Interim Results to 30 Sep 200
Press Release
For Immediate Release: 18 November 2008
Rockhopper Exploration ('Rockhopper' or the 'Company')
Interim results for the six months ended 30 September 2008
Rockhopper Exploration plc (AIM:RKH), the North Falkland Basin oil and gas exploration company, today announces its interim results for the six months ended 30 September 2008.
Estimated Prospective Resources Update:
-
Increased estimates from 1.2 billion barrels recoverable on an unrisked basis to 1.8 billion barrels recoverable in licences PL032 and PL033
-
Overall potential increased to 4.3 billion barrels recoverable oil plus multi Tcf Gas
Operational highlights:
-
Seismic anomaly over the Sea Lion Fan strongly suggestive of oil within the system
-
Benthic sampling completed over licences PL023 and PL024
-
Work on Shell well 14/5-1A confirms significant gas shows
-
New low risk gas prospect identified with proven gas with potential to contain multi-Tcf reserves
-
Farm out discussions continue
-
Signs of easing in rig rates and availability
Financial highlights:
-
Placing of new shares in May 2008 raised £3.6m
-
Total cash and deposit balances at period end of £4.8m
Commenting on the period under review, Executive Chairman, Dr. Pierre Jungels said:
'We now have in our portfolio prospects with total estimated unrisked recoverable prospective resources of 4.3 billion barrels of oil and multi Tcf of gas which, subject to rig availability, financing and all relevant consents, are ready to drill. We have met with a number of companies as part of our ongoing farm-out programme and we continue to keep all options open with regard to funding our drilling commitments. We are currently in discussion with a number of rig contractors regarding securing a suitable drilling vessel and from these discussions have noted an easing in both rates and availability of drilling units in recent months.'
For further information, please contact:
|
Rockhopper Exploration plc |
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Sam Moody - Managing Director |
01722 414 419 |
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Aquila Financial Ltd |
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Peter Reilly |
0118 979 4100 |
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Teathers- Corporate Finance |
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Tom Hulme |
020 7426 9000 |
Rockhopper confirms that in accordance with AIM Rule 17, the Company's nominated adviser and broker is Teathers, a division of Straumur-Burdaras Investment Bank hf., of Berkeley Square House, Third Floor, Berkeley Square, London W1J 6BU.
Each statement about the Company's prospective resources has been approved by David Bodecott (Exploration Director), who is a Member of Petroleum Exploration Society of Great Britain (PESGB) and the American Association of Petroleum Geologists (AAPG) with over 30 years of experience in petroleum exploration and management, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects.
Notes to editors
www.rockhopperexploration.co.uk
The Rockhopper Group started trading in February 2004 to invest in and carry out an offshore oil exploration programme to the north of the Falkland Islands. The Group, floated on AIM in August 2005, is currently the largest licence holder in the North Falkland Basin and has a 100 per cent. interest in four offshore production licences which cover approximately 3,800 sq. km. These licences have been granted by the Falkland Islands government.
Chairman's statement
I write to you during a period of unprecedented global market turmoil which has seen share prices all over the world suffer significant falls. Notwithstanding these market conditions, we continue to move your Company forward towards realising the value of our underlying assets.
Falling commodity prices do not necessarily impact our fundamental business case, as previous work indicates that a discovery on Rockhopper acreage could be economic at an oil price as low as $25 per barrel. Indeed, in our view, a period of lower oil prices would be likely to feed through into lower service sector costs, leading to lower rig rates and enhanced availability. All of which could actually prove to be of benefit to companies in the exploration phase. To this end, we are currently in discussion with a number of rig contractors about securing a suitable drilling vessel and from these discussions we are already observing indications of an easing in both rates and availability of drilling units.
During the six months ending 30 September 2008 we have refined our interpretation of the 3D seismic collected over licences PL032 and PL033. The resultant new mapping has resulted in three significant developments:
Firstly, an increase in our estimate for the prospect sizes in those licences from 1.2 billion barrels recoverable on an unrisked basis to 1.8 billion barrels recoverable.
Secondly, analysis has revealed an Amplitude vs. Offset anomaly (AVO), which is a type of Direct Hydrocarbon Indicator (DHI), over the Sea Lion Fan. This AVO anomaly is consistent with the presence of oil within the target. In addition to the discovery of the AVO anomaly over Sea Lion, the P50 size of the target has been increased from 130m to 230m barrels recoverable.
Thirdly, re-analysis of the gas shows in Shell well 14/5-1A has confirmed that a significant quantity of gas was encountered. A new prospect, the Johnson Prospect, has been mapped in the area. The gas shows in the Shell well demonstrate that the area has proven gas and the potential to contain multiple Trillion cubic feet (Tcf) of gas reserves. Rockhopper acreage is the only acreage in the North Falkland Basin with wells that have recovered both oil and gas.
We also collected new benthic samples used to assess the environmental conditions of organisms living on or just beneath the seafloor. These samples will allow us to submit our Environmental Impact Assessment before drilling. Analysis of the Weddell 2D seismic is not yet completed.
Finally, in August of this year Arcadia Petroleum Limited, a major crude oil trading firm, farmed into certain of Desire Petroleum's North Falkland Basin licences. Part of the Arcadia farm in is to part of licence PL003 where Rockhopper has a 7.5% interest. We welcome Arcadia to the Basin and are working closely with both Arcadia and Desire in the planning of a drilling campaign of at least six wells, four of which Rockhopper currently expects to participate in. At present, our most likely drilling targets are Sea Lion and Ernest. In addition, we are likely to participate in two wells in our farm in with Desire.
Our total cash and deposit balances were £4.8m at the period end. We operate a conservative treasury policy and our cash balances have not been affected by the recent turmoil in global financial markets.
We now have in our portfolio a series of prospects with total estimates unrisked prospective resources of 4.3 billion barrels of oil and multiple Tcf of gas which, subject to rig availability, financing and all relevant consents, are ready to drill. In this regard we have met with a number of companies as part of our ongoing farm-out programme and notwithstanding current difficult global market conditions we continue to keep all options open with regard to funding our drilling commitments.
Dr Pierre Jungels
Chairman
Finance Director's Review
Financial review for the first half of the financial year
The group has incurred a loss for the six month period to 30 September 2008 of $1,183k ($725k: 2007) which equates to a loss per share of 1.50 cents (0.96 cents: 2007). The loss has increased over the comparative period primarily as a function of an increase in administrative expenses and the charge for share based remuneration.
Administrative expenses rose by $302k from $761k to $1,063k. $133k of the increase was down to salary costs, particularly the increased bonus payment for the twelve months to 30 April. Most of the balance was due to the greater levels of farm out activity significantly contributing to rises in travel costs of $63k, professional fees of $80k and printing and marketing of $18k.
The share based expense of $469k compares to $117k for the previous period. The increased charge reflects the recognition of all the remaining cost of the third tranche of options that all vested on 15 August 2008.
Finance income for the period increased to $195k ($160k: 2007) due to the greater level of funds on deposit following the placing in May. However, the yield on the average cash balances of $7,830k ($5,547k: 2007) actually fell from 5.8% to 4.6% as a result of falls in the base rate and the federal reserve rate and also the lower returns available from better security.
Group net assets have increased by $6,077k since the year ended 31 March 2008 mainly due to the equity placing in May 2008 that raised $7,226k after expenses.
Financial outlook for the second half of the financial year
The unprecedented rate at which the US$ has strengthened relative to GB£, from 2.00:1 at 31 March 2008 to 1.82:1 at 30 September 2008 to below 1.50:1 since the period end, will increase the GB£ cost of any US$ expenditure relative to the current period.
The base rate in the UK and the federal fund rate in the USA both fell during the six months ended 30 September 2008 and the recent concerns as to the strength of both economies has seen rates cut since the period end, with further near term cuts possible in both the UK and USA. Cuts in either rate will reduce the group's future investment income. In anticipation of falling rates $7,280k of the group's cash was placed on fixed deposit prior to the period end, at up to 5.6%, to mitigate the immediate effect of rate cuts. However, all deposits mature before the coming year end as liquidity remains the key group priority and so if rates do continue to fall they will have an effect once the fixed deposits expire.
Overheads are expected to remain stable for the second half of the year and should be notably less than the first half year as the entire charge of $197k for the annual bonuses is taken in the first six months. Possible areas of increased expenditure would be travel costs and professional fees due to continued work on a possible farm out.
Unless the underlying assumptions change, the charge for share based remuneration will fall significantly as all but one of the three tranches of options have now been fully expensed.
Total cash and deposit balances were £4,762k, or $8,667k at period end exchange rates. This total includes financial assets of $3,640 which represents fixed deposits of greater than three months. Of the total cash balances, $747k was held in US$ and so should insulate the group for a time against the strengthening of the US$. Cash requirements from committed exploration expenditure over the coming six months are expected to be modest with the emphasis on interpretation of the 3D data acquired during the year ended 31 March 2007.
Risk review
The risks and uncertainties facing the group are covered in note 4.
Key performance indicators ('KPI's')
As discussed within the annual report for the year ended 31 March 2008, the highly focussed nature of the group means that standard key performance indicators are not relevant and management instead has concentrated on protecting the group's licences and achieving the commitments they require. Work on these areas continues to comply with, or exceeds, the license requirements of our assets.
Peter Dixon-Clarke ACA
Finance Director
Consolidated income statement - unaudited
for the period ended 30 September 2008
|
|
|
6 months ended 30 September 2008 |
6 months ended 30 September 2007 |
Year ended 31 March 2008 |
|
|
|
Unaudited |
Unaudited |
Audited |
|
|
Notes |
$'000 |
$'000 |
$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Administrative expenses |
|
(1,063) |
(761) |
(1,487) |
|
Charge for share based remuneration |
|
(469) |
(117) |
(235) |
|
Foreign exchange movement |
|
154 |
(7) |
(17) |
|
Total expenses |
|
(1,378) |
(885) |
(1,739) |
|
Finance income |
|
195 |
160 |
267 |
|
Loss before tax |
|
(1,183) |
(725) |
(1,472) |
|
|
|
|
|
|
|
Income tax expense |
|
- |
- |
- |
|
|
|
|
|
|
|
Net loss for the period/year attributable to equity holders of the parent company |
|
(1,183) |
(725) |
(1,472) |
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
basic and diluted - cents |
3 |
(1.50) |
(0.96) |
(1.95) |
|
|
|
|
|
|
|
Weighted average number of shares: basic and diluted |
|
79,055,577 |
75,663,490 |
75,679,199 |
|
|
|
|
|
|
The results for the period relate wholly to continuing operations.
Consolidated balance sheet - unaudited
as at 30 September 2008
|
|
As at 30 September 2008 |
As at 30 September 2007 |
As at 31 March 2008 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
$'000 |
$'000 |
$'000 |
|
Assets |
|
|
|
|
Capitalised exploration expenditure |
26,596 |
25,442 |
25,942 |
|
Property and equipment |
21 |
13 |
6 |
|
Other receivables Financial assets |
245 3,640 |
19 - |
35 - |
|
Cash and cash equivalents |
5,027 |
4,897 |
3,525 |
|
|
|
|
|
|
Assets |
35,529 |
30,371 |
29,508 |
|
|
|
|
|
|
|
|
|
|
|
Other payables |
991 |
868 |
1,047 |
|
|
|
|
|
|
Liabilities |
991 |
868 |
1,047 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
1,414 |
1,325 |
1,330 |
|
Share premium |
36,139 |
28,403 |
28,597 |
|
Currency translation reserve |
426 |
4,418 |
4,087 |
|
Share based remuneration reserve |
1,682 |
1,267 |
1,371 |
|
Merger reserve |
(243) |
(243) |
(243) |
|
Retained losses |
(4,880) |
(5,667) |
(6,681) |
|
Attributable to equity shareholders of the company |
34,538 |
29,503 |
28,461 |
|
|
|
|
|
|
Total liabilities and equity |
35,529 |
30,371 |
29,508 |
|
|
|
|
|
These interim results were approved by the directors and authorised for issue on 17 November 2008 and are signed on their behalf by:
Samuel Moody Peter Dixon-Clarke ACA
Managing Director Finance Director
Consolidated statement of changes in equity - unaudited
for the period ended 30 September 2008
|
|
6 months ended 30 September 2008 |
6 months ended 30 September 2007 |
Year ended 31 March 2008 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
$'000 |
$'000 |
$'000 |
|
Share capital |
|
|
|
|
Opening balance |
1,330 |
1,325 |
1,325 |
|
Options exercised |
9 |
- |
5 |
|
New shares issued |
75 |
- |
- |
|
Closing balance |
1,414 |
1,325 |
1,330 |
|
|
|
|
|
|
Share premium |
|
|
|
|
Opening balance |
28,597 |
28,403 |
28,403 |
|
Premium on options exercised |
391 |
- |
194 |
|
Premium on new shares issued |
7,484 |
- |
- |
|
Issues costs |
(333) |
- |
- |
|
Closing balance |
36,139 |
28,403 |
28,597 |
|
|
|
|
|
|
Currency translation reserve |
|
|
|
|
Opening balance |
4,087 |
3,413 |
3,413 |
|
Movement on share capital |
(144) |
(45) |
(30) |
|
Movement on share premium |
(3,542) |
969 |
649 |
|
Movement on merger reserve |
25 |
(9) |
(5) |
|
Closing balance |
426 |
4,418 |
4,087 |
|
|
|
|
|
|
Share based remuneration reserve |
|
|
|
|
Opening balance |
1,371 |
1,115 |
1,115 |
|
Charge for the period/year |
469 |
117 |
235 |
|
Currency translation difference |
(158) |
35 |
21 |
|
Closing balance |
1,682 |
1,267 |
1,371 |
|
|
|
|
|
|
Merger reserve |
|
|
|
|
Opening and closing balance |
(243) |
(243) |
(243) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained losses |
|
|
|
|
Opening balance |
(6,681) |
(4,609) |
(4,609) |
|
Net income and expense recognised in the income statement |
(1,183) |
(725) |
(1,472) |
|
Net income and expense recognised directly in equity |
2,761 |
- |
(614) |
|
Currency translation difference |
223 |
(333) |
14 |
|
Closing balance |
(4,880) |
(5,667) |
(6,681) |
|
|
|
|
|
|
Equity |
34,538 |
29,503 |
28,461 |
|
|
|
|
|
The total of income and expense items recognised directly in equity is $(835)k: (2007:$(707)k and $95k for the year ended 31 March 2008). Consolidated cash flow statement - unaudited
for the period ended 30 September 2008
|
|
6 months ended 30 September 2008 |
6 months ended 30 September 2007 |
Year ended 31 March 2008 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
$'000 |
$'000 |
$'000 |
|
Cash flows from operating activities |
|
|
|
|
Net (loss) before tax |
(1,183) |
(725) |
(1,472) |
|
Adjustments to reconcile net losses to cash (Utilised) |
|
|
|
|
Depreciation |
3 |
7 |
14 |
|
Share based remuneration charge |
469 |
117 |
235 |
|
Foreign exchange movement |
(154) |
7 |
17 |
|
Other non cash items Changes in: |
(681) |
101 |
355 |
|
Receivables |
(210) |
55 |
39 |
|
Trade payables |
(187) |
(201) |
(507) |
|
Cash (utilised) by operating activities |
(1,943) |
(639) |
(1,319) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Capitalised exploration expenditure |
(538) |
(801) |
(1,692) |
|
Purchase of equipment Financial assets |
(3) (3,640) |
(4) - |
(4) - |
|
Cash flows (utilised) for investing activities |
(4,181) |
(805) |
(1,696) |
|
|
|
|
|
|
Cash inflow from financing activities |
|
|
|
|
Options exercised |
400 |
- |
199 |
|
Issue of share capital |
7,599 |
- |
- |
|
Share issue costs |
(333) |
- |
- |
|
Cash inflow from financing activities |
7,626 |
- |
199 |
|
Net cash inflow/(outflow) |
1,502 |
(1,444) |
(2,816) |
|
|
|
|
|
|
Cash and cash equivalents brought forward |
3,525 |
6,341 |
6,341 |
|
|
|
|
|
|
Cash and cash equivalents carried forward |
5,027 |
4,897 |
3,525 |
|
|
|
|
|
Notes to the consolidated interim results - unaudited
1 Accounting policies
1.1 Group and its operations
Rockhopper Exploration plc ('the company'), a public limited company incorporated and domiciled in the United Kingdom ('UK'), together with its subsidiaries (collectively, 'the group') holds certain licences granted in 2004 and 2005 for the evaluation, exploration and exploitation of oil and gas in the North Falkland Basin. The registered office of the Company is Hilltop Park, Devizes Road, Salisbury, SP3 4UF.
1.2 Basis of preparation
The interim report is reviewed but not audited and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The figures for the year ended 31 March 2008 included in the interim report have been extracted from the financial statements for the year ended 31 March 2008 The financial statements for the year ended 31 March 2008 have been reported on by the company's auditor and have been delivered to the registrar of companies. The auditor's report on the financial statements for the year ended 31 March 2008 was unqualified and did not contain reference to any matter to which the auditor drew attention by way of emphasis and did not contain any statement under section 237(2) or (3) of the Companies Act 1985.
This interim report is not required to be prepared in accordance with IAS 34: Interim financial reporting and therefore does not comply with IFRS. The annual financial statements of the company are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union.
Items included in the interim report of each of the group's entities are measured in the currency of the primary economic environment in which that entity operates (the 'functional currency'). The consolidated interim report is stated in US$. The functional and presentation currency of the subsidiaries, where the licences are held, is US$ whilst the functional currency of the holding company is GB£. All values are rounded to the nearest thousand dollars ($'000), and stated as 'k', except when otherwise indicated. The interim report has been prepared in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union, and AIM rules for Companies.
At the date of authorisation of this interim report, the following standards, which have not been applied in this interim report were in issue but not yet effective.
IFRS 8 - Operating segments
IFRIC 12 - Service concession arrangements
IFRIC 13 - Customer loyalty programmes
IFRIC 14 - Defined benefit pension assets and their minimum funding requirements
IFRIC 15 - Agreements for the construction of real estate
IFRIC 16 - Hedges of net investment in a foreign operation
IAS 23 - Amendment: Borrowing costs
IAS 1 - Amendment: Presentation of financial statements
IAS 3 - Amendment: Business combinations
IAS 27 - Amendment: Consolidated and separate financial statements
Management does not believe that the application of these standards, where applicable, will have an impact on the financial statements, except for the requirement of additional disclosures.
1.3 Significant accounting policies
(a) Basis of accounting
The group has identified the accounting policies that are most significant to its business operations and the understanding of its results. These accounting policies are those which involve the most complex or subjective decisions or assessments, and relate to the capitalisation of exploration expenditure. The determination of this is fundamental to the financial results and position and requires
management to make a complex judgment based on information and data that may change in future periods.
Since these policies involve the use of assumptions and subjective judgments as to future events and are subject to change, the use of different assumptions or data could produce materially different results.
The measurement basis that has been applied in preparing the interim results is historical cost with the exception of financial assets which are held at fair value.
The significant accounting policies adopted in the preparation of the interim results are set out below.
(b) Basis of consolidation
These consolidated interim results include the accounts of the company and all of its subsidiaries. Subsidiaries are those entities in which the company has the power to exercise control over financial and operating policies in order to gain economic benefits. Subsidiaries are consolidated from the date on which effective control was transferred to the group and are excluded from consolidation from the date of disposal or when control no longer exists over financial and operating policies.
The reversal of an existing trading group into a shell company, such as Rockhopper Exploration plc's acquisition of Rockhopper Resources Ltd, does not fall within the scope of IFRS 3 Business Combinations since the acquirer is not a business per the definition used in that Standard. IFRS contain specific guidance to be followed where a transaction falls outside the scope of IFRS. This guidance is included at paragraphs 10 to 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The Directors may consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted that the United Kingdom Accounting Standards Board (ASB) has issued Financial Reporting Standard 6 'Acquisitions and Mergers' which deals with those business combinations that are not, in substance, the acquisition of one entity by another.
The financial statements consolidate the results, cash flows and assets and liabilities of the company and its wholly owned subsidiary undertakings by the method of merger accounting.
On consolidation the difference between the nominal value of the shares issued with the nominal value of the shares received has been debited to a merger reserve.
All inter-company accounts and transactions have been eliminated on consolidation.
(c) Segmental reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. The group considers itself to have a single purpose, the evaluation, exploration and exploitation of its licenses, and therefore, taking into account that all exploration activity takes place in the North Falkland Basin, concludes that it has only one segment.
(d) Capitalised exploration expenditure
Exploration assets are measured at cost and all costs relating to the exploration for and development of oil and gas interests, whether productive or not, are accumulated and capitalised as capitalised exploration expenditure. These costs, which are initially classified as capitalised exploration expenditure, are only carried forward to the extent that they are expected to be recouped through the successful development of an area or where activities in an area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.
Costs dealt with in this way include seismic data, licence costs, technical work, exploration and appraisal drilling, general technical support, finance costs and a proportion of directly attributable administrative and overhead costs.
Costs are transferred to depreciable pools within capitalised exploration expenditure in each regional cost pool upon declaration of commerciality or upon cessation of exploration on each license and amortised over the life of the area according to the rate of depletion of the economically recoverable costs. Any proceeds arising from the sale or farm-out of assets are deducted from the relevant cost pool.
Depreciation and depletion of costs in depreciable pools is provided under the unit of production method which uses the estimated commercial reserves in the cost pool and the sum of the total costs in the pool and any further anticipated costs to develop such reserves.
At the end of each year, an assessment is made as to whether the economic value of interests is in excess of costs capitalised as capitalised exploration expenditure. Any impairment is transferred to depreciable regional cost pools within tangible fixed assets and depreciated. Where a project is terminated, which is ascertained on a country basis, the related exploration costs are written
off immediately.
For the period under review, based on the results of recent surveys and the estimates of potential oil recoverable, the directors have concluded that there is no impairment.
(e) Foreign currency translation
Functional and presentation currency:
Items included in the interim results of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates, the functional currency. The consolidated interim results are presented in US$ as this best reflects the economic environment of the oil exploration sector in which the group operates. The functional currency of the group's
subsidiaries, where the licenses are held, is also US$ but for the company itself it is GB£ as that is the currency in which the company raises capital to finance the group operations.
Transactions and balances:
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Group companies:
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
- income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
- all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
The period end rates of exchange actually used were:
|
|
30 September 2008 |
30 September 2007 |
31 March 2008 |
31 March 2007 |
|
GB£:US$ |
1.82 |
2.02 |
2.00 |
1.96 |
(f) Investment income
Investment income consists of interest receivable for the period. Interest income is recognised as it accrues, taking into account the effective yield on the investment.
(g) Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group has become a party to the contractual provisions of the instrument.
I Other receivables
Other receivables are classified as loans and receivables and are initially recognised at fair value. They are subsequently measured at their amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made where there is objective evidence that amounts will not be recovered in accordance with original terms of the agreement. A provision for
impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.
II Financial assets
Financial assets comprise fixed-term deposits held by the group with maturities of more than three months but less than twelve months.
III Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at bank and other short-term deposits held by the group with maturities of less than three months.
IV Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
V Trade payables
Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
VI Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
(h) Income taxes and deferred taxation
The current tax expense is based on the taxable profits for the period, after any adjustments in respect of prior years. Tax, including tax relief for losses if applicable, is allocated over profits before tax and amounts charged or credited to reserves as appropriate.
Deferred taxation is recognised in respect of all taxable temporary differences that have originated but not reversed at the balance sheet date where transaction or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the exception that deferred tax assets are recognised only to the extent that the directors consider that
it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
(i) Share based remuneration
The group has two schemes that have each granted options over the ordinary shares of the company, being an employee share option scheme ('ESOS') and a non-employee share option scheme ('NESOS').
Both schemes were created after 7 November 2002 and the group accounts for their cost until such time as they are fully vested in line with IFRS 2: Share based payments. Under the method set out in this standard, the cost of providing for such schemes is based on the fair value of the options at the date of grant. The cost is charged to the income statement over the expected vesting period of the
options and credited to a share based payment reserve.
When new shares are issued, the proceeds, net of any transaction costs, are credited to share capital at nominal value and the balance to share premium. The related amount in the share based payment reserve is then credited to retained earnings.
(j) Property and equipment
Equipment is intially recorded at cost then depreciation is calculated on the straight line method to write down the cost of the asset to their residual values over their estimated useful lives as follows:
Computer and office equipment Three years
Leasehold improvements Five years
(k) Current, non current disclosure
The group does not present its balance sheet on the basis of current and non-current assets and liabilities as presentation broadly in order of liquidity is reliable and more relevant. All balances within receivables and payables are expected to be recovered or settled within twelve months of the balance sheet date.
(l) Leasing
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.
2 Use of estimates, assumptions and judgements
The group makes estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. Estimates, assumptions and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The most material area relates to the capitalisation of intangible assets.
3 Basic and diluted loss per share
|
|
6 months ended 30 September 2008 |
6 months ended 30 September 2007 |
Year ended 31 March 2008 |
|
|
Number |
Number |
Number |
|
|
|
|
|
|
Shares in issue brought forward |
75,908,330 |
75,663,305 |
75,663,305 |
|
Shares issued during the period |
|
|
|
|
- Issued on 13 September 2007 |
- |
1,980 |
1,980 |
|
- Issued on 13 November 2007 |
- |
|
4,950 |
|
- Issued on 11 March 2008 |
- |
- |
238,095 |
|
- Issued on 10 April 2008 - Issued on 30 April 2008 - Issued on 22 May 2008 |
238,095 238,095 3,780,000 |
- - - |
- - - |
|
Shares in issue carried forward |
80,164,520 |
75,665,285 |
75,908,330 |
|
Weighted average shares in issue |
79,055,577 |
75,663,490 |
75,679,199 |
|
|
|
|
|
|
|
$'000 |
$'000 |
$'000 |
|
Loss after tax |
( 1,183) |
(725) |
(1,472) |
|
Basic and diluted net (loss) per share - cents |
(1.50) |
(0.96) |
(1.95) |
|
|
|
|
|
The calculation of the basic loss per share is based upon the loss for the period and the weighted average shares in issue. As the group is reporting a loss for all periods then in accordance with IAS 33 the share options are not considered dilutive because the exercise of the share options would have the effect of reducing the loss per share.
4 Risk management policies
Risk review
The risks and uncertainties facing the group include but are not limited to:
The availability and cost of survey ships, drilling vessels and qualified personnel; is the risk that delays will be caused in the timetable to drilling because equipment is either not available at all or is not available at a commercial price. Given the limited cash resources of the group and the uncertainty over an actual date for drilling, this is a difficult risk to protect against by, say, pre-booking a rig at a fixed rate. However, whilst the group has always been exposed to this risk, there are increasing indications that more rigs are becoming available.
Foreign exchange risks; is the risk that the group suffers loss through unhedged movements of the foreign exchange rate of, primarily, the GB£ against the US$. Most significant would be where a strengthening US$ increased the cost of exploration expenditure as most of this is incurred and settled in US$. With the risk above, due to limited levels of cash and uncertainty over an actual date for drilling, this is a difficult risk to protect against. That said, when sufficient information about timing and quantum of future exploration work is known, the group would expect to buy forward some or all of the US$ amount required.
As well as the risk that future exploration work becomes more expensive, the group is also exposed to foreign exchange risk because the functional currency of the company differs from that of its subsidiaries and its presentational currency. Foreign exchange movements on monetary assets and liabilities are taken to the income statement and the potential exposure to such is set out in the table below:
|
As at 30 September 2008 |
US$ denominated $'000 |
GB£ denominated $'000 |
Total $'000 |
|
Non-monetary assets |
26,596 |
21 |
26,617 |
|
Monetary Assets |
747 |
8,164 |
8,912 |
|
Monetary Liabilities |
(865) |
(126) |
(991) |
|
|
26,478 |
8,059 |
34,538 |
|
Equity |
|
|
34,538 |
|
As at 30 September 2007 |
US$ denominated $'000 |
GB£ denominated $'000 |
Total $'000 |
|
Non-monetary assets |
25,442 |
13 |
25,455 |
|
Monetary Assets |
880 |
4,036 |
4,916 |
|
Monetary Liabilities |
(857) |
(11) |
(868) |
|
|
25,465 |
4,038 |
29,503 |
|
Equity |
|
|
29,503 |
|
As at 31 March 2008 |
US$ denominated $'000 |
GB£ denominated $'000 |
Total $'000 |
|
Non-monetary assets |
25,942 |
6 |
25,948 |
|
Monetary Assets |
853 |
2,707 |
3,560 |
|
Monetary Liabilities |
(865) |
(182) |
(1,047) |
|
|
25,930 |
2,531 |
28,461 |
|
Equity |
|
|
28,461 |
Finally, the company makes and carries loans to its subsidiaries in both GB£ and US$. As the functional currency of the company is GB£ it recognises gains or losses on the US$ element of the monies lent, whilst the subsidiaries recognise gains and losses on the GB£ element because their functional currency is US$. Consequently, the movements due to foreign exchange don't net off completely during consolidation and so the difference is taken straight to equity. The potential exposure to these gains and losses is set out in the table below:
|
|
At 30 September 2008 $'000 |
At 30 September 2007 $'000 |
At 31 March 2008 $'000 |
|
GB£ denominated loans made to the subsidiaries |
7,716 |
7,701 |
7,610 |
|
US$ denominated loans made to the subsidiaries |
23,667 |
19,386 |
22,702 |
|
Due from subsidiary undertakings |
31,383 |
27,087 |
30,312 |
|
Translated to GB£ at the period/year end rate |
17,243 |
13,409 |
15,156 |
Until 1 April 2007, all loans were carried in GB£ but these were retranslated to their original currency to maintain consistency with the conversion of the group to a US$ presentational currency.
Interest rate risks; there are a number of instruments available to protect against falling interest rates reducing the investment income enjoyed by the group but, as discussed above, with the expectation of interest rate cuts in both the UK and USA they have become more expensive to purchase and could divert funds from the main business of the group, that of developing the licenses.
Liquidity risks; having completed the shooting and processing of the 3D data, the group's committed exploration demands on current funds are limited to the final payment to CGG, who shot and processed the 3D data and the relatively modest costs required for further interpretation of the 3D data.
|
|
At 30 September 2008 $'000 |
At 30 September 2007 $'000 |
At 31 March 2008 $'000 |
|
Available immediately |
1,387 |
1,359 |
1,478 |
|
Available within 3 months |
3,640 |
3,538 |
2,047 |
|
Cash and cash equivalents |
5,027 |
4,897 |
3,525 |
|
Available in more than 3 months but less than 12 months |
3,640 |
- |
- |
|
|
8,667 |
4,897 |
3,525 |
Counter-party risk; is the risk that the company suffers a loss of assets due to the default by any of the institutions with whom the company has placed deposits. During a prior period, the decision was taken not to keep all of the funds with one bank and so the board elected to split the funds and move an amount of at least £1m to a second bank with a higher security rating than the primary bank. At the time of writing, the Moody's rating for RBS is Aa1 and for Lloyds TSB is Aaa.
|
|
At 30 September 2008 $'000 |
At 30 September 2007 $'000 |
At 31 March 2008 $'000 |
|
HSBC plc |
48 |
16 |
52 |
|
Lloyds TSB plc |
1,880 |
2,020 |
2,046 |
|
RBS plc |
6,739 |
2,861 |
1,427 |
|
|
8,667 |
4,897 |
3,525 |
5 Copies of the interim report
Copies of the interim report will be dispatched to shareholders shortly and will also be posted to the Company's website www.rockhopperexploration.co.uk .
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 interim financial report for the six months ended 30 September 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, and the related explanatory notes. We have read the
other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report, including the conclusion, has been prepared for and only for the Company for the
purpose of meeting the requirements of the AIM Rules for Companies and for no other purpose. We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Directors' Responsibilities
The interim financial report, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing and presenting the interim financial report in accordance with the AIM Rules for Companies.
As disclosed in note 1.2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations
Committee ('IFRIC') pronouncements as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with the
measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements, as adopted by the
European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial 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 United Kingdom. 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 interim financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union, and the AIM Rules for Companies.
Baker Tilly UK Audit LLP
Chartered Accountants
55-61 Victoria Street
Bristol
BS1 6AD
17 November 2008
This information is provided by RNS
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