
o Navitas to acquire 65% interest in, and become Operator of,
Rockhopper's North Falkland Basin licences
o Harbour to exit the Falklands
-- Navitas to fund all of Rockhopper's Phase 1 Sea Lion project costs* pre FID via 8% loan
-- Navitas to fund two-thirds of Rockhopper's Sea Lion Phase 1
project costs* from FID to one year after first oil, or project
completion if earlier, via interest free loan (for any costs not
met by third party debt financing)
-- Loans repaid from 85% of Rockhopper's working interest share
of Sea Lion Phase1 project cash flows
(* This excludes licence costs, taxes, abandonment and
decommissioning costs (including the Temporary Dock Facility) and
contract termination costs incurred in connection with Harbour
withdrawing)
Corporate and Financial
-- Administrative expenses at lowest level since pre-Sea Lion discovery - G&A US$3.3 million
-- Cash of US$4.8 million as at 31 December 2021
Outlook
-- Ombrina Mare Arbitration proceedings formally closed on 25
April 2022 - seeking significant monetary damages
o Tribunal has 120 days after closing to issue its Award,
extendable by 60 days
-- Satisfaction of various conditions precedent to the Navitas
and Harbour transaction required for deal completion, including
various regulatory and other approvals required from the Falkland
Islands Government
-- Navitas to assume operatorship of Sea Lion and strengthen operating capability
-- Lower upfront cost Sea Lion development to be worked up and financing sought
-- FID targeted 2023/24
Keith Lough, Chairman of Rockhopper, commented:
" We are delighted to have signed legally binding documentation
allowing Harbour a clean exit and bringing Navitas into the
Falklands. At current oil prices and with an increased focus on
security of supply, we believe a responsibly developed Sea Lion
presents an exceptional chance to create very significant value for
all stakeholders.
We look forward to working closely with Navitas on a lower cost
development and associated financing plan for the project. With the
Ombrina Mare arbitration result expected later in the year, we hope
and believe that 2022 will be the start of a bright new chapter for
Rockhopper ".
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
Tel. +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona/Ben Simons/Kendall Hill
Tel. +44 (0) 20 7390 0234
Note regarding financial information disclosure
The financial information set out below does not constitute the
Group's statutory accounts for the year ended 31 December 2021, but
is derived from those accounts. References within the document may
refer to information in the statutory accounts and these will be
sent to shareholders and published on the Company's website
imminently.
Chairman and Chief Executive Officer's Review
Introduction
2021 saw the build-up to the outbreak of a major conflict in
Europe for the first time in decades, with Russia invading Ukraine
early in 2022. The most significant impact of the invasion has been
and continues to be on the people of Ukraine, for whom Rockhopper's
Board express their support. A consequence of the invasion has been
to place an increased focus on energy security of supply and the
volume of oil and gas imported from Russia into Europe in
particular. At the same time the COVID-19 pandemic continues to
cause uncertainty around energy demand with China imposing new
lockdowns as cases spike and economic uncertainty continues across
the globe. Against this backdrop it is perhaps unsurprising that
energy prices have seen material volatility. The price of a barrel
of Brent Crude Oil is around $115 as at time of writing, having
risen from a low of $21 per barrel in April 2020.
While worldwide moves to reduce GHG emissions and reduce
reliance on hydrocarbons continue as we journey through energy
transition towards net zero, we believe that responsibly produced
oil and gas will continue to form a meaningful part of global
energy supply for many years to come.
With a best estimate of over 500 million barrels of recoverable
oil ( ERCE 2016 report) , Sea Lion represents a potentially secure,
highly material source of supply for those countries seeking to
reduce their dependence on Russian oil. Under Premier Oil plc's
("Premier") development concept, based on hundreds of millions of
dollars and multiple years of engineering efforts, the series of
development phases at Sea Lion were projected to produce in excess
of 120,000 barrels per day. At that rate, Sea Lion alone could be
capable of replacing a highly material proportion of the oil by
volume imported into the UK from Russia, all from a politically
stable UK Overseas Dependent Territory. Furthermore, significant UK
content is possible within the project and the regulatory regime in
the Falklands will ensure the development is undertaken with high
regard to ESG issues.
Navitas brings renewed energy and proven financing capability to
the project
The most significant news related to Sea Lion is the signing of
definitive legally binding documentation relating to the entry of
Navitas Petroleum LP ("Navitas") to the Falklands. Navitas brings a
new, dynamic energy to Sea Lion which was significantly delayed
following Chrysaor Holdings Limited's ("Chrysaor") merger with
Premier and the creation of Harbour Energy plc ("Harbour").
Navitas' senior team's exceptional ability to raise finance for
challenging projects was clearly demonstrated as recently as last
year when they successfully secured a US$1bn project financing for
the Shenandoah field in the Gulf of Mexico. In fact, Navitas has
raised in excess of $1.4bn of equity and debt since 2017 and as we
consider financing to be the main hurdle for Sea Lion's
development, we are particularly pleased to be welcoming them to
the basin. Sea Lion will represent Navitas' largest operated
development opportunity, so is highly material to both
partners.
Sea Lion
From 2012-2022, we estimate that Premier and Rockhopper spent in
excess of US$300m on engineering and other non-drilling work
relating to the Sea Lion project. Navitas and Rockhopper plan to
build on this very significant bank of knowledge to create a lower
cost development, potentially based around a re-deployed FPSO with
fewer wells being drilled pre first oil. Given the amount of
engineering already done, the timing is likely to be driven largely
by interaction with the vendor community, most notably in finding a
suitable FPSO, and the time taken to progress the financing. Having
said this, the target is to reach FID in 2023 or 2024 and to then
have formal project sanction as early in 2024 as possible.
Rockhopper believes it is possible to materially reduce pre
first oil capex from the previously estimated US$1.8bn (assuming a
leased FPSO) and overall project capex by taking actions such as
reducing the number of wells drilled pre first oil and reducing the
number of drill centres.
As part of the transaction, Navitas commissioned Netherland,
Sewell & Associates, Inc. ("NSAI") to produce a resource report
which used a different approach to the ERCE 2016 report. NSAI
concluded that the 2C for Sea Lion is significantly larger than the
517mmbbls contained in the ERCE report. As this report was not
produced for Rockhopper we will continue to refer to the ERCE
numbers, but are delighted at this additional third party
validation of the potential of the North Falkland Basin and Sea
Lion to produce significant quantities of oil.
As Navitas have not formally become Operator and licence holder,
they are yet to be in position to have substantive conversations
with the contractor community as part of the working up of the new
development plan for Sea Lion. That said, Rockhopper's Board remain
confident that the Sea Lion project will continue to benefit from
robust economics, particularly at current oil prices. Based on the
Premier Oil development from 2019-2020 at a real terms US$75 Brent,
Sea Lion phase one only would have a pre-financing project NPV 10
of over US$5bn at first oil. Whilst the lower cost development
concept is likely to see a lower number, we believe this
demonstrates the enormous potential value represented by Sea Lion
for all stakeholders, including the Falkland Islands
Government.
Ombrina Mare arbitration
Having commenced proceedings against the Republic of Italy in
2017 and completed the first and second hearings during the course
of 2019, the Tribunal confirmed that proceedings had been formally
closed on 25 April 2022. Under ICSID Arbitration Rules, the
Tribunal has 120 days after closing to issue its Award, extendable
by a further 60 days (Rule 46). The 120 days rule means that we
should receive the final decision, including the quantum of any
award should we be successful, by 22 August 2022, or 22 October
2022 should the extension be required. The Company continues to
believe it has strong prospects of recovering significant monetary
damages.
Corporate matters
Following eight years at the Company, Stewart MacDonald stepped
down from his role as Executive Director and Chief Financial
Officer in January 2022. Stewart helped Rockhopper agree what we
believe is a positive and exciting framework with Navitas that sees
us fully aligned and committed to bringing Sea Lion to production,
and the Board wishes him every success in his future career.
William Perry, who has been working as Rockhopper's Financial
Controller since 2011, has stepped up to become the Company's
Interim Chief Financial Officer.
Following a series of material cost reduction initiatives, the
Company's G&A is now at its lowest level for over a decade.
Decisions have included relocating the office to Salisbury and
sub-letting the London office, materially reducing headcount and
moving a number of key technical staff to part-time working in
order to balance a reduction in cash burn whilst retaining required
expertise and specific Sea Lion and Falklands knowledge within the
Company.
ESG
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 an environmentally responsible
manner.
As noted last year FIG established an independent environment
trust to receive and administer future off-setting payments from
the Sea Lion project and distribute those funds for activities
aimed at ensuring a positive environmental legacy in the
Islands.
Once FID on Sea Lion has been achieved, the Company commits to
define measures, report transparently, and mitigate our own
emissions as far as practicable.
Outlook
With over 500 million barrels of recoverable oil, Sea Lion
continues to represent a development with significant potential
value for all stakeholders. Additionally, recent global
developments have highlighted the importance of security of supply
for energy, and hydrocarbons' vital role in that.
The Board believes that the addition of Navitas, a committed and
aligned partner with recent proven ability to access capital for
oil field developments, represents the start of a bright new
chapter in the history of Sea Lion, bringing with it a renewed
energy and enthusiasm for the project. This new joint venture,
along with a strong oil price and changing supply background,
provides us with the best possible chance of seeing the project
sanctioned.
Finally, we thank the Government and people of the Falkland
Islands for their continued support as they move towards
commemorating the 40(th) anniversary of the end of the 1982
conflict.
FINANCIAL REVIEW
OVERVIEW
From a finance perspective, the most significant events in the
year include:
-- Announcement by 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
-- Detailed Heads of Terms signed with Navitas and Harbour for
Harbour to exit the Falklands and for Navitas to farm-in to 65 per
cent interest in the North Falkland Basin assuming operatorship
-- Detailed transaction terms agreed with Premier/Harbour and
Navitas in relation to the Sea Lion project (the "Transaction")
-- Finalisation of the corporate cost reduction programmes previously implemented
Assuming the Transaction completes the arrangements with Navitas
ensure that Rockhopper is funded for all pre-sanction costs related
to the Sea Lion Phase 1 development (other than licence fees, taxes
and project wind down costs). As such, the Group believes the above
events materially strengthen the Group's financial position in the
short and medium term and significantly enhance the prospects for a
successful project financing for Sea Lion.
RESULTS FOR THE YEAR
For the year ended 31 December 2021, the Group reported revenues
of US$0.8 million (2020: US$2.8 million) and loss after tax of
US$7.8 million (2020: US$236.5 million). The significant reduction
in loss after tax was driven by last year's results including
non-recurring non-cash impairments associated with previously
incurred exploration costs in the North Falkland Basin. The
decision was made, in line with the operator, to write off historic
exploration costs associated with the resources which will not be
developed as part of the Sea Lion Phase 1 project.
REVENUE AND COST OF SALES
The Group's revenues of US$0.8 million (2020: US$2.8 million)
during the year relate entirely to the sale of natural gas in the
Greater Mediterranean (specifically Italy) region. The reduction in
revenues from the comparable period reflects the completion of the
disposal of the Group's Egypt portfolio in February 2020. The
Egyptian portfolio made up US$2.1 million of 2020 revenues. Gas was
sold at a price linked to the Italian "PSV" (Virtual Exchange
Point) gas marker price.
Cash operating costs, excluding depreciation and impairment
charges, amounted to US$1.1 million (2020: US$2.1 million). Again,
the reduction in operating costs reflects the disposal of the
Group's Egypt portfolio during the prior period.
Revenue and cost of sales are not expected to be material going
forward.
OPERATING COSTS
Exploration and evaluation expenses are not material in the
year. The reversal of impairment in the year relates to impairments
against amounts over accrued in the prior year. As previously
mentioned, the prior year expenses was mainly due to the write off
of costs relating to areas of the North Falkland Basin which will
not be developed as part of the Sea Lion Phase 1 project.
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. In light of the sharp
reduction in oil prices experienced in the first half of 2020,
initiatives to further reduce corporate costs commenced in May
2020. The full benefit of these cost reduction initiatives were
realised in 2021 resulting in G&A costs of US$3.3 million in
2021 (2020: US$4.0 million), excluding non-recurring expenses
related to restructuring and acquisitions and divestments.
The foreign exchange gain in the year is US$0.8 million (2020:
loss of US$1.4 million). As with last year, this is mainly
movements in relation to the tax arising from the Group's farm-out
to Premier in 2012, a GBPGBP denominated balance. Finance expense
in the year of US$3.5million (2020: US$nil) also relate to
adjustments in relation to this tax balance. This balance is
discussed further below.
Following the decision in February 2016 by the Italian Ministry
of Economic Development not to award the Group a Production
Concession covering the Ombrina Mare field, in March 2017 the Group
commenced international arbitration proceedings against the
Republic of Italy. All of the Group's costs associated with the
arbitration are funded on a non-recourse ("no win - no fee") basis
from a specialist arbitration funder.
CASH MOVEMENTS AND CAPITAL EXPITURE
At 31 December 2021, the Group had cash and term deposits of
US$4.8 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 0.8
Cost of sales (1.1)
Falkland Islands (3.2)
Greater Mediterranean (0.2)
Administrative expenses (3.3)
Miscellaneous 0.1
Closing cash balance (31 December
2021) 4.8
----------------------------------------- ------
During 2021, the Group paid US$3.2 million in relation to Sea
Lion costs. This included the tax liability of US$1.4 million
associated with the 2015/16 Falklands drilling campaign accrued for
as at the prior year end.
Miscellaneous includes foreign exchange and movements in working
capital during the period.
Impairment of oil and gas assets
The Sea Lion development remains central to the Group's plans.
Whilst Harbour's decision to exit the North Falkland Basin was
disappointing, the Group is excited at the prospect of bringing in
a new industry partner, in Navitas, especially given their
experience in financing projects of a similar scale to Sea Lion. As
part of the Transaction to bring Navitas onto the licences we are
seeking licence extensions from the Falkland Island Government.
This should allow the newly formed joint venture to leverage the
extensive engineering work carried out to date and pursue a lower
upfront cost development. As such it was concluded that there were
no current indicators of impairment for Phase 1 of the Sea Lion
development.
In the prior year a decision was made, in line with the
operator, to write off historic exploration costs associated with
the resources which will not be developed as part of the Sea Lion
Phase 1 project. This impairment has no impact on the Group's
long-term strategy for multiple phases of development in the North
Falkland Basin but instead reflects the limited capital which will
be invested outside of the Phase 1 project in the near-term.
MERGERS, ACQUISITIONS AND DISPOSALS
Post year end the Group announced Harbour and Navitas have
signed legally binding definitive documentation in relation to
Harbour exiting and Navitas entering the North Falkland Basin.
Ultimately the Transaction will align working interests across
all the North Falkland Basin petroleum licences - Rockhopper 35% /
Navitas 65% - subject to all necessary consents. The Group and
Navitas will jointly develop and agree a technical and financing
plan to enable the development of the Sea Lion project to achieve
first oil on a lower cost and expedited basis post sanction.
Navitas will provide loan funding to the Group to cover;
(i) the majority of its share of Sea Lion phase one related
costs from Transaction completion up to Final Investment Decision
("FID") through a loan from Navitas with interest charged at 8% per
annum (the "Pre-FID Loan").
(ii) Subject to a positive FID, Navitas will provide an interest
free loan to fund two-thirds of the Group's share of Sea Lion phase
one development costs (for any costs not met by third party debt
financing).
Certain costs, such as licence costs, are excluded in both
instances. Funds drawn under the loans will be repaid from 85% of
Rockhopper's working interest share of free cash flow.
Whilst Transaction completion is still subject to receipt of
various agreements, consents and approvals by the Falkland Islands
Government , the Group is optimistic that these will be
forthcoming.
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 Exploration
plc.
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$43.2 million.
Full details of the provisions and undertakings of the Tax
Settlement Deed are disclosed in note 18 of these consolidated
financial statements and these include "creditor protection"
provisions including undertakings not to declare dividends or make
distributions while the tax liability remains outstanding (in whole
or in part).
LIQUIDITY, COUNTERPARTY RISK AND GOING CONCERN
The Group monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management.
At 31 December 2021, the Group had cash resources of US$4.8
million. As at the end of April 2022 the Group had cash resources
of $US3.4 million and as well as normal working capital
requirements expects a number of non recurring costs in relation to
the Transaction. Going forward projected recurring expenditure is
around US$4.0 million per year.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development. In
April 2022, the Group signed definitive documentation to bring
Navitas into the North Falkland Basin (the "Transaction"). The
Transaction is subject to certain conditions precedent, the most
important of which are certain consents from FIG which include, but
are not limited to, a two year extension on the Licences being
acquired, Navitas being approved as an Operator and certain tax
clearances from FIG. Assuming completion, Navitas will provide loan
funding to the Group for its share of all Sea Lion pre-sanction
costs (other than licence fees, taxes and project wind down
costs).
Management believe that the Transaction will complete before the
end of the year. Based on previous correspondence with FIG,
Management does not believe the Transaction completion would
constitute a substantial disposal and therefore will not accelerate
the deferred CGT liability related to the 2012 farm out.
Even in the case of Transaction completion Management has
determined that the Group will require further funding for working
capital and to achieve Sea Lion FID, with FID estimated to be in
early 2024. The Group believes that a funding solution is
achievable, with options including the issue of equity in addition
to the potential award of significant monetary damages with respect
to international arbitration proceedings against the Republic of
Italy in relation to the Ombrina Mare field which declared closed
on the 25 April 2022. At the time of writing, the final form and
availability of funding is yet to be determined. Subject to market
conditions we anticipate having raised sufficient funds by the end
of Q3 2022.
In the event the Transaction does not complete then as well as
working capital requirements it is possible that this could lead to
the acceleration of Falkland Island infrastructure decommissioning
costs currently estimated at US$4.0million (Group's net share), for
which the Group is not funded.
Accordingly, after making enquiries and considering the risks
described above, the Directors have reviewed the Group's overall
position and given their belief, that raising funds will be
possible, 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 financial statements.
Given the Directors' confidence in their ability to complete a
funding solution in the near term, the Directors believe that the
Group will be sufficiently funded and believe the use of the going
concern basis is appropriate. Nonetheless, for the avoidance of
doubt, in the downside scenarios in which either the Transaction
does not complete or a funding solution is not completed and in the
absence of potential mitigating actions, a material uncertainty
exists that may cast significant doubt on the Group's ability to
continue as a going concern. The Consolidated and Parent Company
financial statements do not include adjustments that would result
if the group was unable to continue as a going concern.
PRINCIPAL RISK AND UNCERTAINTIES
A detailed review of the potential risks and uncertainties which
could impact the Group are outlined elsewhere in this Strategic
Report. The Group identified its key risks at the end of 2021 as
being:
1 oil price volatility;
2 access to capital;
3 joint venture partner alignment; and
4 failure of joint venture partners to secure the requisite
funding to allow a Sea Lion Final Investment Decision.
In 2020, the environmental impact of oil and gas extraction
(e.g. climate change) was added to the risk register, reflecting
the increased focus on ESG issues which could have an adverse
impact on investor and lender sentiment towards the Group and the
Sea Lion project.
CONSOLIDATED income statement
for the YEAR ended 31 DeCEMBER 2021
Year Year
ended ended
31 December 2021 31 December 2020
Notes $'000 $'000
---------------------------------------------------- ------ ------------------ ------------------
Revenue 3 839 2,754
---------------------------------------------------- ------ ------------------ ------------------
Other cost of sales (1,141) (2,109)
Depreciation and impairment of oil and gas assets (667) (2,692)
---------------------------------------------------- ------ ------------------ ------------------
Total cost of sales 4 (1,808) (4,801)
---------------------------------------------------- ------ ------------------ ------------------
Gross loss (969) (2,047)
---------------------------------------------------- ------ ------------------ ------------------
Other exploration and evaluation expenses (398) (2,431)
Impairment of exploration and evaluation assets 273 (223,280)
---------------------------------------------------- ------ ------------------ ------------------
Total exploration and evaluation expenses 5 (125) (225,711)
---------------------------------------------------- ------ ------------------ ------------------
Non recurring restructuring costs - (614)
Recurring administrative costs (3,263) (4,010)
---------------------------------------------------- ------ ------------------ ------------------
Total administrative expenses 6 (3,263) (4,624)
Charge for share based payments 9 (824) (1,840)
Foreign exchange movement 10 789 (1,438)
Results from operating activities and other income (4,392) (235,660)
Finance income 11 4 44
Finance expense 11 (3,522) (819)
---------------------------------------------------- ------ ------------------ ------------------
Loss before tax (7,910) (236,435)
Tax 12 151 (69)
---------------------------------------------------- ------ ------------------ ------------------
LOSS FOR THE YEAR ATTRIBUTABLE TO THE
EQUITY SHAREHOLDERS OF THE PARENT COMPANY (7,759) (236,504)
---------------------------------------------------- ------ ------------------ ------------------
Loss per share: cents
Basic 13 (1.70) (51.73)
Diluted 13 (1.70) (51.73)
---------------------------------------------------- ------ ------------------ ------------------
All operating income and operating gains and losses relate to
continuing activities.
CONSOLIDATED statement of comprehensive income
for the YEAR ended 31 DECEMBER 2021
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------------------------ -------------- --------------
Loss for the year (7,759) (236,504)
Items that may be reclassified to profit
or loss
Exchange differences on translation of
foreign operations 889 (893)
------------------------------------------ -------------- --------------
(6,870 (237,397
TOTAL COMPREHENSIVE LOSS FOR THE YEAR ) ))
------------------------------------------ -------------- --------------
The notes on pages 50 to 68 form an integral part of these
consolidated financial statements.
CONSOLIDATED balance sheet
as at 31 DECEMBER 2021
31 December 31 December
2021 2020
Notes $'000 $'000
----------------------------------------- ------ ------------ ------------
NON CURRENT ASSETS
Exploration and evaluation assets 14 249,583 244,349
Property, plant and equipment 15 201 1,420
Finance lease receivable 730 462
CURRENT ASSETS
Inventories - 310
Other receivables 16 2,074 2,464
Finance lease receivable 288 187
Restricted cash 579 486
Cash and cash equivalents 4,822 11,680
TOTAL ASSETS 258,277 261,358
----------------------------------------- ------ ------------ ------------
CURRENT LIABILITIES
Other payables 17 2,000 3,790
Lease liability 286 567
NON-CURRENT LIABILITIES
Lease liability 842 1,273
Tax payable 18 43,204 40,703
Provisions 19 18,287 15,158
Deferred tax liability 20 39,137 39,300
TOTAL LIABILITIES 103,756 100,791
----------------------------------------- ------ ------------ ------------
EQUITY
Share capital 21 7,218 7,218
Share premium 22 3,622 3,622
Share based remuneration 22 4,327 5,973
Own shares held in trust 22 (3,342) (3,342)
Merger reserve 22 74,332 74,332
Foreign currency translation reserve 22 (9,682) (10,571)
Special reserve 22 175,281 188,028
Retained losses 22 (97,235) (104,693)
----------------------------------------- ------ ------------ ------------
ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
OF THE COMPANY 154,521 160,567
----------------------------------------- ------ ------------ ------------
TOTAL LIABILITIES AND EQUITY 258,277 261,358
----------------------------------------- ------ ------------ ------------
These financial statements on pages 46 to 68 were approved by
the directors and authorised for issue on 27 May 2022 and are
signed on their behalf by:
Samuel Moody
CHIEF EXECUTIVE OFFICER
Rockhopper Exploration plc
Registered Company number: 05250250
The notes on pages 50x to 68 form an integral part of these
consolidated financial statements.
CONSOLIDATED statement of changes in equity
for the YEAR ended 31 DECEMBER 2021
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
2019 7,212 3,547 4,871 (3,371) 74,332 (9,678) 433,766 (114,565) 396,114
Loss for
the year - - - - - - - (236,504) (236,504)
Other
comprehensive
loss for
the year - - - - - (893) - - (893)
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ------------ ------------
Total
comprehensive
loss for
the year - - - - - (893) - (236,504) (237,397)
Share based
payments
(see note
9) - - 1,840 - - - - - 1,840
Share issues
in relation
to SIP 6 75 - (71) - - - - 10
Other
transfers - - (738) 100 - - (245,738) 246,377 -
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ------------ ------------
Balance
at 31
December
2020 7,218 3,622 5,973 (3,342) 74,332 (10,571) 188,028 (104,693) 160,567
Loss for
the year - - - - - - - (7,759) (7,759)
Other
comprehensive
profit
for the
year - - - - - 889 - - 889
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ------------ ------------
Total
comprehensive
loss for
the year - - - - - 889 - (7,759) (6,870)
Share based
payments
(see note
9) - - 824 - - - - - 824
Other
transfers - - (2,470) - - - (12,747) 15,217 -
Balance
at 31
December
2021 7,218 3,622 4,327 (3,342) 74,332 (9,682) 175,281 (97,235) 154,521
--------------- -------- -------- ------------- -------- -------- ------------ ---------- ------------ ------------
See note 22 for a description of each of the reserves of the
Group.
Other transfers relate to amounts transferred from share based
remuneration reserve to retained losses in relation to options that
have either not vested or lapsed and amounts transferred from
special reserve utilised to reduce the amount of losses incurred by
the parent company.
CONSOLIDATED STATEMENT OF CASHFLOWS
for the YEAR ended 31 DECEMBER 2021
Year Year
ended ended
31 December 31 December
2021 2020
Notes $'000 $'000
------------------------------------------------------ ------ -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (7,910) (236,435)
Adjustments to reconcile net losses to cash:
Depreciation 15 1,082 808
Share based payment charge 9 824 1,840
Impairment of oil and gas assets 15 - 1,114
Impairment reversal of exploration and evaluation
assets 14 (273) 223,280
Profit/(loss) on disposal of property, plant
and equipment (156) 4
Finance expense 3,601 816
Foreign exchange (640) 1,315
------------------------------------------------------ ------ -------------- --------------
Operating cash flows before movements in working
capital (3,472) (7,282)
Changes in:
Inventories 287 1,289
Other receivables 176 1,904
Payables 420 (1,320)
Movement on other provisions 6 (54)
------------------------------------------------------ ------ -------------- --------------
Cash utilised by operating activities (2,583) (5,439)
------------------------------------------------------ ------ -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalised expenditure on exploration and
evaluation assets (3,248) (14,570)
Purchase of property, plant and equipment (228) (85)
Disposal of assets held for sale - 14,763
Investing cash flows before movements in capital
balances (3,476) 108
Changes in:
Restricted cash (100) -
Cash flow from investing activities (3,576) 108
------------------------------------------------------ ------ -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Share incentive plan - 10
Lease liability payments (587) (382)
Finance expense - (19)
------------------------------------------------------ ------ -------------- --------------
Cash flow from financing activities (587) (391)
------------------------------------------------------ ------ -------------- --------------
Currency translation differences relating to
cash and cash equivalents (112) 179
Net cash flow (6,746) (5,722)
Cash and cash equivalents brought forward 11,680 17,223
------------------------------------------------------ ------ -------------- --------------
CASH AND CASH EQUIVALENTS CARRIED FORWARD 4,822 11,680
------------------------------------------------------ ------ -------------- --------------
Notes to the CONSOLIDATED financial statements
for the Year ended 31 DECEMBER 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 certain exploration licences for the exploration and
exploitation of oil and gas in the Falkland Islands. In addition,
it has operations in the Greater Mediterranean based in Italy. The
registered office of the Company is Warner House, 123 Castle
Street, Salisbury, Wiltshire, SP1 3TB.
1.2 Statement of compliance
The consolidated financial statements of the Group have been
prepared on a going concern basis in accordance with International
Financial Reporting Standards (IFRS) in conformity with the
requirements of the Companies Act 2006 and UK-adopted International
Accounting Standards. The consolidated financial statements were
approved for issue by the board of directors on 27 May 2022 and are
subject to approval at the Annual General Meeting of shareholders
on 28 June 2022.
1.3 Basis of preparation
The results upon which these financial statements have been
based were prepared using the accounting policies set out below.
These policies have been consistently applied unless otherwise
stated.
These consolidated financial statements have been prepared under
the historical cost convention with the exception of Share Based
Payments which are at fair value.
Items included in the results of each of the Group's entities
are measured in the currency of the primary economic environment in
which that entity operates (the "functional currency"). The
consolidated financial statements are presented in US Dollars ($),
which is Rockhopper Exploration plc's functional currency.
All values are rounded to the nearest thousand dollars ($'000)
or thousand pounds (GBP'000), except when otherwise indicated.
1.4 change in accounting policy
Changes in accounting standards
In the current year the following new and revised Standards and
Interpretations have been adopted. None of these have a material
impact on the Group's annual results.
Amendments to IFRS 9 , IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform (Phase 2)
New accounting pronouncements
At 31 December 2021, the following Standards, Amendments and
Interpretations were in issue but not yet effective:
IFRS 17: Insurance contracts, IFRS 10 and IAS 28 (amendments):
Sale or contribution of assets between an investor and an associate
or joint venture, Amendments to IAS 1: Classification of
liabilities, Amendments to IFRS 3: Reference to the Conceptual
Framework, Amendments to IAS 16: Property, Plant and
Equipment-Proceeds before Intended Use, Amendments to IAS 37:
Onerous Contracts - Cost of Fulfilling a Contract, Annual
Improvements to IFRS Standards: 2018-2020 Cycle, Amendments to IFRS
1: First-time Adoption of International Financial Reporting
Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41
Agriculture, Amendments to IAS 1 and IFRS Practice Statement 2:
Disclosure of Accounting Policies, Amendments to IAS 8: Definition
of Accounting Estimates, Amendments to IAS 12: Deferred Tax related
to Assets and Liabilities arising from a Single Transaction.
The Directors do not expect that the adoption of the above
Standards, Amendments and Interpretations will have a material
impact on the Financial Statements of the Group in future
periods.
1.5 Going concern
The Group monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management.
At 31 December 2021, the Group had cash resources of US$4.8
million. As at the end of April 2022 the Group had cash resources
of $US3.4 million and as well as normal working capital
requirements expects a number of non recurring costs in relation to
the Transaction. Going forward projected recurring expenditure is
around US$4.0 million per year.
Historically, the Group's largest annual expenditure has related
to pre-sanction costs associated with the Sea Lion development. In
April 2022, the Group signed definitive documentation to bring
Navitas into the North Falkland Basin (the "Transaction"). The
Transaction is subject to certain conditions precedent, the most
important of which are certain consents from FIG which include, but
are not limited to, a two year extension on the Licences being
acquired, Navitas being approved as an Operator and certain tax
clearances from FIG. Assuming completion, Navitas will provide loan
funding to the Group for its share of all Sea Lion pre-sanction
costs (other than licence fees, taxes and project wind down
costs).
Management believe that the Transaction will complete before the
end of the year. Based on previous correspondence with FIG,
Management does not believe the Transaction completion would
constitute a substantial disposal and therefore will not accelerate
the deferred CGT liability related to the 2012 farm out.
Even in the case of Transaction completion Management has
determined that the Group will require further funding for working
capital and to achieve Sea Lion FID, with FID estimated to be in
early 2024. The Group believes that a funding solution is
achievable, with options including the issue of equity in addition
to the potential award of significant monetary damages with respect
to international arbitration proceedings against the Republic of
Italy in relation to the Ombrina Mare field which declared closed
on the 25 April 2022. At the time of writing, the final form and
availability of funding is yet to be determined. Subject to market
conditions we anticipate having raised sufficient funds by the end
of Q3 2022.
In the event the Transaction does not complete then as well as
working capital requirements it is possible that this could lead to
the acceleration of Falkland Island infrastructure decommissioning
costs currently estimated at US$4.0 million (Group's net share),
for which the Group is not funded.
Accordingly, after making enquiries and considering the risks
described above, the Directors have reviewed the Group's overall
position and given their belief, that raising funds will be
possible, 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 financial statements.
Given the Directors' confidence in their ability to complete a
funding solution in the near term, the Directors believe that the
Group will be sufficiently funded and believe the use of the going
concern basis is appropriate. Nonetheless, for the avoidance of
doubt, in the downside scenarios in which either the Transaction
does not complete or a funding solution is not completed and in the
absence of potential mitigating actions, a material uncertainty
exists that may cast significant doubt on the Group's ability to
continue as a going concern. The Consolidated and Parent Company
financial statements do not include adjustments that would result
if the group was unable to continue as a going concern.
1.6 Significant accounting policies
(a) Basis of accounting
The Group has identified the accounting policies that are most
significant to its business operations and the understanding of its
results. These accounting policies are those which involve the most
complex or subjective decisions or assessments, and relate to the
capitalisation of exploration expenditure. The determination of
this is fundamental to the financial results and position and
requires management to make a complex judgement based on
information and data that may change in future periods.
Since these policies involve the use of assumptions and
subjective judgements as to future events and are subject to
change, the use of different assumptions or data could produce
materially different results. The measurement basis that has been
applied in preparing the results is historical cost.
The significant accounting policies adopted in the preparation
of the results are set out below.
(b) Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings drawn up
to 31 December 2021. Subsidiaries are those entities over which the
Group has control. Control is achieved where the Group has the
power over the subsidiary, is exposed, or has rights to variable
returns from the subsidiary and has the ability to use its power to
affect its returns. All subsidiaries are 100 per cent owned by the
Group and there are no non-controlling interests.
The results of subsidiaries acquired or disposed of during the
year are included in the income statement from the effective date
of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries acquired to bring the accounting
policies used into line with those used by other members of the
Group.
All intercompany balances have been eliminated on
consolidation.
(c) Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
as required by IFRS8 Operating Segments. The chief operating
decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the board of directors.
The Group's operations are made up of three segments, the oil
and gas exploration and production activities in the geographical
regions of the Falkland Islands and the Greater Mediterranean
region as well as its corporate activities centered in the UK.
(d) Oil and Gas Assets
The Group applies the successful efforts method of accounting
for exploration and evaluation ("E&E") costs, having regard to
the requirements of IFRS6 - 'Exploration for and evaluation of
mineral resources'.
Exploration and evaluation ("E&E") expenditure
Expensed exploration & evaluation costs
Expenditure on costs incurred prior to obtaining the legal
rights to explore an area, geological and geophysical costs are
expensed immediately to the income statement.
Capitalised intangible exploration and evaluation assets
All directly attributable E&E costs are initially
capitalised in well, field, prospect, or other specific, cost pools
as appropriate, pending determination.
Treatment of intangible E&E assets at conclusion of
appraisal activities
Intangible E&E assets related to each cost pool are carried
forward until the existence, or otherwise, of commercial reserves
have been determined, subject to certain limitations including
review for indicators of impairment. If commercial reserves have
been discovered, the carrying value, after any impairment loss, of
the relevant E&E assets, are then reclassified as development
and production assets within property plant and equipment. However,
if commercial reserves have not been found, the capitalised costs
are charged to expense.
Development and production assets
Development and production assets, classified within property,
plant and equipment, are accumulated generally on a field-by-field
basis and represent the costs of developing the commercial reserves
discovered and bringing them into production, together with the
E&E expenditures incurred in finding commercial reserves
transferred from intangible E&E assets.
Depreciation of producing assets
The net book values of producing assets are depreciated
generally on a field-by-field basis using the unit-of-production
method by reference to the ratio of production in the year and the
related commercial reserves of the field, taking into account the
future development expenditure necessary to bring those reserves
into production.
Disposals
Net cash proceeds from any disposal of an intangible E&E
asset are initially credited against the previously capitalised
costs. Any surplus proceeds are credited to the income
statement.
Decommissioning
Provision for decommissioning is recognised in full when the
related facilities are installed. The amount recognised is the
present value of the estimated future expenditure. A corresponding
amount equivalent to the provision is also recognised as part of
the cost of the related oil and gas property. This is subsequently
depreciated as part of the capital costs of the production
facilities. Any change in the present value of the estimated
expenditure is dealt with prospectively as an adjustment to the
provision and the oil and gas property. The unwinding of the
discount is included in finance cost.
(E) Leases
The Group as lessee
The Group assesses whether a contract is, or contains, a lease,
at inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases and leases of low value assets
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. Lease payments
included in the measurement of the lease liability comprise fixed
lease payments The lease liability is presented as a separate line
in the consolidated statement of financial position. The lease
liability is subsequently measured by increasing the carrying
amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to
reflect the lease payments made.
The Group has not had to remeasure the lease liability (and
makes a corresponding adjustment to the related right-of-use
asset).
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any
initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment. Right-of-use assets are
depreciated over the shorter period of lease term and useful life
of the right-of-use asset. The depreciation starts at the
commencement date of the lease. The right-of-use assets are
presented as a separate line in the notes to the financial
statements.
Payment associated with short term leases and leases of low
value assets are recognised on a straight-line basis as an expense
in profit or loss. Short term leases are leases with a lease term
of 12 months or less. Low-value assets comprise IT-equipment and
small items of office furniture.
The Group as lessor
The Group enters into lease agreements as a lessor with respect
to some sublets on its rented offices. Leases for which the Group
is a lessor are classified as a finance lease as the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. Finance lease income is allocated to accounting
periods so as to reflect a constant periodic rate of return on the
Group's net investment outstanding in respect of the leases.
(F) Capital commitments
Capital commitments include all projects for which specific
board approval has been obtained up to the reporting date. Projects
still under investigation for which specific board approvals have
not yet been obtained are excluded.
(G) Foreign currency translation
Functional and presentation currency:
Items included in the results of each of the Group's entities
are measured using the currency of the primary economic environment
in which the entity operates, the functional currency. The
consolidated financial statements are presented in US$ as this best
reflects the economic environment of the oil exploration sector in
which the Group operates. The Group maintains the financial
statements of the parent and subsidiary undertakings in their
functional currency. Where applicable, the Group translates
subsidiary financial statements into the presentation currency,
US$, using the closing rate method for assets and liabilities which
are translated at the rate of exchange prevailing at the balance
sheet date and rates at the date of transactions for income
statement accounts. Differences are taken through the Statement of
Comprehensive Income to reserves.
Transactions and balances:
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are expensed in the income statement, except
when deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges.
The year end rates of exchange were:
31 December 2021 31 December 2020
----------- ----------------- -----------------
GBP : US$ 1.35 1.36
EUR : US$ 1.13 1.23
----------- ----------------- -----------------
(H) Revenue and income
(i) Revenue
Revenue arising from the sale of goods is recognised when a
performance obligation is satisfied by transferring control over a
product or service to a customer, which is typically at the point
that title passes, and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received
or receivable and represents amounts receivable for goods provided
in the normal course of business, net of discounts, customs duties
and sales taxes.
(ii) Investment income
Investment income consists of interest receivable for the
period. Interest income is recognised as it accrues, taking into
account the effective yield on the investment.
(I) NON-DERIVATIVE Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group has become a party to the
contractual provisions of the instrument.
(i) Other receivables
Other receivables are initially measured at fair value. They are
subsequently measured at amortised cost using the effective
interest method, less loss allowance. A provision for impairment is
made where there is objective evidence that amounts will not be
recovered in accordance with original terms of the agreement. The
Group recognises an allowance for expected credit losses for all
debt instruments not held at fair value through profit or loss.
Expected credit losses are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate.
(ii) Restricted cash
Restricted cash is disclosed separately on the face of the
balance sheet and denoted as restricted when it is not under the
exclusive control of the Group. All amounts relate to balances held
as security in relation to property leases.
(iii) Cash and cash equivalents
Cash and cash equivalents comprise instant access bank balances
as well as a small amount of cash in hand. They are stated at
carrying value which is deemed to be fair value.
(iv) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
(v) Account and other payables
Account payables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
method.
(vii) Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
(J) INCOME TAXES AND DEFERRED TAXATION
The current tax expense is based on the taxable profits for the
year, after any adjustments in respect of prior years. Tax,
including tax relief for losses if applicable, is allocated over
profits before tax and amounts charged or credited to reserves as
appropriate.
Deferred taxation is recognised in respect of all taxable
temporary differences that have originated but not reversed at the
balance sheet date where a transaction or events have occurred at
that date that will result in an obligation to pay more, or a right
to pay less or to receive more, tax, with the exception that
deferred tax assets are recognised only to the extent that the
directors consider that it is probable that there will be suitable
taxable profits from which the future reversal of the underlying
temporary differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax
rates that are expected to apply in the periods in which temporary
differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
(K) Share based remuneration
The Group issues equity settled share based payments to certain
employees. Equity settled share based payments are measured at fair
value (excluding the effect of non market based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity settled share based payments is expensed on a
straight line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest and adjusted for non
market based vesting conditions.
Fair value is measured by use of either Binomial or Monte-Carlo
simulation. The main assumptions are disclosed in note 9.
Cash settled share based payment transactions result in a
liability. Services received and liability incurred are measured
initially at fair value of the liability at grant date, and the
liability is remeasured each reporting period until settlement. The
liability is recognised on a straight line basis over the period
that services are rendered.
2 Use of estimates, assumptions and judgements
The Group makes estimates, assumptions and judgements that
affect the reported amounts of assets and liabilities. Estimates,
assumptions and judgements are continually evaluated and based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed in the relevant note as is sensitivity analysis as
required. The key areas identified and the relevant note are as
follows:
Carrying value of intangible exploration and evaluation assets
(note 14) - judgements
Tax payable (note 18) - judgements
Decommissioning costs (note 19) - judgement and estimates
3 REVENUE AND SEGMENTAL INFORMATION
The Group's operations are located and managed in three
geographically distinct business units; namely the Falkland
Islands, the Greater Mediterranean, and Corporate (or UK). Some of
the business units currently do not generate any revenue or have
any material operating income. The business is only engaged in one
business of upstream oil and gas exploration and production.
YEARED 31 DECEMBER 2021
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
------------------------------------- --------- -------------- ---------- --------
Revenue - 839 - 839
Cost of sales - (1,808) - (1,808)
------------------------------------- --------- -------------- ---------- --------
Gross profit - (969) - (969)
Exploration and evaluation
reverse/(expenses) 608 (589) (144) (125)
Restructuring costs - - - -
Recurring administrative costs - (823) (2,440) (3,263)
------------------------------------- --------- -------------- ---------- --------
Total administrative expenses - (823) (2,440) (3,263)
Charge for share based payments - - (824) (824)
Foreign exchange (loss)/gain 680 - 109 789
------------------------------------- --------- -------------- ---------- --------
Results from operating activities
and other income 1,288 (2,381) (3,299) (4,392)
Finance income - 1 3 4
Finance expense (3,180) (285) (57) (3,522)
------------------------------------- --------- -------------- ---------- --------
Loss before tax (1,892) (2,665) (3,353) (7,910)
Tax - 151 - 151
------------------------------------- --------- -------------- ---------- --------
Loss for year (1,892) (2,514) (3,353) (7,759)
------------------------------------- --------- -------------- ---------- --------
Reporting segments assets 249,211 2,440 6,626 258,277
Reporting segments liabilities 86,341 15,337 2,078 103,756
Depreciation and impairments (608) 1,117 300 809
YEARED 31 DECEMBER 2020
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
------------------------------------- ---------- -------------- ---------- ----------
Revenue - 2,754 - 2,754
Cost of sales - (4,801) - (4,801)
------------------------------------- ---------- -------------- ---------- ----------
Gross profit - (2,047) - (2,047)
Exploration and evaluation
expenses (222,593) (2,312) (806) (225,711)
Restructuring costs - - (614) (614)
Recurring administrative costs - (1,096) (2,914) (4,010)
------------------------------------- ---------- -------------- ---------- ----------
Total administrative expenses - (1,096) (3,528) (4,624)
Charge for share based payments - - (1,840) (1,840)
Foreign exchange (loss)/gain (1,537) 78 21 (1,438)
------------------------------------- ---------- -------------- ---------- ----------
Results from operating activities
and other income (224,130) (5,377) (6,153) (235,660)
Finance income - 6 38 44
Finance expense - (305) (514) (819)
------------------------------------- ---------- -------------- ---------- ----------
Loss before tax (224,130) (5,676) (6,629) (236,435)
Tax - (69) - (69)
------------------------------------- ---------- -------------- ---------- ----------
Loss for year (224,130) (5,745) (6,629) (236,504)
------------------------------------- ---------- -------------- ---------- ----------
Reporting segments assets 243,647 4,643 13,068 261,358
Reporting segments liabilities 79,840 16,301 4,650 100,791
Depreciation and impairments 222,584 1,429 493 224,506
All of the Group's worldwide sales revenues of oil and gas $839
thousand (2020: $2,754 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).
4 Cost of sales
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------------------------------ -------------- --------------
Other cost of sales 1,141 2,109
Impairment of oil and gas assets (see note 15) - 1,114
Depreciation of oil and gas assets (see note
15) 667 232
Depreciation and impairment on assets held for
sale - 1,346
1,808 4,801
------------------------------------------------ -------------- --------------
5 exploration and evaluation expenses
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
-------------------------------------------------- -------------- --------------
Allocated from administrative expenses (see note
6) 143 799
Capitalised exploration costs impaired (see note
14) (273) 223,280
Impairment on assets held for sale - 314
Other exploration and evaluation expenses 255 1,318
125 225,711
-------------------------------------------------- -------------- --------------
6 Administrative expenses
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
-------------------------------------------------- -------------- --------------
Directors' salaries and fees, including bonuses
(see note 7) 1,114 1,090
Other employees' salaries 930 1,806
National insurance costs 453 483
Pension costs 89 325
Employee benefit costs 45 82
Total staff costs (including group restructuring
costs) 2,631 3,786
Amounts reallocated (751) (937)
-------------------------------------------------- -------------- --------------
Total staff costs charged to administrative
expenses 1,880 2,849
Auditors' remuneration (see note 8) 161 244
Other professional fees 554 588
Other 867 1,222
Depreciation 149 162
Amounts reallocated (348) (441)
-------------------------------------------------- -------------- --------------
3,263 4,624
-------------------------------------------------- -------------- --------------
The average number of full time equivalent staff employed during
the year was 9 (2020: 13). As at the year end the Group employed 12
staff, 8 of which were in the UK and 4 in Italy
Amounts reallocated relate to the costs of staff and associated
overhead in relation to non administrative tasks. These costs are
allocated to exploration and evaluation expenses or capitalised as
part of the intangible exploration and evaluation assets as
appropriate.
7 directors' remuneration
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------------------------------- -------------- --------------
Executive salaries 725 812
Company pension contributions to money purchase
schemes & pension cash allowance 117 120
Benefits 8 21
Non-executive fees 272 278
1,122 1,231
------------------------------------------------- -------------- --------------
The total remuneration of the highest paid director was:
Year Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
-------------------------------- -------------- --------------
Annual salary 283 341
Money purchase pension schemes 47 51
Benefits 4 7
334 399
-------------------------------- -------------- --------------
Interest in outstanding share options and SARs, by director, are
separately disclosed in the directors' remuneration report.
8 Auditors' remuneration
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
----------------------------------------------------- -------------- --------------
Fees payable to the Company's auditors for the
audit of the Company's annual financial statements 135 135
Fees payable to the Company's auditors and its
associates for other services:
Audit of the accounts of subsidiaries 26 58
Half year review - 33
161 226
----------------------------------------------------- -------------- --------------
Amounts in the current year relate to BDO LLP. Amounts in the
prior year related to previous auditor Pricewaterhouse Coopers
LLP.
After the completion of the 2019 consolidated financial
statements additional audit fees for subsidiaries amounting to
$18,000 were incurred. These were included in the results for 2020,
but are not included in the analysis above.
9 Share based Payments
The charge for share based payments relate to options granted to
employees of the Group.
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------------------------------- -------------- --------------
Charge for option scheme 257 530
Charge for the long term incentive plan options 567 1,112
Charge for shares issued under the SIP - 198
------------------------------------------------- -------------- --------------
824 1,840
------------------------------------------------- -------------- --------------
The models and key assumptions used to value each of the grants
and hence calculate the above charges are set out below:
Option scheme
A one-off equity option package was implemented during the prior
year (the "Option Scheme") to replace the existing long term
incentive plan. In place of the LTIP scheme, executive directors
and senior staff received options to subscribe for Ordinary Shares,
exercisable at a price of 6.25 pence per new Ordinary Share (the
"Market Price Options). The Market Price Options will vest in equal
tranches after three, four and five years' further continuous
employment.
Executive directors and staff in lieu of their contractual
notice periods also received options to subscribe for an aggregate
new ordinary shares in the capital of the Company ("Ordinary
Shares"), exercisable at a price of 1 pence per new Ordinary Share
(the "1p Options").
The options have been valued using a binomial model the key
inputs of which are summarised below:
Grant date: 19 May 19 May 19 May 19 May 19 May
2020 2020 2020 2020 2020
Vesting date 19 Nov 19 May 19 May 19 May 19 May
2020 2021 2023 2024 2025
Closing share price
(pence) 6.25 6.25 6.25 6.25 6.25
Number granted 1,986,972 6,357,616 7,949,997 7,950,000 7,950,003
Weighted average volatility 50.0% 50.0% 50.0% 50.0% 50.0%
Weighted average risk
free rate 0.08% 0.07% 0.10% 0.12% 0.14%
Exercise price (pence) 1.00 1.00 6.25 6.25 6.25
Dividend yield 0% 0% 0% 0% 0%
----------------------------- ---------- ---------- ---------- ---------- ----------
Weighted average volatility has been selected with reference to
historic volatility but taking into account exceptionally high
volatility in the year preceding the grant of the options.
Generally, in calculating the charge a 100% of staff are assumed
to be employed for the vesting period. The departure of an
executive director was known pre year end and so the charge was
adjusted to reflect this fact even though the options did not lapse
until after the year end.
The following movements occurred during the year:
At 31 December At 31 December
Vesting
Issue date date Expiry date 2020 Lapsed 2021
------------- ------------- ------------- --------------- ------- ---------------
19 May 2020 19 Nov 2020 18 Nov 2030 1,986,972 - 1,986,972
19 May 2020 19 May 2021 18 Nov 2030 6,357,616 - 6,357,616
19 May 2020 19 May 2023 18 Nov 2030 7,949,997 - 7,949,997
19 May 2020 19 May 2024 18 Nov 2030 7,950,000 - 7,950,000
19 May 2020 19 May 2025 18 Nov 2030 7,950,003 - 7,950,003
------------- ------------- ------------- --------------- ------- ---------------
32,194,588 32,194,588
----------------------------------------- --------------- ------- ---------------
Long term incentive plan
LTIP awards vest or become exercisable subject to the
satisfaction of a performance condition measured over a three year
period ("Performance Period") determined by the Remuneration
Committee at the time of grant. The performance condition used is
based on Total Shareholder Return ("TSR") measured over a
three-year period against the TSR of a peer group of at least 9
other oil and gas companies comprising both FTSE 250, larger AIM
oil and gas companies and Falkland Islands focused companies ("Peer
Group"). The Peer Group for the Awards may be amended by the
Remuneration Committee at their sole discretion as appropriate.
Performance measurement for the Awards are based on the average
price over the relevant 90 day dealing period measured against the
90 dealing day period three years later. Awards vest on a sliding
scale from 35% to 100% for performance in the top two quartiles of
the Peer Group. No awards vest for performance in the bottom two
quartiles.
The Awards granted on 8 October 2013 and 10 March 2014 have an
additional performance condition so that no awards will be
exercisable unless the Company's share price exceeds GBP1.80 based
on an average price over any 90 day dealing period up to 31 March
2023.
The LTIP has been valued using a Monte Carlo model the key
inputs of which are summarised below:
Grant date: 31 July 23 April 16 June
2019 2018 2017
Closing share price 20.75 25.7p 21.25p
Number granted 7,200,000 7,000,000 6,700,000
Weighted average volatility 50.0% 44.4% 53.3%
Weighted average volatility
of index 70.0% 64.0% 71.4%
Weighted average risk free
rate 0.35% 0.90% 0.18%
Correlation in share price
movement with comparator
group 5% 13.0% 15.3%
Exercise price 0p 0p 0p
Dividend yield 0% 0% 0%
----------------------------- ---------- ---------- ----------
The following movements occurred during the year:
At 31 December At 31 December
Expiry
Issue date date 2020 Lapsed 2021
---------------- ----------- --------------- ------------ ---------------
8 October
8 October 2013 2023 546,145 - 546,145
10 March
10 March 2014 2024 70,391 - 70,391
16 June
16 June 2017 2027 3,216,000 3,216,000
23 April
23 April 2018 2028 7,000,000 (7,000,000) -
31 July
31 July 2019* 2029 7,200,000 - 7,200,000
---------------- ----------- --------------- ------------ ---------------
18,032,536 11,032,536
---------------------------- --------------- ------------ ---------------
* Denotes LTIPs that had not completed the Performance Period
and as such were unvested at the year end. After the year end
3,300,001 of the LTIPs vested, with the balance lapsing.
Share incentive plan
The Group had in place an HMRC approved Share Incentive Plan
("SIP"). The SIP allowed the Group to award Free Shares to UK
employees (including directors) and to award shares to match
Partnership Shares purchased by employees, subject to HMRC limits.
New share awards under the SIP ended in the prior year.
In the year ended 31 December 2020 the Group issued two Matching
Shares for every Partnership Share purchased and made a free award
of GBP35,999 worth of Free Shares to eligible employees.
This resulted in the issue of 195,756 Free Shares and 306,606
SIP scheme matching and partnership shares.
31 December
2020
------------------------------------------------------ ------------
The average fair value of the shares awarded (pence) 12
Vesting 100%
Dividend yield Nil
Lapse due to withdrawals Nil
------------------------------------------------------ ------------
Share appreciation rights
A share appreciation right ("SAR") is effectively a share option
that is structured from the outset to deliver, on exercise, only
the net gain in the form of new ordinary shares that would have
been made on the exercise of a market value share option.
On exercise, an option price of 1 pence per ordinary share,
being the nominal value of the Company's ordinary shares, is paid
and the relevant awardee will be issued with ordinary shares with a
market value at the date of exercise equivalent to the notional
gain that the awardee would have made, being the amount by which
the aggregate market value of the number of ordinary shares in
respect of which the SAR is exercised, exceeds a notional exercise
price, equal to the market value of the shares at the time of grant
(the "base price"). All SARs have vested and the remuneration
committee has discretion to settle the exercise of SARs in
cash.
The following movements occurred during the year:
Exercise At 31 At 31
price Dec Dec
Issue date Expiry date (pence) 2020 Expired 2021
---------------- -------------- --------- -------- ---------- --------
11 January 11 January
2011 2021 372.75 175,048 (175,048) -
14 July 2011 14 July 2021 239.75 43,587 (43,587) -
16 August
16 August 2011 2021 237.00 17,035 (17,035) -
13 December 13 December
2011 2021 240.75 29,594 (29,594) -
17 January 17 January
2012* 2022 303.75 244,541 - 244,541
30 January 30 January
2013 2023 159.00 277,162 - 277,162
---------------- -------------- --------- -------- ---------- --------
786,967 (265,264) 521,703
------------------------------- --------- -------- ---------- --------
* Denotes SARs that lapsed post year end.
10 FOREign Exchange
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
-------------------------------------------------- -------------- --------------
Foreign exchange gain/(loss) on Falkland Islands
tax liability (see note 18) 679 (1,537)
Other foreign exchange movements 110 99
-------------------------------------------------- -------------- --------------
Total net foreign exchange gain/(loss) 789 (1,438)
-------------------------------------------------- -------------- --------------
11 FINANCE INCOME AND EXPENSE
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
----------------------------------------------------- -------------- --------------
Bank and other interest receivable 4 44
Total finance income 4 44
----------------------------------------------------- -------------- --------------
Unwinding of discount on Falkland Tax Liability 3,180 -
(see note 18)
Unwinding of discount on decommissioning provisions
(see note 19) 274 296
Other 68 523
----------------------------------------------------- -------------- --------------
Total finance expense 3,522 819
----------------------------------------------------- -------------- --------------
12 Taxation
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
-------------------------------------------------------- -------------- --------------
Current tax:
Overseas tax - -
Adjustment in respect of prior years - (10)
-------------------------------------------------------- -------------- --------------
Total current tax - (10)
-------------------------------------------------------- -------------- --------------
Deferred tax:
Overseas tax (151) 79
-------------------------------------------------------- -------------- --------------
Total deferred tax (credit)/charge - note 20 (151) 79
-------------------------------------------------------- -------------- --------------
Tax on profit on ordinary activities (151) 69
-------------------------------------------------------- -------------- --------------
Loss on ordinary activities before tax (7,910) (236,435)
-------------------------------------------------------- -------------- --------------
Loss on ordinary activities multiplied at 26% weighted
average rate (31 December 2020: 26%) (2,057) (61,473)
Effects of:
Income and gains not subject to taxation (248) -
Expenditure not deductible for taxation 827 58,812
Depreciation in excess of capital allowances 281 9
IFRS2 Share based remuneration cost 214 478
Losses carried forward 983 2,349
Effect of tax rates in foreign jurisdictions - (156)
Other - (19)
Adjustments in respect of prior years - (10)
Current tax credit for the year - (10)
-------------------------------------------------------- -------------- --------------
The total carried forward losses and carried forward pre trading
expenditures potentially available for relief are as follows:
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------ -------------- --------------
UK 77,393 74,762
Falkland Islands 619,400 618,444
Italy 65,202 64,086
------------------ -------------- --------------
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. Losses carried forward in the Falkland
Islands includes amounts held within entities where utilisation of
the losses in the future may not be possible.
13 Basic and diluted loss per share
31 December 31 December
2021 2020
Number Number
----------------------------------------------------- ------------ ------------
Shares in issue brought forward 458,482,117 457,979,755
Shares issued
- Issued under the SIP - 502,362
----------------------------------------------------- ------------ ------------
Shares in issue carried forward 458,482,117 458,482,117
----------------------------------------------------- ------------ ------------
Weighted average number of Ordinary Shares in issue 458,482,117 458,289,239
Shares held in Employee Benefit Trust (3,131,000) (3,131,000)
----------------------------------------------------- ------------ ------------
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 455,351,117 455,158,239
----------------------------------------------------- ------------ ------------
$'000 $'000
------------------------------------------------------ -------- ----------
Net loss after tax for purposes of basic and diluted
earnings per share (7,759) (236,504)
------------------------------------------------------ -------- ----------
Loss per share - cents
Basic (1.70) (51.73)
Diluted (1.70) (51.73)
------------------------------------------------------ -------- ----------
The weighted average number of Ordinary Shares takes into
account those shares which are treated as own shares held in trust.
As at the year end the Group had 3,131,000 Ordinary shares held in
an Employee Benefit Trust which have been purchased to settle
future exercises of options. As the Group is reporting a loss in
the year then in accordance with IAS33 the share options are not
considered dilutive because the exercise of the share options would
have the effect of reducing the loss per share.
14 intangible exploration and evaluation assets
Falkland Greater
Islands Mediterranean Total
$'000 $'000 $'000
---------------------------- ---------- -------------- ----------
At 31 December 2019 464,639 1,181 465,820
Additions 1,592 147 1,739
Written off to exploration
costs (222,584) (696) (223,280)
Foreign exchange
movement - 70 70
------------------------------ ---------- -------------- ----------
At 31 December
2020 243,647 702 244,349
Additions 4,956 54 5,010
Written back/(off)
exploration costs 608 (335) 273
Foreign exchange
movement - (49) (49)
------------------------------ ---------- -------------- ----------
At 31 December
2021 249,211 372 249,583
------------------------------ ---------- -------------- ----------
FALKLAND ISLANDS LICENCES
The amounts for intangible exploration and evaluation assets
represent active exploration and evaluation projects. These amounts
will be written off to the income statement as exploration costs
unless commercial reserves are established or the determination
process is not completed and there are no indications of impairment
in accordance with the Group's accounting policy.
The additions during the year of $5.0 million relate principally
to the Sea Lion development, with the majority of this movement
being non-cash and relating to the recognition of a provision for
decommissioning Falkland Islands facilities.
Given the quantum of intangible exploration and evaluation
assets potential impairment could have a material impact on the
financial statements. As such whether there are indicators of
impairment is a key judgement. Management looked at a number of
factors in making a judgement as to whether there are any
indicators of impairment during the year. In particular with regard
to the carrying value of the Falkland Islands assets, which relates
to the Sea Lion Phase one development these include, but are not
limited to;
-- The Transaction is bringing on board a new partner with a
track record of funding large offshore developments
-- As part of the Transaction a two year license extension is being sought
-- Whilst inflationary pressures exist increasing potential
capital costs, Rockhopper and Navitas plan to use the extensive
engineering work already carried out to create a lower cost
development with the target to reach FID early 2024
-- Current market conditions, including oil price and security
of supply, provide stronger prospects for ultimate sanction of Sea
Lion
Management concluded that for these reasons, currently for Phase
1 of the Sea Lion development, there were no indicators of
impairment.
In the prior year, management made the judgement that the
limited near term capital being invested outside of the Phase 1
project was an indicator of impairment in the subsequent phases of
the project. Accordingly a decision was made, in line with the
operator, to write off historic exploration costs associated with
the resources which will not be developed as part of the Sea Lion
Phase 1 project. This impairment has no impact on the Group's
long--term strategy for multiple phases of development in the North
Falkland Basin. This will be re-evaluated when the Phase 1 project
has been sanctioned, currently anticipated in 2024, and investment
resumes on the Phase 2 project .
15 property, plant and equipment
Oil and Right Other
gas of use
assets assets assets Total
$'000 $'000 $'000 $'000
----------------------------- -------- -------- ------- --------
Cost
At 31 December 2019 24,275 1,555 914 26,744
Additions - 138 84 222
Foreign exchange 2,006 - 14 2,020
Disposals - - (99) (99)
----------------------------- -------- -------- ------- --------
At 31 December 2020 26,281 1,693 913 28,887
Additions 228 - - 228
Foreign exchange (2,006) (22) (11) (2,039)
Disposals - - (497) (497)
Derecognition - (1,264) - (1,264)
At 31 December 2021 24,503 407 405 25,315
----------------------------- -------- -------- ------- --------
Depreciation and impairment
At 31 December 2019 22,565 300 810 23,675
Charge for the year 232 528 48 808
Impairment 1,114 - - 1,114
Foreign exchange 1,960 - 5 1,965
Disposals - - (95) (95)
----------------------------- -------- -------- ------- --------
At 31 December 2020 25,871 828 768 27,467
Charge for the year 667 353 62 1,082
Foreign exchange (2,035) (15) (4) (2,054)
Disposals - - (501) (501)
Derecognition - (880) - (880)
At 31 December 2021 24,503 286 325 25,114
----------------------------- -------- -------- ------- --------
Net book value at 31
December 2020 410 865 145 1,420
----------------------------- -------- -------- ------- --------
Net book value at
31 December 2021 - 121 80 201
----------------------------- -------- -------- ------- --------
All oil and gas assets relate to the Greater Mediterranean
region, specifically producing assets in Italy. Right of use assets
relate to rented offices.
16 OTHER Receivables
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
---------------- -------------- --------------
Current
Receivables 478 620
Other 1,596 1,844
---------------- -------------- --------------
2,074 2,464
---------------- -------------- --------------
The carrying value of receivables approximates to fair value.
Other receivables includes US$0.7 million related to deferred
considerations in relation to the disposal of the Group's Egyptian
business. This is due to be received during 2022.
17 Other payables and accrualS
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------ -------------- --------------
Accounts payable 608 1,021
Accruals 1,129 2,553
Other creditors 263 216
------------------ -------------- --------------
2,000 3,790
------------------ -------------- --------------
All amounts are expected to be settled within twelve months of
the balance sheet date and so the book values and fair values are
considered to be the same.
18 Tax payable
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------- -------------- --------------
Non current tax payable 37,359 40,703
------------------------- -------------- --------------
37,359 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.
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16.
As a result of the Tax Settlement Deed the outstanding tax
liability is confirmed at GBP59.6 million and payable on the
earlier of: (i) the first royalty payment date on Sea Lion; (ii)
the date of which Rockhopper disposes of all or a substantial part
of the Group's remaining licence interests in the North Falkland
Basin; or (iii) a change of control of Rockhopper Exploration
plc.
The tax liability is a non current liability and as such has
been discounted. Management in reviewing the carrying value of the
tax liability have had to make key judgements about both the timing
of the liability and the discount rate applied.
Management believe the most likely timing of payment is in line
with the first royalty payment . Based on previous correspondence
with FIG, Management does not believe that the Transactions
completion would constitute a substantial disposal and therefore
will not accelerate the liability. Currently, therefore, payment is
anticipated to be in 5.5 years (2020: 5.0 years).
As at the year end a discount rate of 12% (2020: 15%) has been
applied. Management has made the judgement to reduce the discount
rate used at the year end due to a number of factors including a
reduction in market interest rates of debt issued which in
management's view has a similar risk profile. If the discount rate
applied had been increased 2% this would have reduced the liability
by $US4.0 million and if the rate had been decreased by 2% this
would have increased the liability by $US4.5 million.
The impact of changes to these judgements in the year increased
the balance by US$3.2 million (2020: US$nil) and has been treated
as a finance expense.
This increase has been offset by a foreign exchange gain of
US$0.7 million (2020: US$1.5 million loss) in the year.
19 Provisions
Decommissioning Other
provision provisions
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000 $'000 $'000
----------------------------- ---------------- ----------- -------------- --------------
Brought forward 15,067 91 15,158 13,636
Amounts utilized - - - (54)
Amounts arising in the year 4,000 6 4,006 7
Unwinding of discount 274 - 274 296
Foreign exchange (1,144) (7) (1,151) 1,273
----------------------------- ---------------- ----------- -------------- --------------
Carried forward at year end 18,197 90 18,287 15,158
----------------------------- ---------------- ----------- -------------- --------------
The decommissioning provision relates to the Group's licences in
the Greater Mediterranean region as well as facilities in the
Falkland Islands. The provision covers both the plug and
abandonment of wells drilled as well as removal of facilities and
any requisite site restoration.
Amounts arising in the year relate to the Group's share of the
potential costs arising on the removal of facilities in the
Falkland Islands. This has been recognised during the year as in
managements view it is probable that the facilities will require
decommissioning in the future, all be it that currently our
expectation is that following appropriate upgrades they will be
able to be utilised as part of the Sea Lion development.
Judgements are made are made based on the long term economic
environment around appropriate inflation and discount rates to be
applied as well as the timing of any future decommissioning. In the
Falkland Islands costs are most likely to be in $US or GBGBP so
management consider the UK economic environment when informing
these judgements. In the Greater Mediterranean all assets are in
Italy and so costs are likely to be in Euros and as such management
consider the Italian as well as the broader Eurozone region to
inform these judgements.
Whilst recognising short term inflationary pressures, the Group
continues to believe it appropriate to use an inflation rate of 2
per cent (2020: 2 per cent) and a discount rate of 2 per cent
(2020: 2 per cent).
Decommissioning costs are uncertain and management's cost
estimates can vary in response to many factors, including changes
to the relevant legal requirements, the emergence of new technology
or experience at other assets. The expected timing, work scope and
amount of expenditure may also change. Therefore, significant
estimates and assumptions are made in determining the costs
associated with the provision for decommissioning. The estimated
decommissioning costs are reviewed annually, and the results of the
most recent available review used as a basis for the amounts in the
Consolidated Financial Statements. Provision for environmental
clean-up and remediation costs is based on current legal and
contractual requirements, technology and price levels. However,
actual decommissioning costs will ultimately depend upon future
market prices for the necessary decommissioning works required
which will reflect market conditions at the relevant time.
T he estimated costs associated with the decommissioning works
are those that are likely to have a material impact on the
provision. A 10 per cent increase in these estimates would increase
both the provision and the loss in the year by US$1,420 thousand.
Similarly, a 10 per cent reduction in these estimated costs would
decrease both the provision and the loss in the year by US$1,420
thousand.
Other provisions include amounts due to employees for accrued
holiday and leaving indemnity for staff in Italy, that will become
payable when they cease employment.
20 deferred tax liability
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------ -------------- --------------
At beginning of period 39,300 39,221
Foreign exchange (12) -
Movement in period (151) 79
At end of period 39,137 39,300
------------------------ -------------- --------------
The deferred tax liability arises due to temporary differences
associated with the intangible exploration and evaluation
expenditure. The majority of the balance relates to historic
expenditure on licences in the Falklands, where the tax rate is
26%, being utilised to minimise the corporation tax due on the
consideration received as part of the farm out disposal during
2012.
Total carried forward losses and carried forward pre-trading
expenditures available for relief on commencement of trade at 31
December 2021 are disclosed in note 12 Taxation. No deferred tax
asset has been recognised in relation to these losses due to
uncertainty that future suitable taxable profits will be available
against which these losses can be utilised.
21 Share capital
Year ended 31 Year ended 31
December 2021 December 2020
$'000 Number $'000 Number
---------------------------------- ------ ------------ ------ ------------
Authorised, called up, issued
and fully paid: Ordinary shares
of GBP0.01 each 7,218 458,482,117 7,218 458,482,117
---------------------------------- ------ ------------ ------ ------------
For details of all movements during the year, see note 13.
22 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 The share incentive plan reserve captures the equity
remuneration 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 Shares held in trust represent the issue value of
held in trust shares held on behalf of participants in the SIP
by Capita IRG Trustees Limited, the trustee of the
SIP as well as shares held by the Employee Benefit
Trust which have been purchased to settle future
exercises of options.
Merger reserve The difference between the nominal value and the
fair value of shares issued on acquisition of subsidiaries.
Foreign currency Exchange differences arising on consolidating the
translation assets and liabilities of the Group's subsidiaries
reserve 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.
23 CAPITAL COMMITMENTS
Significant capital expenditure contracted for at the end of the
reporting period but not recognised as liabilities is US$0.4million
(2020: US$0.4 million) relating to the Group's intangible
exploration and evaluation assets.
24 Related Party Transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed. Subsidiaries are listed in note 3 of the Company
financial statements.
The remuneration of directors, who are the key management
personnel of the Group, is set out below in aggregate.
In addition there are deferred salary and bonuses amounts that
are contingent on future events and as such have not been recorded
in the accounts. Further information about the remuneration of
individual directors, including deferred salary and bonus amounts,
is provided in the Directors' Remuneration Report on pages 26 to
35.
Year Year
ended ended
31 December 31 December
2021 2020
$'000 $'000
------------------------------ -------------- --------------
Short term employee benefits 1,005 1,111
Pension contributions 117 120
Share based payments 447 873
------------------------------ -------------- --------------
1,569 2,104
------------------------------ -------------- --------------
In the prior year directors purchased the following ordinary
shares of GBP0.01 each in the Company as follows
Date Number Price (pence)
15 January
Sam Moody 2020 125,000 19.45
15 January
Keith Lough 2020 80,000 19.24
8 June 2020 148,515 8.08
15 January
Stewart MacDonald 2020 80,000 19.24
Alison Baker 8 June 2020 70,000 8.85
John Summers 8 June 2020 74,229 8.08
25 Risk management policies
Risk review
The risks and uncertainties facing the Group are set out in the
risk management report. Risks which require further quantification
are set out below.
Foreign exchange risks: The Group is exposed to foreign exchange
movements on monetary assets and liabilities denominated in
currencies other than US$, in particular the tax liability with the
Falkland Island Government which is a GBGBP denominated balance. In
addition a number of the Group's subsidiaries have a functional
currency other than US$, where this is the case the Group has an
exposure to foreign exchange differences with differences being
taken to reserves.
The Group's has cash and cash equivalents and restricted cash of
US$5.4 million of which US$4.7 million was held in US$
denominations. The Group has expenditure in GBGBP and Euro and
accepts that to the extent current cash balances in those
currencies are not sufficient to meet those expenditures they will
need to acquire them. The following table summarises the split of
the Group's assets and liabilities by currency:
Currency denomination of balance $ GBP EUR
$'000 $'000 $'000
---------------------------------- -------- ------- -------
Assets
31 December 2021 253,975 1,859 2,443
31 December 2020 253,577 3,115 4,666
Liabilities
31 December 2021 43,352 45,067 15,337
31 December 2020 41,338 43,152 16,301
----------------------------------- -------- ------- -------
The following table summarises the impact on the Group's pre-tax
profit and equity of a reasonably possible change in the US$ to
GBGBP exchange rate and the US$ to euro exchange:
Pre tax profit Total equity
+10% US$ -10% US$ +10% US$ -10% US$
rate rate rate rate
increase decrease increase decrease
$'000 $'000 $'000 $'000
------------------- ---------- ---------- ---------- ----------
US$ against GBGBP
31 December 2021 (4,321) 4,321 (4,321) 4,321
31 December 2020 (4,004) 4,004 (4,004) 4,004
------------------- ---------- ---------- ---------- ----------
US$ against euro
31 December 2021 (1,289) 1,289 (1,289) 1,289
31 December 2020 (1,164) 1,164 (1,164) 1,164
------------------- ---------- ---------- ---------- ----------
Capital risk management: the Group manages capital to ensure
that it is able to continue as a going concern whilst maximising
the return to shareholders. The capital structure consists of cash
and cash equivalents and equity. The board regularly monitors the
future capital requirements of the Group, particularly in respect
of its ongoing development programme. Further information can be
found in the going concern assessment contained in Note 1.5.
Credit risk; the Group recharges partners and third parties for
the provision of services and for the sale of Oil and Gas. Should
the companies holding these accounts become insolvent then these
funds may be lost or delayed in their release. The amounts
classified as receivables as at the 31 December 2021 were
$2,306,000 (31 December 2020: $2,079,000). Credit risk relating to
the Group's other financial assets which comprise principally cash
and cash equivalents and restricted cash arises from the potential
default of counterparties. Investments of cash and deposits are
made within credit limits assigned to each counterparty. The risk
of loss through counterparty failure is therefore mitigated by the
Group splitting its funds across a number of banks, two of which
are part owned by the British government.
Interest rate risks; the Group has no debt and so its exposure
to interest rates is limited to finance income it receives on cash
and term deposits. The Group is not dependent on its finance income
and given the current interest rates the risk is not considered to
be material.
Liquidity risks;
The Group monitors the liquidity position by preparing cash flow
forecasts to ensure sufficient funds are available. Further
information can be found in the going concern assessment contained
in Note 1.5.
Maturity of financial liabilities
The table below analyses the Group's financial liabilities,
which will be settled on a gross basis, into relevant maturity
groups based on the remaining period at the balance sheet to the
contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows.
At 31 December Within 2 to 5 More than Total contractual Carrying
2021 1 year years 5 years cashflows amount
$'000 $'000 $'000 $'000 $'000
----------------- -------- ------- ---------- ------------------ ---------
Other payables 2,000 - - 2,000 2,000
Lease liability 574 860 - 1,434 1,128
Tax payable - - 79,413 79,413 43,204
2,574 860 79,413 82,847 46,532
At 31 December Within 2 to 5 More than Total contractual Carrying
2020 1 year years 5 years cashflows amount
$'000 $'000 $'000 $'000 $'000
----------------- -------- ------- ---------- ------------------ ---------
Other payables 3,790 - - 3,790 3,790
Lease liability 608 1,473 - 2,081 1,840
Tax payable - - 81,867 81,867 40,703
4,398 1,473 81,867 87,738 46,333
The tax payable amounts in the current and prior year relate to
amounts as disclosed in note 18.
26 POST BALANCE SHEET EVENTS
On the 19th April 2022 the Group announced that it, Harbour and
Navitas have signed legally binding definitive documentation in
relation to Harbour exiting and Navitas entering the North Falkland
Basin (the "Transaction").
The Transaction remains subject to completion pending, inter
alia, regulatory approvals.
Under the Transaction Navitas will acquire Premier Oil
Exploration and Production Limited ("POEPL"), the Company in which
Harbour holds all of its Falkland Islands licences. The group and
Navitas will seek to align working interests across all their North
Falkland Basin petroleum licences - Rockhopper 35% / Navitas 65% -
subject to all necessary consents.
The Group and Navitas will jointly develop and agree a technical
and financing plan to enable the development of the Sea Lion
project to achieve first oil on a lower cost and expedited basis
post sanction.
Navitas wil provide loan funding to the Group to cover;
(i) the majority of its share of Sea Lion phase one related
costs from Transaction completion up to Final Investment Decision
("FID") through a loan from Navitas with interest charged at 8% per
annum (the "Pre-FID Loan").
(ii) Subject to a positive FID, Navitas will provide an interest
free loan to fund two-thirds of the Group's share of Sea Lion phase
one development costs (for any costs not met by third party debt
financing).
Certain costs, such as licence costs, are excluded in both
instances. Funds drawn under the loans will be repaid from 85% of
Rockhopper's working interest share of free cash flow.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR KZGZKGLRGZZZ
(END) Dow Jones Newswires
May 30, 2022 02:01 ET (06:01 GMT)
Rockhopper Exploration (AQSE:RKH.GB)
Historical Stock Chart
From Jun 2024 to Jul 2024
Rockhopper Exploration (AQSE:RKH.GB)
Historical Stock Chart
From Jul 2023 to Jul 2024
