Interim Results to 30 Sept 07
Rockhopper Exploration plc
22 November 2007
Press Release
For Immediate Release: 22 November 2007
Rockhopper Exploration ('Rockhopper' or the 'Company')
Interim results for the six months ended 30 September 2007
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 2007.
Highlights
•3D seismic processing completed
•Initial review shows prospects
•Technical work advancing
•Environmental impact assessment started
Commenting on the interpretation work carried out during the period, Managing
Director Sam Moody said:
'An initial review of the 3D seismic, which covers some 850km2, reveals that
both fan shaped amplitude anomalies and structural closures can clearly be seen.
These will add to our existing prospect and lead inventory which currently
consists of a number of targets in PL023 and PL024 totalling 2.5 billion barrels
of recoverable oil.'
For further information, please contact:
Rockhopper Exploration plc www.rockhopperexploration.co.uk
Sam Moody - Managing Director 01722 414 419
Aquila Financial Ltd www.aquila-financial.com
Peter Reilly 020 7202 2601
Yvonne Fraser 020 7202 2609
Landsbanki Securities (UK) Limited - Corporate Finance
Tom Hulme 020 7426 9000
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 5,800 sq. km. These licences have
been granted by the Falkland Islands government.
Chairman's statement
During the six months ending 30th September 2007 we received the fully processed
3D seismic data volume from CGG Veritas. This delivery of processed data, the
largest and most modern 3D undertaken to date in the Falklands, represents
completion of the data acquisition on our operated acreage set out at the time
of the IPO in August 2005.
We have already identified targets in PL023 and PL024 on 2D and CSEM giving a
total potential figure of 2.5 billion barrels recoverable. We have significantly
reduced the risk associated with exploring in PL023 and PL024, found a number of
large prospects and leads and created an increased expected monetary value as a
result.
Initial interpretation of the 3D seismic data in licences PL032 and PL033 is
hugely encouraging and will add to our prospect and lead inventory while also
further de-risking the acreage. The fans identified near the Shell wells on the
3D have the potential to become one of the largest targets in our portfolio.
While oil prices remain high, the market for semi-submersible rigs of the type
required in the North Falkland Basin has eased with a number of suitable units
becoming available. While these units remain expensive, that cost can be
significantly reduced if the mobilisation and demobilisation can be shared with
other operators.
At the same time, the market for farm outs is also improving and we have now
been asked to present to a number of large oil companies.
We will be in a position to begin that process in earnest once we complete the
interpretation of our data which will happen later this year. We are also
keeping all other funding options open.
As part of the review undertaken during the conversion to IFRS we have changed
our
presentational currency to US Dollars. This better reflects both the industry
and economic environment in which we operate.
Dr Pierre Jungels
Chairman
Managing Director's review
With the delivery of the final processed 3D seismic data volume from CGG Veritas
we are able to take an important step forward in our technical work programme as
set out at the time of the IPO.
An initial review of the 3D seismic, which covers some 850km2, reveals that both
fan shaped amplitude anomalies and structural closures can clearly be seen.
These will add to our existing prospect and lead inventory which currently
consists of a number of targets in PL023 and PL024 totalling 2.5 billion barrels
of recoverable oil.
The 3D was acquired over licences PL032 and PL033 where Shell drilled two wells
during 1998, one of which recovered live oil to the surface. Shell had also
collected a small 3D programme (300km2) over that acreage during 1997. We have
merged our 3D with the previous Shell 3D to give us a total 3D coverage of
almost 900km2, the equivalent to four North Sea blocks.
In addition to interpreting the 3D seismic, we are undertaking additional
technical work
designed both to further reduce the risk associated with our acreage and to help
us to obtain maximum value for shareholders in any farm out.
The rig market is easier than twelve months ago and we are also seeing signs of
an improvement in the farm out market with a number of companies asking us to
present to them.
Since we were admitted to trading on AIM in 2005 we have collected over 900km 2D
seismic in licences PL023 and PL024 which has allowed us to map prospects and
leads with a total P50 of 2.5 billion barrels of recoverable oil.
We have collected four CSEM lines in licences PL023 and PL024 with positive
outcomes on prospects Ernest and Dolphin.
Once we complete the interpretation of the 3D seismic in licences PL032 and
PL033 we will update our prospect and lead inventory, rank our targets to decide
drilling locations and then carefully consider our options in terms of financing
our drilling programme.
Samuel Moody
Managing Director
Financial review for the first half of the financial year
The group has declared a loss for the six month period to 30 September 2007 of
$725k ($681k: 2006) which equates to a loss per share of 96 cents (95 cents:2006).
The loss has increased over the comparative period primarily as a function of
lower investment income earned, offset to a degree by lower charges for share
based payment and foreign exchange movement.
Investment income for the period fell to $160k ($502k: 2006) despite rising
interest rates in both the UK and the USA. The reduction is due to the reducing
cash balances held as a result of the 3D work undertaken during the second half
of last year. However, as a percentage the group enjoyed a better return on the
funds it did hold of 5.75% for the current period against 4.88% for the prior
period.
Administrative expenses were $761k against $725k for the comparative period, the
apparent increase being due to the weakening of the US$. Expenses are almost
exclusively incurred in GB£ but being presented in US$ means they are influenced
by exchange rate movements. Translating expenses back into GB£ results in a
charge of £381k for the current period against £394k for the comparative period.
The lower actual expenses were the result of a lower charge in respect of
executive bonuses and lower professional fees incurred.
The share based expense of $117k compares to $223k for the previous period. The
lower charge reflects the first tranche of options that have now vested.
Group net assets have reduced by $320k since the year ended 31 March 2007 with a
loss of $725k for the period offset by the movement of the share based charge of
$117k to reserves and currency gains on shareholders' equity brought forward of
$288k.
Financial outlook for the second half of the financial year
Whilst the base rate in the UK and the federal fund rate in the USA both rose
during the six months ended 30 September 2007, the recent concerns as to the
strength of both economies saw the federal fund rate cut by 50 basis points with
further near term cuts possible in both the UK and USA. Cuts in either rate will
reduce the group's future investment income on the current account as the group
funds earn a fixed margin relative to the UK base rate and US federal funds
rate. In anticipation of falling rates £1,750k of the group's cash was placed on
fixed deposit prior to the period end, at up to 6%, to mitigate the immediate
effect of rate cuts. However, all deposits are for less than 90 days as
liquidity remains the key group priority and so if rates do indeed 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 less than the first half year as the entire charge for the annual
bonuses is taken in the first six months. Possible areas of increased
expenditure would be travel costs and professional fees.
Unless the underlying assumptions change, the charge for share based
remuneration will continue at a consistent level until the six month period
ending 30 September 2010 when it will be fully expensed.
Cash balances at 30 September 2007 stood at $4,897k and cash requirements from
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. Of the total cash balances, $862k was held in US$ and so
should insulate the group for a time against possible currency fluctuations,
particularly a strengthening of the US$.
Conversion to International Financial Reporting Standards ('IFRS')
This is the first time the group has had to report under IFRS, an obligation
placed on it by its admission to trading on AIM. Whilst there have been a number
of presentational changes in this report and a greater level of disclosure and
analysis is anticipated for the year end report, there has been no impact to the
actual results and the comparatives contained within this report. Consequently,
no IFRS reconciliations have been presented.
Change of presentational currency from GB£ to US$
As part of the review undertaken during the conversion to IFRS, the group also
took the opportunity to review its presentational currency and concluded that
the US$ was now more suitable given that it better reflects the economic
environment in which the group operates.
The most notable feature of this conversion is to emphasise the benefit the
group has enjoyed by being capitalised and holding funds in GB£ over a period
when the US$ has weakened considerably. At the effective date of transition to
IFRS, 1 April 2006, the US$ was trading at 1.74 to the GB£ as opposed to the
rate of 2.02 used for this report. However, whilst the group presents its
results in US$, the functional currency of the parent company remains GB£ and so
changes to shareholders' equity, where the impact is greatest, are taken
straight to reserves rather than through the income statement.
IAS 21: The effects of changes in foreign exchange rates requires that reserve
elements of shareholders' equity are reconverted at the end of each period and
the currency translation differences reflected within that reserve. However, in
the case of share capital and share premium these are fixed at their historic
rate, at the date of issue or 1.74 if issued prior to the effective date of
transition to IFRS, and the difference taken to a currency translation reserve
that would unwind were the US$ to strengthen against GB£.
The currency translation reserve also holds the differences that arise from
translating the capitalised amounts in respect of exploration licenses. Whilst
previously the expenditure on exploration licenses was fixed at the exchange
rate prevailing at the time and carried forward as a converted GB£ amount, this
exaggerates the rate of exchange impact when translated directly into US$.
Accordingly, the values presented in the balance sheet have been adjusted so
that they reflect the actual currency in which they were spent.
Peter Dixon-Clarke
Consolidated income statement - unaudited
for the period ended 30 September 2007
6 months ended Restated* Restated*
30 September 6 months ended Year ended 31
2007 30 September March 2007
2006
Unaudited Unaudited Unaudited
Notes $'000 $'000 $'000
Revenue
Investment income 160 502 852
Total revenue 160 502 852
Expenses
Administrative expenses 761 725 1,459
Charge for share based remuneration 117 223 440
Foreign exchange movement 7 235 367
Total expenses 885 1,183 2,266
Loss before tax (725) (681) (1,414)
Income tax expense - - -
Net loss after tax arising (725) (681) (1,414)
from continuing activities
and attributable to equity
holders of the parent
company
Loss per share
basic and diluted - cents 2 (0.96) (0.95) (1.97)
Weighted average number of shares:
basic and diluted 75,663,490 71,800,154 71,817,756
* The restatement applies solely to the decision to change the presentational
currency from that of GB£ to US$ and not the transition to IFRS.
The results for the period relate wholly to continuing operations.
Consolidated balance sheet - unaudited
as at 30 September 2007
As at 30 Restated * Restated *
September 2007 As at 30 September As at 31 March
2006 2007
Unaudited Unaudited Unaudited
$'000 $'000 $'000
Assets
Capitalised exploration
expenditure 25,442 5,163 24,946
Office equipment 13 24 16
Receivables 19 9 74
Cash and cash equivalents 4,897 22,326 6,341
Total assets 30,371 27,522 31,377
Liabilities
Payables 868 125 1,554
Total liabilities 868 125 1,554
Equity
Share capital 1,325 1,254 1,325
Share premium 28,403 26,008 28,403
Currency translation
reserve 2,820 1,930 2,460
Reserve for share based
remuneration 1,267 879 1,115
Other reserves (283) (262) (274)
Retained losses (4,029) (2,412) (3,206)
Total equity attributable
to group shareholders 29,503 27,397 29,823
Total liabilities
and equity 30,371 27,522 31,377
* The restatement applies solely to the decision to change the presentational
currency from that of GB£ to US$ and not the transition to IFRS.
These interim results were approved by the directors and authorised for issue on
21 November 2007 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 2007
6 months ended Restated* Restated*
30 September 6 months ended Year ended 31
2007 30 September March 2007
2006
Unaudited Unaudited Unaudited
$'000 $'000 $'000
Share capital
Opening balance 1,325 1,249 1,249
Options exercised - 5 5
New shares issued - - 71
Closing balance 1,325 1,254 1,325
Share premium
Opening balance 28,403 25,959 25,959
Premium on options exercised - 49 49
Premium on new shares issued - - 2,532
Issues costs - - (137)
Closing balance 28,403 26,008 28,403
Currency translation reserve
Opening balance 2,460 9 9
Movement on capitalised
exploration expenditure (654) (114) (994)
Movement on share capital 45 94 159
Movement on share premuim 969 1,941 3,286
Closing balance 2,820 1,930 2,460
Share based remuneration
Opening balance 1,115 607 607
Share based expense charge for the period 117 223 440
Transferred to retained
losses in respect of options - - (24)
exercised in the year
Currency translation difference 35 49 92
Closing balance 1,267 879 1,115
Other reserves
Opening balance (274) (244) (244)
Currency translation difference (9) (18) (30)
Closing balance (283) (262) (274)
Retained losses
Opening balance (3,206) (1,611) (1,611)
Loss for the period (725) (681) (1,414)
Transferred from share based
remuneration reserve - - 24
Currency translation difference (98) (120) (205)
Closing balance (4,029) (2,412) (3,206)
Equity shareholders'funds 29,503 27,397 29,823
* The restatement applies solely to the decision to change the presentational
currency from that of GB£ to US$ and not the transition to IFRS.
Consolidated cash flow statement - unaudited
for the period ended 30 September 2007
6 months ended Restated* Restated*
30 September 6 months ended Year ended 31
2007 30 September March 2007
2006
Unaudited Unaudited Unaudited
$'000 $'000 $'000
Cash flows from operating activities
Net (loss) (725) (681) (1,414)
Adjustments to reconcile net income
to cash provided by operating activities
Depreciation 7 7 17
Share based remuneration expense 117 223 440
Foreign exchange movement 7 235 367
Changes in:
Receivables 55 8 (57)
Trade payables (201) 22 109
Cash (utilised) by operating activities (740) (186) (538)
Cash (outflow) for capital expenditure
Capitalised exploration expenditure (801) (583) (18,709)
Office equipment (4) (10) (10)
Cash flows (used) for capital expenditure (805) (593) (18,719)
Cash inflow from financing activities
Options exercised - 54 54
Issue of share capital - - 2,603
Share issue costs - - (137)
Cash inflow from financing activities - 54 2,520
Net cash (outflow) (1,545) (725) (16,737)
Net foreign exchange differences 101 1,379 1,406
Cash and cash equivalents
brought forward 6,341 21,672 21,672
Cash and cash equivalents
carried forward 4,897 22,326 6,341
* The restatement applies solely to the decision to change the presentational
currency from that of GB£ to US$ and not the transition to IFRS.
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 exploration 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
From 1 January 2007 all companies on the Alternative Investment Market ('AIM')
are required to prepare their consolidated financial statements using standards
issued by the International Accounting Standards Board ('IASB') as adopted by
the European Union. The effective date of transition to IFRS is therefore 1
April 2006. The results upon which this announcement has been based were
prepared using the accounting policies set out below.
The interim reults are reviewed but not audited and do not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
figures for the year ended 31 March 2007 included in the interim statement have
been extracted from the UK GAAP financial statements and restated into IFRS. The
UK GAAP financial statements for the year ended 31 March 2007 have been reported
on by the company's auditor and have been delivered to the registrar of
companies. The auditor's report on the UK GAAP financial statements for the year
ended 31 March 2007 was unqualified 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 IFRS
accounting policies adopted are the ones that will apply for the year ended 31
March 2008.
The Company has elected to take the exemption offered within IFRS1: First time
adoption of International Financial Reporting Standards in relation to business
combinations.
Items included in the financial statements of each of the group's entities are
measured in the currency of the primary economic environment in which that
entity operates (the 'functional currency'). The consolidated financial
statements are stated in US dollars. The functional and presentation currency of
the subsidiaries, where the licences are held, is US dollars whilst the
functional currency of the holding company is £ sterling. All values are rounded
to the nearest thousand dollars ($'000), also stated as 'k', except when
otherwise indicated.
1.3 Significant accounting policies
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 intangible assets. In each
case, the determination of these is fundamental to the financial results and
position and requires management to make complex judgments based on information
and data that may change in future periods.
Since these 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.
2. Basic and diluted loss per share
6 months ended 6 months ended Year ended 31
30 September 30 September March 2007
2007 2006
Number Number Number
Shares in issue brought forward 75,663,305 71,774,605 71,774,605
Shares issued during the period
- Issued on 17 August 2006 - 225,000 225,000
- Issued on 22 August 2006 - 75,000 75,000
- Issued on 5 March 2007 - - 3,588,700
- Issued on 13 September 2007 1,980 - -
Shares in issue carried forward 75,665,285 72,074,605 75,663,305
Weighted average shares in issue 75,663,490 71,800,154 71,817,756
$'000 $'000 $'000
Net (loss) after tax ( 725) (681) (1.414)
Basic and diluted net (loss) per
share - cents (0.96) (0.95) (1.97)
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.
3 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 .
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