Half-year results

RNS Number : 4600N

Rockhopper Exploration plc

30 September 2021

 

30 September 2021 

Rockhopper Exploration plc

("Rockhopper", the "Group" or the "Company")

Half-year results for the six months to 30 June 2021

Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and production company with key interests in the North Falkland Basin, announces its unaudited results for the six months ended 30 June 2021.

Year to date highlights

Sea Lion

· Announcement by Harbour Energy plc ("Harbour") in September 2021 that the Sea Lion project does not fit its corporate strategy and therefore that it will seek to exit the project and its North Falkland Basin licences

· Rockhopper to continue to pursue the Sea Lion project with a handover process to commence shortly

· Discussions ongoing with Navitas Petroleum LP ("Navitas") regarding its potential entry to the Sea Lion project

· Extension of the Company's North Falkland Basin Petroleum Licences, including the Sea Lion Discovery Area, to 1 November 2022

Corporate and financial

· Continued focus on corporate costs resulted in reduced administrative expenses - G&A US$1.6 million in H1 2021 (H1 2020: US$2.7 million)

· Further corporate cost savings implemented post period end

· Cash resources of US$7.1 million as at 30 June 2021

Outlook

· Formal exit by Harbour - Rockhopper expects to regain operatorship and 100% working interest in Sea Lion and key North Falkland Basin licences, subject to necessary consents

· Progress an alternative, lower-cost development scheme for Sea Lion utilising the existing extensive design and engineering work undertaken for the project in recent years

· Potential farm-out of Sea Lion project to Navitas

· Outcome awaited in relation to Ombrina Mare arbitration - seeking significant monetary damages

Keith Lough, Chairman of Rockhopper, commented: 

"Harbour Energy's decision not to proceed with Sea Lion is both a disappointment and an opportunity, affording us greater control through our expected regaining of operatorship and a 100% working interest.

"Sea Lion is a world-class oil field with the scale and potential to create very material value for Rockhopper, its partners and the Falkland Islands as a whole.

"Work will continue on a number of fronts over the coming weeks, including: (1) progressing Harbour's orderly exit from the Falklands; (2) advancing plans for an alternative, lower cost, development of Sea Lion; and (3) progressing discussions with Navitas Petroleum around their potential entry to the project."

Enquiries:

Rockhopper Exploration plc

Sam Moody - Chief Executive

Stewart MacDonald - Chief Financial Officer

Tel. [phone] (via Vigo Communications)

Canaccord Genuity Limited (NOMAD and Joint Broker)

Henry Fitzgerald-O'Connor/James Asensio

Tel. [phone]

Peel Hunt LLP (Joint Broker)

Richard Crichton

Tel. [phone]

Vigo Communications

Patrick d'Ancona/Ben Simons

Tel. [phone]

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

Rockhopper's strategy is to create value for all our stakeholders through the safe and responsible development of our assets in the North Falkland basin. The Company has been operating offshore the Falkland Islands since 2004 and discovered the world-class Sea Lion oil field in 2010. We are a long-term partner of the Falklands and our aim has always been to support the rights of the Falkland Islanders to develop their natural resources.

Sea Lion development

The recent decision by Harbour Energy plc ("Harbour") that Sea Lion does not fit its strategy and therefore that it will not proceed with the project is a disappointment. Nonetheless, whilst this is a difficult moment for Rockhopper it is also a very real opportunity.

The Sea Lion project (with independently audited 2C resources in excess of 500 million barrels) was discovered and appraised by Rockhopper 100% as Operator. The Company has unrivalled knowledge of Sea Lion and the North Falkland Basin having held the acreage since 2004 and plans to continue to pursue the development of the project.

Work has already commenced on an alternative, lower-cost development scheme utilising the existing extensive design and engineering work undertaken for the project in recent years.

Rockhopper is in discussions with Navitas Petroleum LP ("Navitas") around its potential entry to the Sea Lion project following Harbour's decision not to proceed. In August this year, Navitas and partners raised project financing in excess of US$900 million and have taken final investment decision on the 330 million barrel deep water Shenandoah project in the US Gulf of Mexico, demonstrating their ability to raise capital for large-scale offshore oil developments.

The previously announced Heads of Terms with Harbour and Navitas expires on 30 September 2021 and as a result Harbour will have an initial 90 days to elect how to proceed with their exit. Rockhopper will continue to be funded (excluding licence fees, taxes and project wind down costs) by Harbour during that period under the terms announced on 7 January 2020 and 30 April 2020.

Rockhopper has commenced discussions with Harbour and the Falkland Islands Government ("FIG") to ensure an orderly exit by Harbour from the Falkland Islands.

Ombrina Mare arbitration

Rockhopper commenced international arbitration proceedings against the Republic of Italy in relation to the Ombrina Mare field in March 2017. The hearing took place in early February 2019 in Paris. In June 2019, the Tribunal rejected Italy's request for the suspension of the arbitration and Italy's related intra-EU jurisdictional objections.

Post-hearing briefings were submitted in October and November 2019. The Tribunal confirmed in May 2021 that it anticipated being in a position to render its award in the course of July 2021. In late September 2021, Italy made a request, and the Tribunal agreed, to admit a recent European Court of Justice judgment related to inter-EU Energy Charter Treaty disputes. The Tribunal has requested Rockhopper's legal advisers to respond to the European Court of Justice judgment by 6 October 2021.

Rockhopper continues to believe it has strong prospects of recovering very significant monetary damages - on the basis of lost profits - as a result of the Republic of Italy's breaches of the Energy Charter Treaty. All of Rockhopper's costs associated with the arbitration to date have been funded on a non-recourse ("no win - no fee") basis from a specialist arbitration funder.

With the expectation that the Ombrina Mare arbitration is approaching a conclusion, the Company is considering options to exit its legacy gas interests in Italy.

Corporate Matters

The Group continues to actively manage its corporate costs and has reduced G&A by over 50% over the last five years. During 2020 approximately  US $2.0 million   of recurring annual corporate costs were identified and removed permanently from the business. G&A costs decreased to   US$1.6 million   in H1 2021 (H1 2020:   US$2.7 million) .

Post period end, further actions to preserve the Company's cash position have been agreed, including: 

· the sub-let of the Company's former London office which is expected to realise additional cash savings in excess of US$1.0 million over the remaining term of the lease;

· each of the Executive Directors have agreed to defer all of their annual base salaries above £200,000 until the earlier of (1) a positive Ombrina Mare arbitration award; or (2) the execution of a farm-out transaction on Sea Lion. Should neither of these events occur then that portion of salary will be permanently lost. This equates to a further 35% reduction for the CEO and a further 20% reduction for the CFO in addition to the permanent 20% reduction in Executive Director base salaries announced in May 2020;

· the Chairman has also agreed to defer 25% of his base fee in addition to a 15% permanent voluntary reduction already taken.

Environmental, Social and Governance

ESG, and Corporate Responsibility more generally, continues to be a key focus for Rockhopper.

As an oil and gas exploration and production business our role is to produce hydrocarbons in a safe and environmentally responsible manner. 

The Company will in 2022 (delayed from 2021 due to the recent decision by Harbour to exit the Sea Lion project) be undertaking a review of its broader ESG framework to ensure it remains appropriate to its business and increasing stakeholder interest in this area.  

Outlook

Sea Lion is a world-class oil field with the scale and potential to create very material value for Rockhopper, its partners and the Falkland Islands as a whole.

Work will continue on a number of fronts over the coming weeks, including: (1) progressing Harbour's orderly exit from the Falklands; (2) advancing plans for an alternative, lower cost, development of Sea Lion; and (3) progressing discussions with Navitas around their potential entry to the project. Given the unique characteristics and challenges of progressing an oil field development in the Falklands, an innovative approach to funding will likely be required.

While we can make no guarantees, our expectation, based on communications from the Tribunal in July, is that the Ombrina Mare arbitration is approaching a conclusion, although precise timing remains unclear.

We thank the Falkland Islands government for its continuing support and will continue to work closely with all stakeholders to maximise the chance of unlocking the value within the project long-awaited by all stakeholders.

Keith Lough  Sam Moody

Chairman  Chief Executive Officer

FINANCIAL REVIEW

Following the sale of the Company's interests in Egypt (completed February 2020), the Group's sole source of revenue is from the production and sale of limited volumes of natural gas in Italy.

For the period ended 30 June 2021, the Group reported revenues of US$0.3 million and loss after tax of US$3.3 million.

CASH MOVEMENTS AND CAPITAL EXPENDITURE

At 30 June 2021, the Group had cash and term deposits of US$7.1 million (31 December 2020: US$11.7 million).

Cash and term deposit movements during the period:

	US$m
Opening cash balance (31 December 2020)	11.7
Revenues	0.3
Cost of sales	(0.6)
Falkland Islands - (relating to post 1 January 2020)	(1.0)
- (relating to pre 1 January 2020)	(1.4)
Greater Mediterranean	(0.0)
Administrative expenses	(1.6)
Miscellaneous	(0.3)
Closing cash balance (30 June 2021)	7.1

Falkland Island spend, relating to the period post 1 January 2020, primarily relates to licence fees and internal costs associated with the Sea Lion development. During H1 2021, the Group received and subsequently paid a significantly larger than expected tax liability of   US$1.4 million   associated with the 2015/16 Falklands drilling campaign. Limited further costs related to the period prior to 1 January 2020 are expected.

Administrative expenses of US$1.6 million include US$0.4 million of corporate and administrative costs directly associated with the Group's legacy interests in Italy.

Miscellaneous includes non-recurring restructuring costs, foreign exchange and movements in working capital during the period.

The previously announced Heads of Terms with Harbour and Navitas expires on 30 September 2021 and as a result Harbour will have an initial 90 days to elect how to proceed with their exit. Rockhopper will continue to be funded (excluding licence fees, taxes and project wind down costs) by Harbour during that period under the terms announced on 7 January 2020 and 30 April 2020.

TAXATION

On 8 April 2015, the Group agreed binding documentation ("Tax Settlement Deed") with FIG in relation to the tax arising from the Group's farm-out to Premier.

The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and is made under Extra Statutory Concession 16.

As a result of the Tax Settlement Deed, the outstanding tax liability was confirmed at   £64.4 million   and is payable on the earlier of: (i) the first royalty payment date on Sea Lion; (ii) the date of which Rockhopper disposes of all or a substantial part of the Group's remaining licence interests in the North Falkland Basin; or (iii) a change of control of Rockhopper.

During the first half of 2017, as a result of the Group receiving the full Exploration Carry from Premier during the 2015/16 drilling campaign, the Falkland Islands Commissioner of Taxation agreed to reduce the tax liability in line with the terms of the Tax Settlement Deed. As such, the tax liability has been revised downwards to   £59.6 million. The outstanding tax liability is classified as non-current and is discounted to a period-end value of   US$41.0 million.

Full details of the provisions and undertakings of the Tax Settlement Deed are disclosed in note 7 of these condensed consolidated interim financial statements and these include "creditor protection" provisions including undertakings not to declare dividends or make distributions while the tax liability remains outstanding (in whole or in part).

As a result of the recently announced decision by Harbour to exit the Sea Lion project, Rockhopper has commenced discussions with FIG as to the impact of such a decision on the Group's deferred tax liability.

LIQUIDITY, COUNTERPARTY RISK AND GOING CONCERN

The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management, with surplus cash held on term deposits with a number of major financial institutions.

At 30 June 2021, the Group had cash resources of   US$7.1 million (unaudited). Following the sale of Rockhopper Egypt Pty Limited in 2020, the Group generates limited revenue and cash flow from the sale of oil or gas.

Historically, the Group's largest annual expenditure has related to pre-sanction costs associated with the Sea Lion development. However, following the announcement by Harbour of its intention to exit the Falklands, the Company will have greater control on the level and timing of future expenditure on the Sea Lion project.

Management has also considered a number of downside scenarios, the most significant being one where decommissioning of certain physical assets (principally the Temporary Dock Facility) in the Falklands is required. The Group would be liable for its 40% share of these costs with no funding support from Harbour and/or Navitas.

Under the base case forecast, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of these consolidated financial statements. However, in the downside scenarios, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements. Potential mitigating actions, some of which are outside the Group's control, could include collection of arbitration award proceeds, deferral of expenditure or raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that the cash balance held provides the Group with adequate headroom over forecasted expenditure for the following 12 months - as a result, the Directors have adopted the going concern basis of accounting in preparing these consolidated financial statements.  

Nonetheless, these conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would be required if the Group and Company were unable to continue as a going concern.

PRINCIPAL RISK AND UNCERTAINTIES

A detailed review of the potential risks and uncertainties which could impact the Company are outlined in the Strategic Report of the Group's 2020 Annual Report. The Company identified its key risks as being:

· oil price volatility; 

· access to capital;

· insufficient funds to meet commitments;

· failure to secure joint venture partners for the Sea Lion project; and

· failure to secure the requisite funding to allow a Sea Lion Final Investment Decision. 

In 2020, the environmental impact of oil and gas extraction (e.g. climate change) was added to the risk register, reflecting the increased focus on ESG issues which could have an adverse impact on investor and lender sentiment towards the Company and the Sea Lion project.

Stewart MacDonald

Chief Financial Officer

 

CONDENSED CONSOLIDATED income statement

for the six months ended 30 June 2021

		Six months	Six months
		Ended	Ended
		30 June	30 June
		2021	2020
		Unaudited	Unaudited
	Notes	$'000	$'000
Revenue	2	347	2,467
Other cost of sales		(571)	(1,283)
Depreciation and impairment of oil and gas assets		(440)	(2,598)
Total cost of sales		(1,011)	(3,881)
Gross loss		(664)	(1,414)
Exploration and evaluation expenses		(131)	(223,635)
Administrative expenses		(1,578)	(2,651)
Charge for share based payments		(637)	(843)
Foreign exchange movement		(262)	2,632
Results from operating activities and other income		(3,272)	(225,911)
Finance income		3	36
Finance expense		(32)	(956)
Loss before tax		(3,301)	(226,831)
Tax	3	-	8
Loss for the period attributable to the equity shareholders of the parent company		(3,301)	(226,823)
Loss per share: cents
Basic	4	(0.72)	(49.81)
Diluted	4	(0.72)	(49.81)

CONDENSED CONSOLIDATED statement of comprehensive income

for the six months ended 30 June 2021

		Six months	Six months
		Ended	Ended
		30 June	30 June
		2021	2020
		Unaudited	Unaudited
	Notes	$'000	$'000
Loss for the period		(3,301)	(226,823)
Exchange differences on translation of foreign operations		394	(28)
TOTAL COMPREHENSIVE Loss FOR THE period		(2,907)	(226,851)

 

CONDENSED CONSOLIDATED balance sheet

as at 30 June 2021

		As at	As at
		30 June	31 December
		2021	2020
		Unaudited	Audited
	Notes	$'000	$'000
NON CURRENT Assets
Exploration and evaluation assets	5	244,907	244,349
Property, plant and equipment	6	784	1,420
Finance lease receivable		381	462
CURRENT Assets
Inventories		300	310
Other receivables		1,934	2,464
Finance lease receivable		190	187
Restricted cash		489	486
Cash and cash equivalents		7,093	11,680
Total assets		256,078	261,358
CURRENT Liabilities
Other payables		1,437	3,790
Lease liability		570	567
NON-CURRENT Liabilities
Lease liability		856	1,273
Tax payable	7	40,973	40,703
Provisions		14,650	15,158
Deferred tax liability		39,295	39,300
Total liabilities		97,781	100,791
Equity
Share capital		7,218	7,218
Share premium		3,622	3,622
Share based remuneration		4,349	5,973
Owns shares held in trust		(3,342)	(3,342)
Merger reserve		74,332	74,332
Foreign currency translation reserve		(10,177)	(10,571)
Special reserve		188,028	188,028
Retained losses		(105,733)	(104,693)
Attributable to the equity shareholders of the company		158,297	160,567
Total liabilities and equity		256,078	261,358

These condensed consolidated interim financial statements were approved by the directors and authorised for issue on 30 September 2021 and are signed on their behalf by:

Stewart MacDonald

Chief Financial Officer

 CONDENSED CONSOLIDATED statement of changes in equity

for the six months ended 30 June 2021

				Own		Foreign
				shares		Currency
	Share	Share	Share based	held	Merger	Translation	Special	Retained	Total
	capital	premium	remuneration	in trust	Reserve	Reserve	reserve	losses	Equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 31 December 2019 (audited)	7,212	3,547	4,871	(3,371)	74,332	(9,678)	433,766	(114,565)	396,114
Total comprehensive expense for the period	-	-	-	-	-	(28)	-	(226,823)	(226,851)
Other transfers	-	-	(835)		-	-	-	835	-
Share based payments	-	-	843	-	-	-	-	-	843
Share issues in relation to SIP	6	75	96	29	-	-	-	-	206
Balance at 30 June 2020 (unaudited)	7,218	3,622	4,975	(3,342)	74,332	(9,706)	433,766	(340,553)	170,312
Total comprehensive expense for the period	-	-	-	-	-	(865)	-	(9,681)	(10,546)
Other transfers	-	-	97	100	-	-	(245,738)	245,541	-
Share based payments	-	-	997	-	-	-	-	-	998
Share issues in relation to SIP	-	-	(96)	(100)	-	-	-	-	(196)
Balance at 31 December 2020 (audited)	7,218	3,622	5,973	(3,342)	74,332	(10,571)	188,028	(104,693)	160,567
Total comprehensive expense for the period	-	-	-	-	-	394	-	(3,301)	(2,907)
Other transfers	-	-	(2,261)		-	-	-	2,261	-
Share based payments	-	-	637	-	-	-	-	-	637
Balance at 30 June 2021 (unaudited)	7,218	3,622	4,349	(3,342)	74,332	(10,177)	188,028	(105,733)	158,297

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2021

		Six months	Six months
		Ended	Ended
		30 June	30 June
		2021	2020
		Unaudited	Unaudited
	Notes	$'000	$'000
Cash flows from operating activities
Net loss before tax		(3,301)	(226,831)
Adjustments to reconcile net losses to cash:
Depreciation		654	1,013
Share based payment charge		637	843
Impairment of oil and gas assets	6	-	1,789
Impairment of exploration and evaluation assets	5	-	223,003
Loss on disposal of property, plant and equipment		-	-
Finance expense		31	956
Finance income		(1)	(36)
Foreign exchange		208	(2,450)
Operating cash flows before movements in working capital		(1,772)	(1,713)
Changes in:
Inventories		-	67
Other receivables		682	1,319
Payables		(728)	(677)
Movement on other provisions		3	3
Cash utilised by operating activities		(1,815)	(1,001)
Cash Flows from investing activities
Capitalised expenditure on exploration and evaluation assets		(2,395)	(9,388)
Purchase of property, plant and equipment		(24)	(653)
Net proceeds from disposal of assets held for sale		-	8,421
Interest		1	44
Investing cash flows before movements in capital balances		(2,418)	(1,576)
Cash flow from investing activities		(2,418)	(1,576)
Cash flows from financing activities
Share incentive plan		-	12
Lease liability payments		(327)	(119)
Finance paid		(3)	(3)
Cash flow from financing activities		(330)	(110)
Currency translation differences relating to cash and cash equivalents		(24)	9
Net cash outflow		(4,563)	(2,687)
Cash and cash equivalents brought forward		11,680	17,223
Cash and cash equivalents carried forward		7,093	14,545

 

Notes to the condensed CONSOLIDATED group financial statements

for the six months ended 30 June 2021

1 Accounting policies

1.1 Group and its operations

Rockhopper Exploration plc ('the Company'), a public limited company quoted on AIM, incorporated and domiciled in the United Kingdom ('UK'), together with its subsidiaries (collectively, 'the Group') holds interests in the Falkland Islands and the Greater Mediterranean. The Company's registered office address is Warner House, 123 Castle Street, Salisbury, SP1 3TB.

1.2 Statement of compliance and basis of preparation

These condensed consolidated interim financial statements of the Group, as at and for the six months ended 30 June 2021, include the results of the Company and all subsidiaries over which the Company exercises control.

The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial The accounting policies applied in the preparation of the condensed consolidated interim financial statements are consistent with the policies applied by the Group in the consolidated financial statements as at and for the year ended 31 December 2020. They do not include all information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Company and all its subsidiaries as at the year ended 31 December 2020.

The comparative figures for the year ended 31 December 2020 are not the Group's statutory accounts for that financial period. Those accounts have been reported on by the Group's auditor and delivered to the registrar of companies. The report of the auditor was: (i) unqualified and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

A number of amended standards became applicable for the current reporting period. The group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards.

The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2020.

The condensed consolidated interim financial statements were approved by the Board on 30 September 2021.

All values are rounded to the nearest thousand dollars ($'000) or thousand pounds (£'000), except when otherwise indicated.

1.3 Going concern

The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management, with surplus cash held on term deposits with a number of major financial institutions.

At 30 June 2021, the Group had cash resources of US$7.1 million (unaudited). Following the sale of Rockhopper Egypt Pty Limited in 2020, the Group generates limited revenue and cash flow from the sale of oil or gas.

Historically, the Group's largest annual expenditure has related to pre-sanction costs associated with the Sea Lion development. However, following the announcement by Harbour of its intention to exit the Falklands, the Company will have greater control on the level and timing of future expenditure on the Sea Lion project.

Management has also considered a number of downside scenarios, the most significant being one where decommissioning of certain physical assets (principally the Temporary Dock Facility) in the Falklands is required. The Group would be liable for its 40% share of these costs with no funding support from Harbour and/or Navitas.

Under the base case forecast, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of these consolidated financial statements. However, in the downside scenarios, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements. Potential mitigating actions, some of which are outside the Group's control, could include collection of arbitration award proceeds, deferral of expenditure or raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that the cash balance held provides the Group with adequate headroom over forecasted expenditure for the following 12 months - as a result, the Directors have adopted the going concern basis of accounting in preparing these consolidated financial statements. 

Nonetheless, these conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would be required if the Group and Company were unable to continue as a going concern.

1.4 Period end exchange rates

The period end rates of exchange actually used were:

	30 June 2021	30 June 2020	31 December 2020
£ : US$	1.38	1.31	1.36
€ : US$	1.19	1.12	1.23

2 Revenue and segmental information

Six months ended 30 June 2021 (unaudited)

	Falkland	Greater
	Islands	Mediterranean	Corporate	Total
	$'000	$'000	$'000	$'000
Revenue	-	347	-	347
Cost of sales	-	(1,011)	-	(1,011)
Gross profit/(loss)	-	(664)	-	(664)
Exploration and evaluation expenses	-	(4)	(127)	(131)
Administrative expenses	-	(412)	(1,166)	(1,578)
Charge for share based payments	-	-	(637)	(637)
Foreign exchange movement	(270)	-	8	(262)
Results from operating activities and other income	(270)	(1,080)	(1,922)	(3,272)
Finance income	-	1	2	3
Finance expense	-	(3)	(29)	(32)
Loss before tax	(270)	(1,082)	(1,949)	(3,301)
Tax	-	-	-	-
Loss for period	(270)	(1,082)	(1,949)	(3,301)
Reporting segments assets	244,213	3,120	8,745	256,078
Reporting segments liabilities	(80,110)	(15,235)	(2,436)	(97,781)

There are no material additions to segment assets.

Six months ended 30 June 2020 (unaudited)

	Falkland	Greater
	Islands	Mediterranean	Corporate	Total
	$'000	$'000	$'000	$'000
Revenue	-	2,467	-	2,467
Cost of sales	-	(3,881)	-	(3,881)
Gross profit/(loss)	-	(1,414)	-	(1,414)
Exploration and evaluation expenses	(222,228)	(812)	(595)	(223,635)
Administrative expenses	-	(514)	(2,137)	(2,651)
Charge for share based payments	-	-	(843)	(843)
Foreign exchange movement	2,523	78	31	2,632
Results from operating activities and other income	(219,705)	(2,662)	(3,544)	(225,911)
Finance income	-	-	36	36
Finance expense	-	(30)	(926)	(956)
Loss before tax	(219,705)	(2,692)	(4,434)	(226,831)
Tax	-	8	-	8
Loss for period	(219,705)	(2,684)	(4,434)	(226,823)
Reporting segments assets	242,856	6,509	20,237	269,602
Reporting segments liabilities	(76,370)	(14,401)	(8,519)	(99,290)

There are no material additions to segment assets.

All of the Group's worldwide sales revenues of oil and gas $347 thousand (2020: 2,467 thousand) arose from contracts to customers. Total revenue relates to revenue from one customer (2020: two customers each exceeding 10 per cent of the Group's consolidated revenue).

3 Taxation

	Six months	Six months
	ended	ended
	30 June	30 June
	2021	2020
	$'000	$'000
	Unaudited	Unaudited
Current tax:
Overseas tax	-	-
Adjustment in respect of prior periods	-	8
Total current tax	-	8
Deferred tax:
Overseas tax	-	-
Total deferred tax	-	-
Tax on ordinary activities	-	8

4 Basic and diluted loss per share

	Six months	Six months
	ended	ended
	30 June	30 June
	2021	2020
	Number	Number
	Unaudited	Unaudited
Shares in issue brought forward	458,482,117	457,979,755
Shares issued
- Issued under the SIP	-	502,362
Shares in issue carried forward	458,482,117	458,482,120
Weighted average number of Ordinary Shares for the purpose of earnings per share	455,351,117	455,405,626
$'000	$'000	$'000
Net loss after tax for purposes of basic and diluted earnings per share	(3,301)	(226,823)
Earnings per share - cents
Basic	(0.72)	(49.81)
Diluted	(0.72)	(49.81)

The weighted average number of Ordinary Shares takes into account those shares which are treated as own shares held in trust. As the Group is reporting a loss in each period in accordance with IAS33 the share options are not considered dilutive because the exercise of the share options would have the effect of reducing the loss per share.

At the period end the Group had the following unexercised options and share appreciation rights in issue.

		Six months
		ended
		30 June
		2021
		Number
		Unaudited
Long term incentive plan		11,032,536
Share appreciation rights		611,919
Share options		32,194,588

5 Intangible exploration and evaluation assets

During the period there have not been any material additions. The balance carried forward is predominantly in relation to the Sea Lion project.

At 30 June 2021, the Group reviewed its intangible exploration/appraisal assets for indicators of impairment, with no indicators of impairment being identified. No impairment tests were therefore performed.

6 Property, plant and equipment

During the period there have not been any material additions. The movement in the period mainly relates to depreciation.

7 Tax payable

		Six months ended	Year ended
		30 June	31 December
		2021	2020
		$'000	$'000
		Unaudited	Audited
Current tax payable		-	-
Non current tax payable		40,973	40,703
		40,973	40,703

On the 8 April 2015, the Group agreed binding documentation ("Tax Settlement Deed") with the Falkland Island Government ("FIG") in relation to the tax arising from the Group's farm out to Premier Oil plc ("Premier").

The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and is made under Extra Statutory Concession 16. The Outstanding Tax Liability is intended to be binding and final except, subject to the satisfaction of the Falkland Islands' Commissioner of Taxation, Rockhopper shall be entitled to make an adjustment to the Outstanding Tax Liability if any part of the Development Carry from Premier becomes "irrecoverable".

The Outstanding Tax Liability is payable on the earlier of:

· First royalty payment date, which is expected to occur within six months of the date of first oil;

· The date on which Rockhopper disposes of all or a substantial part of the Company's remaining interest in the Licences, or otherwise realises value from the Licences;

· A change of control of Rockhopper Exploration plc.

As security the Group has provided fixed and floating security over all assets (with limited carve outs where this would conflict with applicable law or existing terms). While such security is in place, restrictions, subject to conventional carve outs, exist on granting further security. The Group also agreed to maintain a minimum 20% interest in licence PL032 and not to make dividends or distributions.

The outstanding tax liability is £59.6 million and is expected to be payable on the first royalty payment date on Sea Lion. Currently the first royalty payment date is anticipated to occur within six months of first oil production which itself is estimated to occur three and a half years after project sanction. As such the tax liability has been discounted at 15% to a US$ equivalent amount of US$41.0 million.

No deferred tax asset has been recognised in respect of temporary differences arising on losses carried forward, outstanding share options or depreciation in excess of capital allowances due to the uncertainty in the timing of profits and hence future utilisation.

8 Post balance sheet events

On the 23 September 2021 Harbour announced that Sea Lion did not fit its strategy and therefore that it will not proceed with the project.

The previously announced Heads of Terms with Harbour and Navitas expires on 30 September 2021 and as a result Harbour will have an initial 90 days to elect how to proceed with their exit. Rockhopper will continue to be funded (excluding licence fees, taxes and project wind down costs) by Harbour during that period under the terms announced on 7 January 2020 and 30 April 2020.

Rockhopper is in discussions with Navitas around its potential entry to the Sea Lion project following Harbour's decision not to proceed. Rockhopper has also commenced discussions with Harbour and the Falkland Islands Government ("FIG") to ensure an orderly exit by Harbour from the Falkland Islands.

 

END

 

 

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