TIDMRKH
RNS Number : 7598J
Rockhopper Exploration plc
14 September 2016
14 September 2016
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Half-year results for the six months to 30 June 2016
Rockhopper Exploration plc (AIM: RKH), the oil and gas company
with key interests in the North Falkland Basin and the Greater
Mediterranean region, is pleased to announce its results for the
six months ended 30 June 2016.
Highlights
During the Period:
-- FEED contracts for the Sea Lion development awarded to a set
of world class contractors
-- All-share merger with Falkland Oil & Gas Limited ("FOGL")
completed - consolidating Rockhopper's leading North Falkland Basin
acreage position
-- Independent resource audit following the successful North
Falkland Basin exploration campaign confirms:
o 2C oil resources in the Sea Lion Complex of 517 mmbbl (258 mmbbl net to Rockhopper)
o 3C oil resources in the Sea Lion Complex of 900 mmbbl (452 mmbbl net to Rockhopper)
o Near field, low risk exploration upside of 207 mmbbl (105
mmbbl net to Rockhopper (Best Case, unrisked))
o Significant additional discovered contingent and low risk prospective resources audited in the Isobel-Elaine Complex
o Audit further supports Rockhopper's view that the North
Falkland Basin has the potential to ultimately deliver a billion
barrels of recoverable oil
-- Amended terms agreed for the acquisition of Beach Petroleum
(Egypt) Pty Limited ("Beach Egypt"), comprising a portfolio of
non-operated production and exploration interests in Egypt
Post 30 June 2016:
-- Further cost reductions achieved at Sea Lion as we progress
through FEED - estimate of capital investment required to reach
first oil reduced to US$1.5 billion (gross), reducing the project's
break-even price to US$45 per barrel
-- Material increase in production following the completion of
Beach Egypt acquisition - average Group production of approximately
1,500 barrels of oil equivalent per day ("boepd") expected during
the remainder of 2016
-- Balance sheet strength maintained with cash resources at 1
September 2016 of approximately US$75 million
David McManus, Chairman of Rockhopper, commented:
"We continue to make very good progress in advancing the Sea
Lion development, taking advantage of the current industry backdrop
to reduce costs and the break-even oil price required to
sanction.
The results of the highly successful exploration campaign and
the subsequent independent resource audit further supports
Rockhopper's view that the North Falkland Basin has the potential
to deliver multiple future phases of development and, ultimately, a
billion barrels of recoverable oil.
As a result of the recently concluded acquisition of Beach
Egypt, our production for the remainder of 2016 is estimated to be
approximately 1,500 boepd, with operating cash flows expected to
broadly cover the Group's overheads going forward."
In addition, the Company announces that it is changing its
registered office address, effective from 1 October 2016, to 4th
Floor, 5 Welbeck Street, London, W1G 9YQ.
For further information, please contact:
Rockhopper Exploration plc
Tel: (via Vigo Communications) - 020 7830 9700
Sam Moody - Chief Executive
Fiona MacAulay - Chief Operating Officer
Stewart MacDonald - Chief Financial Officer
Canaccord Genuity Limited (NOMAD and Joint Broker)
Tel: 020 7523 8000
Henry Fitzgerald-O'Connor
Liberum Capital (Joint Broker)
Tel: 020 3100 2227
Clayton Bush
Neil Elliot
Vigo Communications
Tel: 020 7830 9700
Patrick d'Ancona
Ben Simons
Note regarding Rockhopper oil and gas disclosure
This announcement has been approved by Rockhopper's geological
staff who include Fiona MacAulay (Chief Operating Officer), who is
a Fellow of the Geological Society of London and a Member of the
Petroleum Exploration Society of Great Britain and American
Association of Petroleum Geologists with over 25 years of
experience in petroleum exploration and management, and who is the
qualified person as defined in the Guidance Note for Mining, Oil
and Gas Companies issued by the London Stock Exchange in respect of
AIM companies. In compiling its resource estimates, Rockhopper has
used the definitions and guidelines as set forth in the 2007
Petroleum Resources Management System approved by the Society of
Petroleum Engineers.
Glossary:
2C best estimate of contingent resources
2P proven plus probable reserves
3C a high estimate category of contingent
resources
AGM Annual General Meeting
Beach Energy Beach Petroleum (Egypt) Pty Limited
Best a best estimate category of Prospective
Resources also used as a generic
term to describe a best, or mid
estimate
Board the Board of Directors of Rockhopper
Exploration plc
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
Capex capital expenditure
Company Rockhopper Exploration plc
E&P exploration and production
ERCE ERC Equipoise Limited
Farm-down to assign an interest in a licence
to another party
FEED Front End Engineering and Design
FID Final Investment Decision
FIG Falkland Islands Government
FOGL Falkland Oil and Gas Limited
FPSO Floating Production, Storage and
Offtake vessel
Group the Company and its subsidiaries
High high estimate category of Prospective
Resources also used as a generic
term to describe a high or optimistic
estimate
IFRS International Financial Reporting
Standard
Low a low estimate category of Prospective
Resources also used as a generic
term to describe a low or conservative
estimate
mmbbls million barrels
mmboe million barrels of oil equivalent
MMstb million stock barrels (of oil)
mscf thousand standard cubic feet
net pay the portion of reservoir containing
hydrocarbons that through the placing
of cut offs for certain properties
such as porosity, water saturation
and volume of shale determine the
productive element of the reservoir
P&A plug and abandon
Premier Premier Oil plc
PSV virtual exchange point
scm standard cubic metre
STOIIP stock-tank oil initially in place
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
CHAIRMAN AND CEO'S REPORT
Rockhopper's strategy is to build a well-funded, full-cycle,
exploration led E&P company.
The first half of 2016 has seen significant success with the
achievement of a number of corporate and strategic milestones as we
seek to take advantage of the opportunities created by the
challenging commodity price environment.
Our balance sheet remains strong which ensures we are well
placed for a future uplift in oil prices - a situation many
commentators expect as we see a re-balancing of the market through
late 2016 and into 2017.
In the Falkland Islands, we have substantially grown our
resource position through exploration and acquisition
In January, we completed the merger with Falkland Oil & Gas
Limited ("FOGL"). Your Board believes the combination of Rockhopper
and FOGL will create significant value for shareholders, not only
by positioning Rockhopper as the largest acreage holder in the
North Falkland Basin, but our enhanced interests provide us with a
stronger strategic position in the future commercialisation of our
flag-ship Sea Lion project.
In February we concluded our highly successful North Falkland
Basin exploration drilling campaign which saw material oil
discoveries at each of Zebedee, Isobel Deep and Isobel Elaine.
The contract with Ocean Rig, which covered both the North
Falkland Basin and South Falkland Basin drilling program, was
terminated in February 2016 due to significant operational issues
with the rig. Ocean Rig is claiming termination fees of up to $62.9
million. The operators refute these claims, and are preparing
counter-claims against Ocean Rig. Rockhopper's interest in the
claims is limited to those relating to the original North Falkland
Basin program. A formal arbitration process has commenced with a
decision not expected until the second half of 2017. Given that the
arbitration process has commenced only recently and the claims and
counter-claims of the parties are not fully quantified or
substantiated, it is not appropriate to recognise (or make
provision for) any assets or liabilities in the Company's financial
statements.
Certain costs incurred during the North Falkland Basin
exploration campaign are the subject of an ongoing insurance claim.
Approximately US$16 million of insurance proceeds have been
received to date, net to Rockhopper, with further proceeds expected
during the remainder of 2016 and early 2017.
Following the conclusion of the exploration campaign, ERC
Equipoise Limited ("ERCE") were appointed to conduct an independent
audit of resources in the North Falkland Basin. Further details are
outlined in the Operational Review section but your Board were
particularly pleased to see the audit confirm oil in place on the
Sea Lion Complex is estimated at more than 1.6 billion barrels
gross with estimated gross recoverable contingent oil resources of
517 mmbbls (2C) and 900 mmbbls (3C).
The results of this highly successful exploration campaign and
the subsequent independent resource audit further supports
Rockhopper's view that the North Falkland Basin has the potential
to deliver multiple future phases of development and, ultimately, a
billion barrels of recoverable oil.
Continued cost reduction initiatives reduce project break-even
cost at Sea Lion
In January, the Sea Lion Phase 1 project entered FEED with a set
of world class contractors. The Phase 1 development aims to
commercialise the resources in the north-east and north-west of the
Sea Lion Complex in licence PL032.
The latest estimates of capex to first oil now total US$1.5
billion which, combined with other cost and efficiency
improvements, has resulted in a break-even price of approximately
US$45 per barrel. Further cost reductions are being targeted as we
progress through FEED which we expect to see ramp-up through the
remainder of 2016.
Building a production and cash flow base in the Greater
Mediterranean
In our Mediterranean portfolio, we have benefitted from a
material increase in production following the completion of the
successful Guendalina side-track and the Rockhopper operated Civita
development in H2 2015. Production in H1 2016 averaged 606 boepd
and we expect to benefit from a step-change in production following
the completion of our Egyptian acquisition in August 2016.
As a result of the decision by the Italian Ministry of Economic
Development not to award the Production Concession for the Ombrina
Mare project, work has been undertaken to establish the possibility
of obtaining compensation and damages from the Republic of Italy.
In order to mitigate its losses, Rockhopper has taken advantage of
the current industry cost environment to permanently abandon the
suspended Ombrina Mare well - the costs of which Rockhopper will
seek to recover.
Board changes
Following the Company's AGM in May, Dr Pierre Jungels retired as
Non-executive Chairman having served as Chairman of the Company for
over 10 years. We pay tribute to Pierre's achievements over that
time and offer our sincere thanks for the leadership provided.
In addition, Robert (Bob) Peters, Senior Independent Director,
has elected to retire from the Board effective 31 December 2016. We
thank Bob for his significant contribution and input to Board
deliberations over his six years with the Company.
Outlook
We are now approximately eight months into the FEED process for
Sea Lion and significant cost reductions have been achieved during
that time. The capex to first oil is now estimated at US$1.5
billion (reduced from US$1.8 billion) with the break-even oil price
estimated at US$45 per barrel.
Whilst the spot price for Brent crude is around $50 per barrel
today, Premier has confirmed that, given their financing position,
any final investment decision on Sea Lion will be subject to the
successful conclusion of a farm-down process. Rockhopper is
actively assisting Premier in this initiative.
As a result of the recently concluded acquisition of Beach
Egypt, our production for the remainder of 2016 is estimated to be
approximately 1,500 boepd, with operating cash flows expected to
broadly cover the Group's overheads going forward. Your Board
believes that this production and cash flow, when combined with our
existing balance sheet, helps secure the long-term sustainability
of the Company.
OPERATIONAL REVIEW
Sea Lion project enters FEED with a set of world-class
contractors
In January, we were delighted to announce that FEED work had
commenced on the Sea Lion Phase 1 development. FEED contracts were
awarded to an aligned partnership of world class contractors
comprising SBM Offshore for the FPSO, Subsea 7 for the subsea
installation, National Oilwell Varco for the flexible flowlines and
One Subsea for the subsea production system. The contractor
partnership is designed to create collaborative engagement with a
view to optimising the facilities design and installation
methodology and to reduce project costs.
Engagement with drilling and logistics service providers is
progressing, with a range of innovative commercial and contractual
arrangements being discussed. Tender packages for these services
are expected to be prepared by the year-end. Further cost savings
are being targeted as we progress through the FEED process.
An application was made to the Falkland Islands Government
("FIG") to extend the licence for the Sea Lion Discovery Area. FIG
has confirmed that an extension to April 2020 has been granted by
the Secretary of State.
Success of recent North Falkland Basin exploration campaign
confirmed by independent resource audit
In February we concluded the Isobel Elaine well, the last in our
multi-well exploration campaign in the North Falkland Basin.
As outlined previously, due to material operational issues
experienced with the drilling rig, the rig contract was terminated
before the Chatham well could be fully drilled. The Chatham well is
now expected to be drilled as part of the Sea Lion pre-development
drilling campaign. The postponement of the Chatham well has no
impact on the planning or timetable for the Sea Lion Phase 1
development.
Following the success of the exploration campaign, ERCE were
appointed to conduct an independent audit of the contingent and
prospective resources in licences PL032 and PL004. A summary of the
resource update is outlined below.
Sea Lion Complex
ERCE audit
- Discovered STOIIP 1,667MMstb, 834MMstb net to RKH (Mid Case)
- Discovered 2C resources 517MMstb oil, 258MMstb net to RKH
- Discovered 3C resources 900MMstb oil, 452MMstb net to RKH
- Total discovered 2C resources including gas 747MMboe, 392MMboe net to RKH
- Total discovered 3C resources including gas 1,462MMboe, 798MMboe net to RKH
Upside
- Audited near field low risk exploration upside of 207MMstb,
105MMstb net to RKH (Mid Case, unrisked)
- Additional upside in West Flank if oil-bearing (management
resource estimate 60MMstb)
Isobel-Elaine Complex
ERCE audit
- Utilising the operationally compromised data suite ERCE
audited significant discovered and prospective STOIIP and resources
in the Isobel-Elaine Complex of :
- Discovered STOIIP 277MMstb oil, 177MMstb net to RKH (Mid Case)
- Discovered STOIIP 832MMstb oil, 532MMstb net to RKH (High Case)
- Discovered 2C resources for Isobel Deep (F3H Fan) 20MMstb oil, 13MMstb net to RKH
- Prospective STOIIP 282MMstb oil, 180MMstb net to RKH (Mid Case)
Management estimates
- Without the benefit of completed formation pressure data,
management has applied recovery factors of 25% and 35% respectively
for 2C and 3C resources against audited STOIIP for each of the
Emily, Isobel and Isobel Deep (J) fans:
-- Management 2C resources 49MMstb oil, 31MMstb net to RKH
-- Management 3C resources 198MMstb oil, 127MMstb net to RKH
Management plus ERCE audited resources
-- 2C resources 69MMstb oil, 43MMstb net to RKH
-- 3C resources 270MMstb oil, 173MMstb net to RKH
-- Prospective (Mid Case) resources 70MMstb, 45MMstb net to RKH
-- Prospective (High Case) resources 350MMstb, 224MMstb net to RKH
Rockhopper were delighted that the audit confirmed the Company's
net 2C oil contingent resource base in the North Falkland Basin, as
a result of the exploration campaign and the acquisition of FOGL,
had increased to over 270 million barrels, or over 300 million
barrels including management estimates for the Emily, Isobel and
Isobel Deep J fans.
In the Isobel-Elaine Complex, where data collection was
compromised for operational reasons, ERCE has evaluated the
Discovered STOIIP for each of the fans and attributed contingent
resources to the Isobel Deep (F3H) fan from which significant oil
was recovered to surface. For the other oil-bearing fans (Emily,
Isobel and Isobel Deep J), ERCE believes that recovery factors
comparable to those applied to discoveries could be achieved if an
appraisal programme demonstrates the potential to flow oil at a
rate comparable to wells in these offset discoveries. For these
fans, management has assigned a 25% recovery factor for the 2C and
35% for the 3C resources.
In addition to the discovered resources, management believes
there are a large number of near field prospects in the attractive
and relatively low risk Isobel / Elaine appraisal area for which
estimates of STOIIP and oil prospective resources have been
made.
Italian production assets continue to perform in line with
expectations
Production from the Company's Italian production assets averaged
606 boepd (H1 2015: 232 boepd) net to Rockhopper during the first
six months of the year. The increase in production over the same
period last year is attributable to the Guendalina side-track
operation conducted in H2 2015 and the commencement of production
from the Civita field in November 2015.
Ombrina Mare, Italy
Following the decision in February by the Ministry of Economic
Development not to award the Company a Production Concession
covering the Ombrina Mare field, a decision was made to plug and
abandon ("P&A") the existing OM-2 well and remove the tri-pod
structure which had been constructed in 2008 and at that time
intended to form part of the future production facilities on the
field. The P&A operation was completed in early August, taking
advantage of current depressed rig rates, and plans are progressing
in relation to the decommissioning and removal of the tri-pod.
As outlined previously, Rockhopper is considering its options
with regard to obtaining damages and compensation from the Republic
of Italy in relation to the Ombrina Mare field.
Monte Grosso, Italy
The transfer of operatorship to Eni of the Serra San Bernado
permit, which contains the Monte Grosso prospect, has now
completed. It is hoped that the transfer of operatorship will
accelerate the regulatory and permitting process to enable
drilling.
Area 3, Malta
Seismic and geological evaluation work continues ahead of a
potential decision later in 2016 on whether to proceed to the next
stage of the licence.
Block 9, Croatia
In January 2015, Rockhopper was awarded a 40% interest in
offshore Block 9 in Croatia in partnership with Eni. Discussions
with the Croatian Hydrocarbon Authority continue in relation to the
final form of a Production Sharing Agreement.
FINANCIAL REVIEW
Overview
Rockhopper retains its robust financial position despite the
continued environment of low oil and gas prices.
Capital continues to be allocated principally to investment in
our portfolio of world-class assets in the North Falkland Basin,
which we have grown through the merger with Falkland Oil & Gas
Limited ("FOGL") and through exploration drilling on the
Isobel-Elaine complex during the period.
Development spending in Italy during the second half of 2015 has
resulted in a material increase in production during the period
which we expect to increase further in the remainder of 2016
following completion of the acquisition of Beach Egypt in August
2016.
Our balance sheet remains strong. Cash resources at 30 June 2016
were US$65.4 million and this increased to approximately US$75
million as at 1 September 2016. The increase in cash resources as
at 1 September 2016 reflects receipt of the full Exploration Carry
from Premier and takes into account the consideration paid in
relation to the Beach Egypt acquisition.
Results summary
$m (unless otherwise H1 2016 H1 2015 FY 2015
specified)
Production (boepd) 606 233 322
Revenue 3 2 4
Profit after tax 131 42 11
Cash out flow from
operating activities (10) (3) (7)
Cash 65 160 110
Net assets 460 294 262
Results for the period
For the period ended 30 June 2016, the Company reported revenues
of US$2.9 million and a profit after tax of US$131.3 million. The
profit after tax in the period arose primarily due to the excess of
fair value over consideration associated with the acquisition of
FOGL.
Revenue
The Group's revenues of US$2.9 million during the period relate
entirely to the sale of natural gas and condensate in Italy. The
increase in revenues reflect the increased production volumes
achieved at Guendalina, following a side-track well in H2 2015, and
the commencement of production from Civita in November 2015.
Working interest production averaged 606 boepd in H1 2016, an
increase of over 100% from the same period last year.
During the period, the Group's gas was sold under short-term
contract with an average realised price of EUR0.14 per standard
cubic metre (scm), equivalent to US$4.4 per mscf or approximately
US$26 per boe. Gas is sold at a price linked to the Italian "PSV"
(Virtual Exchange Point) gas marker price. Despite a 27% increase
in the price of Brent oil from US$37 per barrel in January 2016 to
approximately US$47 per barrel as at the end of August, the PSV
price remains weak, having decreased 16% over the same period.
Operating costs
Cash operating costs, excluding depreciation and impairment
charges, amounted to US$1.7 million (H1 2015: US$1.1 million). The
increase in underlying cash operating costs is principally due to
the increased production from Guendalina and Civita. Cash operating
costs on a per barrel of oil equivalent basis reduced from US$26
per boe to US$15 per boe.
General and administration costs, excluding non-recurring
expenses related to acquisitions, amounted to US$3.8 million (H1
2015: US$4.1 million). Non-recurring costs associated with the
acquisition of FOGL were offset by the cash balance acquired.
A corporate cost reduction program has been initiated - as a
result headcount in the Rome office has reduced to approximately 10
(a reduction of over 50% since August 2014 when the Group acquired
Mediterranean Oil & Gas plc). Initiatives to streamline the
Group's UK operations will be achieved by combining our London and
Salisbury staff in a single office in London.
Cash movements and capital expenditure
At 30 June 2016, the Company had cash resources of US$65.4
million (31 December 2015: US$110.4 million) and no debt.
Cash and term deposit movements during the period:
US$m
----------------------------------- -----
Opening cash balance (31 December
2015) 110
Falkland Islands (38)
Greater Mediterranean (2)
Admin and miscellaneous (5)
----------------------------------- -----
Closing cash balance (30 June
2016) 65
----------------------------------- -----
Falkland Island spend of US$38 million, net of Exploration Carry
and insurance proceeds, relates primarily to the 2015/16 drilling
campaign, as well as spend relating to the pre-development
activities on Sea Lion.
For a variety of reasons, including the material operational
issues experienced with the drilling rig, the costs of drilling the
Zebedee, Isobel Deep and Isobel-Elaine wells were above that which
was originally anticipated. Certain costs incurred during the North
Falkland Basin exploration campaign are the subject of an ongoing
insurance claim. Approximately US$16 million of insurance proceeds
have been received to date, net to Rockhopper, with further
proceeds expected during the remainder of 2016 and early 2017.
Spend (net of revenues) in the Greater Mediterranean largely
relates to residual costs associated with the Guendalina side-track
and Civita development in H2 2015.
As at 1 September 2016, Rockhopper had cash resources of
approximately US$75 million which takes into account the
consideration paid in relation to the Beach Egypt acquisition and
after having received the full Exploration Carry from Premier.
Less than 15% of the Group's cash resources as at mid June 2016
were held in sterling and therefore the impact of the recent
weakness in sterling dollar exchange rates is minimal.
Mergers, acquisitions and disposals
The merger with Falkland Oil & Gas Limited completed in
January 2016. Through the merger of FOGL, Rockhopper consolidated
its leading North Falkland Basin acreage position.
Under the terms of the merger, shareholders of FOGL received
0.2993 new Rockhopper shares for each FOGL share held.
The transaction has been accounted for by the purchase method of
accounting with an effective date of 11 January 2016 being the date
on which the Group gained control of FOGL. Information in respect
of the assets and liabilities acquired and the fair value
allocation to the FOGL assets in accordance with the provisions of
"IFRS 3 - Business Combinations" has been determined on a
provisional basis as follows:
Recognised values
on acquisition
US$m
----------------------------- ------------------
Intangible exploration
and appraisal assets 216.0
Property, plant and
equipment 0.1
Inventories 0.2
Trade and other receivables 3.2
Trade and other payables (20.5)
----------------------------- ------------------
Net identifiable assets
and liabilities 199.0
----------------------------- ------------------
The fair value of the net assets acquired was US$199.0 million
resulting in an excess of fair value over consideration of US$138.8
million, recorded as a credit in the income statement.
The fair value of equity instruments has been determined by
reference to the closing share price on the trading day immediately
prior to the completion of the acquisition.
The excess of fair value over consideration has arisen primarily
due to the fact that the financial position of FOGL had
deteriorated due to cost overruns at the Humpback exploration well
as well as merger terms being agreed prior to the Isobel-Elaine
well results, which substantially de-risked the Isobel-Elaine
complex.
In April 2016, Rockhopper announced revised terms for the
acquisition of Beach Egypt for cash consideration of US$11.9
million. The acquisition of Beach Egypt completed in August 2016,
after the period end.
In addition, after the period end, Rockhopper completed the sale
of a package of non-core assets in Italy including interests in the
Monteardone and Fornovo di Taro fields to a local Italian company
for nominal consideration. As a result of this transaction, US$1.1
million of provisions related to future abandonment and
decommissioning have been removed from the balance sheet.
Liquidity, counterparty risk and going concern
The Company monitors its cash position, cash forecasts and
liquidity on a regular basis and takes a conservative approach to
cash management with surplus cash held on term deposits with a
number of major financial institutions.
The Directors have assessed that the cash balance held provides
the Company with adequate headroom over forecast expenditure for
the following 12 months - as a result, the Directors have adopted
the going concern basis of accounting in preparing the annual
financial statements.
Principal risks and uncertainties
A detailed review of the potential risks and uncertainties which
could impact the Company are outlined in the Group's 2015 Annual
Report. The Company identified its principal risks at the end of
2015 as being:
-- sustained low oil price;
-- joint venture partner alignment and funding issues; both of
which could ultimately create a delay to the Sea Lion Final
Investment Decision.
There has been no change in principal risks and uncertainties
since the year end although in light of the Company's recent
acquisition in Egypt, a thorough re-evaluation of the Group's
principal risks will be conducted during the remainder of 2016.
Outlook
As a result of the weak industry backdrop, significant capital
expenditure savings have been achieved at Sea Lion and further
opportunities continue to be pursued. With an estimated capex to
first oil of US$1.5 billion and a project break-even oil price of
approximately US$45 per barrel, the economics of the Sea Lion
project remain robust.
In the second half of 2016, we expect to see a ramp-up in
engineering activity and spend as we progress Sea Lion through
FEED.
Following completion of the acquisition of Beach Egypt, we
expect operating cash flows to broadly cover corporate overheads,
creating a sustainable financing position for the Company as we
move forward.
Our balance sheet remains strong and following completion of the
Beach Egypt acquisition our year end 2016 cash guidance has
narrowed to US$60 - 65 million although this remains subject to the
outcome of a number of material items including exploration
drilling cost audits, disputes and insurance claims - the outcomes
of which should be known during H2 2016.
Group income statement
for the six months ended 30 June 2016
Six Six
months months Year
ended ended ended
30 30 31
June June December
2016 2015 2015
Unaudited Unaudited Audited
Notes $'000 $'000 $'000
-------------------------------------------- ------ ---------- ---------- ----------
Revenue 2,901 1,762 3,966
-------------------------------------------- ------ ---------- ---------- ----------
Other cost of sales (1,703) (1,084) (2,951)
Depreciation and impairment
of oil and gas assets (1,830) (723) (8,098)
-------------------------------------------- ------ ---------- ---------- ----------
Total cost of sales (3,533) (1,807) (11,049)
-------------------------------------------- ------ ---------- ---------- ----------
Gross loss (632) (45) (7,083)
Exploration and evaluation
expenses (1,637) (619) (22,934)
-------------------------------------------- ------ ---------- ---------- ----------
Costs in relation to
acquisition (1,036) - (1,544)
Other administrative
costs (3,842) (4,097) (9,351)
-------------------------------------------- ------ ---------- ---------- ----------
Total administrative
expenses (4,878) (4,097) (10,895)
Excess of fair value
over cost 138,842 - -
Charge for share based
payments (971) (908) (1,937)
Foreign exchange movement 3,999 339 1,927
-------------------------------------------- ------ ---------- ---------- ----------
Results from operating
activities and other
income 134,723 (5,330) (40,922)
Finance income 81 472 975
Finance expense (3,553) (205) (4,750)
-------------------------------------------- ------ ---------- ---------- ----------
Profit before tax 131,251 (5,063) (44,697)
Tax 3 - 47,250 55,395
-------------------------------------------- ------ ---------- ---------- ----------
PROFIT for the period
attributable to the equity
shareholders of the parent
company 131,251 42,187 10,698
-------------------------------------------- ------ ---------- ---------- ----------
Profit per share: cents
Basic 4 29.93 14.39 3.65
Diluted 4 29.87 14.21 3.64
-------------------------------------------- ------ ---------- ---------- ----------
All operating income and operating gains and losses relate to
continuing activities.
Group statement of comprehensive income
for the six months ended 30 June 2016
Six Six
months months Year
ended ended Ended
30 30 31
June June December
2016 2015 2015
Unaudited Unaudited Unaudited
Notes $'000 $'000 $'000
-------------------------------- ------- ---------- ---------- ----------
Profit for the period 131,251 42,187 10,698
Items that may be reclassified
to profit and loss
Exchange differences
on translation of foreign
operations 24 (3,248) (4,943)
----------------------------------------- ---------- ---------- ----------
TOTAL COMPREHENSIVE INCOME
FOR THE period 131,275 38,939 5,755
----------------------------------------- ---------- ---------- ----------
Group balance sheet
as at 30 June 2016
As As As
at at at
30 30 31
June June December
2016 2015 2015
Unaudited Unaudited Audited
------------------------------- ------ ---------- ---------- ----------
Notes $'000 $'000 $'000
NON CURRENT Assets
Intangible exploration
and evaluation assets 5 466,539 246,293 256,658
Property, plant and equipment 11,233 12,371 12,637
Goodwill 10,004 10,027 9,803
Other receivables - 519 -
CURRENT Assets
Inventories 1,866 1,708 1,670
Other receivables 37,350 2,891 6,199
Restricted cash 1,657 1,373 2,192
Term deposits 20,000 85,000 60,000
Cash and cash equivalents 45,363 75,215 50,434
------------------------------- ------ ---------- ---------- ----------
Total assets 594,012 435,397 399,593
------------------------------- ------ ---------- ---------- ----------
CURRENT Liabilities
Other payables 28,121 27,395 30,457
Tax payable 6 9 - 9
NON-CURRENT Liabilities
Tax payable 6 46,075 53,963 47,405
Provisions 20,666 20,510 20,343
Deferred tax liability 39,145 39,144 39,145
------------------------------- ------ ---------- ---------- ----------
Total liabilities 134,016 141,012 137,359
------------------------------- ------ ---------- ---------- ----------
Equity
Share capital 7,193 4,909 4,910
Share premium 3,111 2,942 2,995
Share based remuneration 6,462 4,462 5,491
Shares held by SIP trust (3,616) (3,463) (3,513)
Merger reserve 74,332 11,112 11,112
Foreign currency translation
reserve (9,136) (7,465) (9,160)
Special reserve 472,967 536,976 472,967
Retained losses (91,317) (255,088) (222,568)
------------------------------- ------ ---------- ---------- ----------
Attributable to the equity
shareholders of the company 459,996 294,385 262,234
------------------------------- ------ ---------- ---------- ----------
Total liabilities and
equity 594,012 435,397 399,593
------------------------------- ------ ---------- ---------- ----------
These financial statements were approved by the directors and
authorised for issue on 14 September 2016 and are signed on their
behalf by:
StEWART MAcDONALD
CHIEF FINANCIAL OFFICER
Group statement of changes in equity
for the six months ended 30 June 2016
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
-----------------
in
capital premium remuneration trust reserve Reserve reserve losses Equity
For the six
months ended
30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Balance at
1 January
2016 4,910 2,995 5,491 (3,513) 11,112 (9,160) 472,967 (222,568) 262,234
Total
comprehensive
income for
the period - - - - - 24 - 131,251 131,275
Share based
payments - - 971 - - - - - 971
Shares issues
in relation
to SIP 4 116 - (103) - - - - 17
Shares issued
on acquisition
of subsidiary 2,279 - - - 63,220 - - - 65,499
Balance at
30 June 2016 7,193 3,111 6,462 (3,616) 74,332 (9,136) 472,967 (91,317) 459,996
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
-----------------
in
capital premium remuneration trust reserve Reserve reserve losses Equity
For the six
months ended
30 June 2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Balance at
1 January
2015 4,854 662 4,960 (628) 11,112 (4,217) 536,976 (298,681) 255,038
Total
comprehensive
income for
the period - - - - - (3,248) - 42,187 38,939
Share based
payments - - 908 - - - - - 908
Shares issues
in relation
to SIP 2 133 - (116) - - - - 19
Exercise
of share
options 53 2,147 (1,406) - - - - 1,406 2,200
Purchase
of own shares - - - (2,719) - - - - (2,719)
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Balance at
30 June 2015 4,909 2,942 4,462 (3,463) 11,112 (7,465) 536,976 (255,088) 294,385
----------------- -------- -------- ------------- -------- -------- ------------ -------- ---------- --------
Foreign
Shares Currency
Share
Share Share based held Merger Translation Special Retained Total
----------------
in
capital premium remuneration trust reserve Reserve reserve losses Equity
For the year
ended
31 December
2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- -------- -------- ------------- -------- -------- ------------ --------- ---------- --------
Balance at
1 January
2015 4,854 662 4,960 (628) 11,112 (4,217) 536,976 (298,681) 255,038
Total
comprehensive
loss for
the period - - - - - (4,943) - 10,698 5,755
Share based
payments - - 1,937 - - - - - 1,937
Share issues
in relation
to SIP 3 186 - (152) - - - - 37
Exercise
of share
options 53 2,147 (1,406) - - - - 1,406 2,200
Purchase
of own shares - - - (2,733) - - - - (2,733)
Other transfers - - - - - - (64,009) 64,009 -
---------------- -------- -------- ------------- -------- -------- ------------ --------- ---------- --------
Balance at
31 December
2015 4,910 2,995 5,491 (3,513) 11,112 (9,160) 472,967 (222,568) 262,234
---------------- -------- -------- ------------- -------- -------- ------------ --------- ---------- --------
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2016
Six Six
months months Year
ended ended ended
30 30 31
June June December
2016 2015 2015
Unaudited Unaudited Audited
Notes $'000 $'000 $'000
-------------------------------- ------- ---------- ---------- ----------
Cash flows from operating
activities
Net profit/(loss) before
tax 131,251 (5,063) (44,697)
Adjustments to reconcile
net losses to cash utilised
Depreciation 2,241 660 2,744
Impairment on property,
plant and equipment 7 - 5,649
Exploration impairment
expenses 1,034 27 22,335
Share based payment charge 971 908 1,937
Excess of fair value
over cost (138,842) - -
Loss on disposal of tangible
fixed assets 5 11 12
Finance expense 3,547 202 4,742
Finance income - (385) (800)
Foreign exchange (4,339) (349) (1,921)
----------------------------------------- ---------- ---------- ----------
Operating cash flows
before movements in working
capital (4,125) (3,989) (9,999)
Changes in:
Inventories - 298 291
Other receivables 1,306 1,868 (981)
Payables (7,122) (1,892) 3,765
Movement on other provisions (297) (7) 68
----------------------------------------- ---------- ---------- ----------
Cash utilised by operating
activities (10,238) (3,722) (6,856)
----------------------------------------- ---------- ---------- ----------
Cash Flows from investing
activities
Capitalised expenditure
on exploration and evaluation
assets (39,270) (34,091) (70,661)
Purchase of equipment (548) (1,808) (10,258)
Acquisition of subsidiary 5,312 - -
Interest 235 153 617
Investing cash flows
before movements in capital
balances (34,271) (35,746) (80,302)
Changes in:
Restricted cash 498 (24) (826)
Term deposits 40,000 15,000 40,000
----------------------------------------- ---------- ---------- ----------
Cash (utilised)/generated
by investing activities 6,227 (20,770) (41,128)
----------------------------------------- ---------- ---------- ----------
Cash flows from financing
activities
Share options exercised - 2,200 2,200
Share incentive plan 17 19 37
Purchase of own shares - (2,719) (2,733)
Finance expense (5) (7) (18)
----------------------------------------- ---------- ---------- ----------
Cash (utilised)/generated
from financing activities 12 (507) (514)
----------------------------------------- ---------- ---------- ----------
Currency translation
differences relating
to cash and cash equivalents (1,072) 488 (794)
Net cash outflow (3,999) (24,999) (48,498)
Cash and cash equivalents
brought forward 50,434 99,726 99,726
----------------------------------------- ---------- ---------- ----------
Cash and cash equivalents
carried forward 45,363 75,215 50,434
----------------------------------------- ---------- ---------- ----------
Notes to the condensed group financial statements
for the six months ended 30 June 2016
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 granted in 2004 and 2005
for the exploration and exploitation of oil and gas in the Falkland
Islands. During 2014, it diversified its portfolio through the
acquisition of an exploration and production company with
operations principally in Italy and post period end has further
diversified through the acquisition of an exploration and
production company operating in Egypt. The registered office of the
company is Hilltop Park, Devizes Road, Salisbury, SP3 4UF.
1.2 Statement of compliance
These condensed consolidated interim financial statements of the
group, as at and for the six months ended 30 June 2016, include the
results of the company and all subsidiaries over which the company
exercises control.
The condensed interim consolidated financial statements have
been prepared in accordance with International Accounting Standard
("IAS") 34 Interim Financial Reporting as adopted by the European
Union ("EU"). They do not include all information required for full
annual financial statements, and should be read in conjunction with
the consolidated financial statements of the company and all its
subsidiaries as at the year ended 31 December 2015.
The comparative figures for the year ended 31 December 2015 are
not the company's statutory accounts for that financial period.
Those accounts have been reported on by the company's auditor and
delivered to the registrar of companies. The report of the auditor
was: (i) unqualified; (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying his report; and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The condensed interim consolidated financial statements were
approved by the Board on 14 September 2016.
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 except, as set out in the accounting
policies below, where certain items are included 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
functional currency of the Mediterranean operations acquired during
2014 is euros. All other members of the group have a functional
currency of US$.
All values are rounded to the nearest thousand dollars ($'000)
or thousand pounds (GBP'000), except when otherwise indicated.
1.4 Going concern
These condensed group interim financial statements have been
prepared on a going concern basis as the directors are confident
that the group has sufficient funds in order to continue in
operation for the foreseeable future.
1.5 Period end exchange rates
The period end rates of exchange actually used were:
30 June 30 June 31 December
2016 2015 2015
----------- -------- -------- ------------
GBP : US$ 1.34 1.57 1.48
EUR: US$ 1.12 1.11 1.09
----------- -------- -------- ------------
2 Revenue and segmental information
Six months ended 30 June 2016
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
---------------------------- --------- -------------- ---------- --------
Revenue - 2,901 - 2,901
Cost of sales - (3,533) - (3,533)
---------------------------- --------- -------------- ---------- --------
Gross loss - (632) - (632)
Exploration and evaluation
expenses (7) (1,013) (617) (1,637)
Administrative expenses (699) (1,047) (3,132) (4,878)
Excess of fair value
over cost 138,842 - - 138,842
Charge for share based
payments - - (971) (971)
Foreign exchange movement 4,668 117 (786) 3,999
---------------------------- --------- -------------- ---------- --------
Results from operating
activities and other
income 142,804 (2,575) (5,506) 134,723
Finance income 1 - 80 81
Finance expense (3,340) (209) (4) (3,553)
---------------------------- --------- -------------- ---------- --------
Loss before tax 139,465 (2,784) (5,430) 131,251
Tax - - - -
---------------------------- --------- -------------- ---------- --------
Profit/(loss) for period 139,465 (2,784) (5,430) 131,251
---------------------------- --------- -------------- ---------- --------
Reporting segments
assets 461,202 34,540 98,270 594,012
Reporting segments
liabilities 85,211 22,849 25,956 134,016
Six months ended 30 June 2015
Falkland Greater
Islands Mediterranean Corporate Total
$'000 $'000 $'000 $'000
---------------------------- --------- -------------- ---------- --------
Revenue - 1,762 - 1,762
Cost of sales - (1,807) - (1,807)
---------------------------- --------- -------------- ---------- --------
Gross loss - (45) - (45)
Exploration and evaluation
expenses (303) (296) (20) (619)
Administrative expenses (20) (1,309) (2,768) (4,097)
Charge for share based
payments - - (908) (908)
Foreign exchange movement (774) 249 864 339
---------------------------- --------- -------------- ---------- --------
Results from operating
activities (1,097) (1,401) (2,832) (5,330)
Finance income - - 472 472
Finance expense - (202) (3) (205)
---------------------------- --------- -------------- ---------- --------
Loss before tax (1,097) (1,603) (2,363) (5,063)
Tax 47,250 - - 47,250
---------------------------- --------- -------------- ---------- --------
Profit/(loss) for period 46,153 (1,603) (2,363) 42,187
---------------------------- --------- -------------- ---------- --------
Reporting segments
assets 218,631 57,296 159,470 435,397
Reporting segments
liabilities 93,100 23,282 24,630 141,012
3 Taxation
Six Six
months months Year
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
$'000 $'000 $'000
---------------------------- --------- --------- ------------
Current tax:
Overseas tax - - 9
Adjustment in respect
of prior periods - (47,250) (55,405)
----------------------------- -------- --------- ------------
Total current tax - (47,250) (55,396)
----------------------------- -------- --------- ------------
Deferred tax:
Overseas tax - - 1
----------------------------- -------- --------- ------------
Total deferred tax - - 1
----------------------------- -------- --------- ------------
Tax on ordinary activities - (47,250) (55,395)
----------------------------- -------- --------- ------------
On the 8 April 2015 the Group agreed binding documentation ("Tax
Settlement Deed") with the Falkland Island Government ("FIG") in
relation to the tax arising from the Group's farm out to Premier
Oil plc ("Premier"). As such the Group is able to defer this tax
liability under Extra Statutory Concession 16. As it is deferred,
the liability has been reclassified as non-current and discounted.
The adjustment in respect of prior years is mainly due to the
impact of this discounting. Additional information is given in Note
6 Tax payable.
4 Basic and diluted loss per share
Six Six
months months Year
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
Number Number Number
------------------------- ------------ ------------ ------------
Shares in issue brought
forward 296,579,834 292,805,453 292,805,453
Shares issued
- Issued in relation
to acquisitions 159,684,668 - -
- Issued in relation
to share options - 3,532,920 3,532,920
- Issued under the
SIP 278,697 149,535 241,461
-------------------------- ------------ ------------ ------------
Shares in issue carried
forward 456,543,199 296,487,908 296,579,834
-------------------------- ------------ ------------ ------------
Weighted average number
of Ordinary Shares
for the purposes of
basic earnings per
share 438,564,580 293,244,292 293,442,707
Effects of dilutive
potential Ordinary
shares
Contingently issuable
shares - prior periods
anti-dilutive 790,813 3,606,543 321,330
-------------------------- ------------ ------------ ------------
439,355,393 296,850,835 293,764,037
------------------------- ------------ ------------ ------------
$'000 $'000 $'000
------------------------ ---------- --------- ---------
Net profit after tax
for purposes of basic
and diluted earnings
per share 131,251 42,187 10,698
------------------------- ---------- --------- ---------
Earnings per share
- cents
Basic 29.93 14.39 3.65
Diluted 29.87 14.21 3.64
------------------------- ---------- --------- ---------
At the period end the group had the following unexercised
options and share appreciation rights in issue.
Six months Six Year
months
ended ended Ended
30 June 30 June 31 December
2016 2015 2015
Number Number Number
--------------------- ----------- ---------- ------------
Long term incentive
plan 18,222,590 9,319,704 9,319,704
Share appreciation
rights 1,420,531 1,420,531 1,420,531
---------------------- ----------- ---------- ------------
5 Intangible exploration and evaluation assets
Additions during the period predominantly relate to the fair
value of intangible assets acquired as part of the acquisition of
Falklands Oil & Gas. Additional details are disclosed in Note
9. The majority of the remainder of the movement relates to the
group's interests in the Falkland Islands.
6 Tax payable
Six Six Year
months months ended
ended ended
30 June 30 June 31 December
2016 2015 2015
$'000 $'000 $'000
------------------------- -------- -------- ------------
Current tax payable 9 - 9
Non current tax payable 46,075 53,963 47,405
-------------------------- -------- -------- ------------
46,084 53,963 47,414
------------------------- -------- -------- ------------
On the 8 April 2015 the group agreed binding documentation ("Tax
Settlement Deed") with the Falkland Island Government ("FIG") in
relation to the tax arising from the group's farm out to Premier
Oil plc ("Premier").
The Tax Settlement Deed confirms the quantum and deferment of
the outstanding tax liability and is made under Extra Statutory
Concession 16.
As a result of the Tax Settlement Deed the outstanding tax
liability was confirmed at GBP64.4 million and payable on the first
royalty payment date on Sea Lion. Currently the first royalty
payment date anticipated to occur within six months of first oil
production which itself is estimated to occur in late 2020
(assuming Sea Lion project sanction in mid-2017). As such the tax
liability has been reclassified as non-current and discounted at
15%. The effect of this discounting was a tax credit in the prior
year of $55.4 million.
Movements in the current period are a foreign exchange gain of
$4.7 million offset by an increase of $3.3million due to the
unwinding of the aforementioned discounting.
The tax liability may be revised downward if the Falkland
Islands' Commissioner of Taxation is satisfied that either (i) the
Exploration Carry from Premier is utilised to fund exploration
activities or (ii) any element of the Development Carry from
Premier becomes "irrecoverable". Whilst the benefit of some of the
Exploration Carry has been received from Premier during the current
campaign, this has not resulted in an adjustment in the tax
liability as this is still subject to agreement with the Falkland
Islands' Commissioner of Taxation.
7 Reserves
Set out below is a description of each of the reserves of the
group:
Share premium Amount subscribed for share capital
in excess of its nominal value.
Share based The share incentive plan reserve
remuneration captures the equity related element
of the expenses recognised for
the issue of options, comprising
the cumulative charge to the income
statement for IFRS2 charges for
share based payments less amounts
released to retained earnings
upon the exercise of options.
Own shares Shares held by the SIP trust represent
held in trust the issue value of shares held
on behalf of participants by Capita
IRG Trustees Limited, the trustee
of the SIP.
Merger reserve The difference between the nominal
value and fair value of shares
issued on acquisition of subsidiaries.
Foreign currency Exchange differences arising on
translation consolidating the assets and liabilities
reserve of the group's subsidiaries are
classified as equity and transferred
to the group's translation reserve.
Special reserve The reserve is non distributable
and was created following cancellation
of the share premium account on
4 July 2013. It can be used to
reduce the amount of losses incurred
by the parent company or distributed
or used to acquire the share capital
of the company subject to settling
all contingent and actual liabilities
as at 4 July 2013. Should not
all of the contingent and actual
liabilities be settled, prior
to distribution the parent company
must either gain permission from
the actual or contingent creditors
for distribution or set aside
in escrow an amount equal to the
unsettled actual or contingent
liability.
Retained Cumulative net gains and losses
losses recognised in the financial statements.
8 Ocean Rig arbitration
The contract with Ocean Rig, which covered both the North
Falkland Basin and South Falkland Basin drilling program, was
terminated in February 2016 due to significant operational issues
with the rig. Ocean Rig is claiming termination fees of up to $62.9
million. The operators refute these claims, and are preparing
counter-claims against Ocean Rig. Rockhopper's interest in the
claims is limited to those relating to the original North Falkland
Basin program. A formal arbitration process has commenced with a
decision not expected until the second half of 2017. Given that the
arbitration process has commenced only recently and the claims and
counter-claims of the parties are not fully quantified or
substantiated, it is not appropriate to recognise (or make
provision for) any assets or liabilities in the Company's financial
statements.
9 Acquisition of subsidiary
Acquisition of Falkland Oil and Gas Limited
In January 2016 Rockhopper completed the acquisition of the
entire issued share capital of Falkland Oil and Gas Limited
("FOGL").
The boards of Rockhopper and FOGL believe that a combination of
the Rockhopper and FOGL Groups (together, the "Combined Group")
represents a significant value opportunity arising from the
combination of their highly complementary portfolios. Specifically,
the Combined Group is expected to:
-- be the largest North Falkland Basin licence and discovered
resource holder with a material working interest in all key
licences;
-- have enhanced prospects of progressing the Sea Lion project
through final investment decision;
-- have greater exposure to exploration and appraisal upside potential; and
-- benefit from enhanced scale and capabilities creating value
in the current market environment.
Under the terms of the agreement announced on 24 November 2015,
shareholders of FOGL received 0.2993 shares of the company per FOGL
share.
The transaction has been accounted for by the purchase method of
accounting with an effective date of 18 January 2016 being the date
on which the group gained control of FOGL. Information in respect
of the assets and liabilities acquired and the fair value
allocation to the FOGL assets in accordance with the provisions of
"IFRS3 - Business Combinations" has been determined on a
provisional basis, and is as follows:
Recognised
values
on acquisition
$'000
----------------------------------------- ----------------
Intangible exploration and appraisal
assets 216,000
Property, plant and equipment 58
Inventories 162
Trade and other receivables 3,231
Trade and other payables (20,422)
----------------------------------------- ----------------
Net identifiable assets and liabilities 199,029
Fair value in excess of consideration (138,842)
----------------------------------------- ----------------
Satisfied by:
Equity instruments 159,684,668 ordinary
shares 65,499
Less cash acquired (5,312)
----------------------------------------- ----------------
Total consideration 60,187
----------------------------------------- ----------------
All of the recognised values have been finalised with the
exception of those relating to the intangible exploration and
appraisal assets. The fair value of intangible exploration and
appraisal assets are inherently subjective and a difficult exercise
to determine. The work to determine the fair value is still ongoing
and pending further information and as such has been measured on a
provisional basis at 30 June 2016. All necessary information is
expected to be received by 31 December 2016 in order to finalise
the fair value within the annual report and financial statements
for the year then ended.
The fair value of equity instruments has been determined by
reference to the closing share price on the trading day immediately
prior to the completion of the acquisition.
The fair value in excess of consideration arises due to the
difference between the fair value of the net assets and the
consideration transferred and relates to the fact that the
financial position of FOGL had deteriorated due to cost overruns at
the Humpback exploration well as well as merger terms being agreed
prior to the Isobel Elaine well results, which substantially
de-risked the Isobel-Elaine complex.
Acquisition costs of $1,430,000 arose as a result of the
transaction in this and the prior period. These have been
recognised as part of administrative expenses in the statement of
comprehensive income.
Since the acquisition date, FOGL has contributed $nil to group
revenues and added $873,000 to the group loss. If the acquisition
had occurred on 31 December 2015, group revenues and group profit
for the period would be materially the same.
10 Post balance sheet events
Acquisition of Beach Egypt Pty Limited
In August 2016 Rockhopper completed the acquisition of the
entire issued share capital of Beach Egypt Pty Limited ("BEPL") in
exchange for cash consideration of $11.9 million based on cash flow
effective date of 1 January 2016. BEPL holds a 22% interest in the
Abu Sennan concession and a 25% interest in the El Qa'a Plain
concession.
INDEPENDENT REVIEW REPORT TO ROCKHOPPER EXPLORATION PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly report for the six
months ended 30 June 2016 which comprises group income statement,
the group statement of comprehensive income, the group balance
sheet, the group statement of changes in equity, the group cash
flow statement and the related explanatory notes. We have read the
other information contained in the half-yearly report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the company those matters we are required to state
to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly report in accordance with the AIM
Rules.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the EU.
The condensed set of financial statements included in this
half-yearly report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly report for the six months ended 30 June 2016 is
not prepared, in all material respects, in accordance with IAS 34
as adopted by the EU and the AIM Rules.
LYNTON RICHMOND
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
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