Half-year Report

26 September 2024

Rockhopper Exploration plc

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

Half-Year Results for the Six Months Ended 30 June 2024

Rockhopper Exploration plc (AIM: RKH), the oil and gas company with key interests in the North Falkland Basin ("NFB"), announces its unaudited results for the six months ended 30 June 2024 ("H1 2024").

YEAR TO DATE HIGHLIGHTS

Sea Lion and North Falkland Basin

·    Rockhopper holds 35% working interest

·    Rockhopper benefits from pre and post Final Investment Decision ("FID") loan from the operator Navitas Petroleum Development and Production Limited ¹ ("Navitas" or "Operator")

·    Independent Resource Report commissioned by Navitas²

o  Sea Lion initial development targeting 312mmbbls via two drilling campaigns

o  Sea Lion total 2C resource base 791mmbbls

o  Plateau production up to 55 kbbls/d for prolonged period of eight years

o  Life of field costs US$25/bbls

o  NPV 10 of first 312 mmbbls development > US$4bn gross to the JV pre tax post Falkland Islands Government royalty at US$77 Brent

·    Environmental Impact Statement ("EIS") public consultation period completed

Ombrina Mare Arbitration Award (the "Award")

·    Transaction to monetise the Award completed

·    First Tranche payment received - €19m retained by Rockhopper

·    Annulment hearing with ICSID convened ad hoc committee (the "Committee") completed

·    Post hearing submissions completed

·    Cost submissions made to Committee (by Rockhopper and Italy)

·    No formal timetable for outcome, hopeful a decision is possible by year end 2024

Balance Sheet

·    Balance sheet strengthened following completion of Award monetisation

·    Period end cash balance US$27.8m

·    Cost control maintained

Outlook

·    Strong balance sheet

·    Work continues on securing all permissions required to launch Sea Lion financing, including EIS and licence extension

·    Ombrina Mare annulment, hopeful a decision is possible by year end 2024

Samuel Moody, CEO, commented:

"Rockhopper is in its strongest position for some time. Monetisation of the Award delivers increased financial flexibility and allows the Company to focus on progressing Sea Lion to sanction, which remains our core focus. We also welcome the news, announced on 24th September, of a new general co-operation agreement between the Falklands and Argentina.

"I would like to thank our team for their continued commitment to driving progress at Rockhopper and our shareholders for their continued support at this exciting time for the Group."

¹ Navitas is the legal entity that holds and operates Sea Lion and our other NFB licences. The company's ultimate and controlling parent is Navitas Petroleum LP, a limited partnership established and registered in Israel and listed on the Tel Aviv Stock Exchange.

² Rockhopper is not an addressee and has not been party to the production of the 2024 NSAI Independent Report. The 2024 NSAI Independent Report has been produced to PRMS standards. The last independent resource report commissioned directly by Rockhopper was the ERCE 2016 Report which had an estimated 2C value of 517 MMbbls. See RNS dated 22 January 2024.

Enquiries:

Rockhopper Exploration plc

Sam Moody - Chief Executive Officer

Tel. +44 (0) 20 7390 0234 (via Vigo Consulting)

Canaccord Genuity Limited (NOMAD and Joint Broker)

Henry Fitzgerald-O'Connor/Charlie Hammond

Tel. +44 (0) 20 7523 8000

Peel Hunt LLP (Joint Broker)

Richard Crichton/Georgia Langoulant

Tel. +44 (0) 20 7418 8900

Vigo Consulting

Patrick d'Ancona/Ben Simons/Fiona Hetherington

Tel. +44 (0) 20 7390 0234

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

Rockhopper's strategy is to create value for all our stakeholders through the safe and responsible development of our assets in the NFB.  The Company has been operating offshore the Falkland Islands since 2004 and discovered the Sea Lion oilfield in 2010.  We are a long term partner of the Falkland Islands Government ("FIG") and our aim has always been to support the rights of the Falkland Islanders to develop their natural resources.

Sea Lion project

Our view remains unchanged: the Sea Lion oil field and its associated follow on potential within the NFB, represents a hugely important and valuable strategic asset for the Falkland Islands, the UK and all of our stakeholders.  Since replacing Harbour Energy in 2022, Navitas, the field's operator, has increased resources while reducing costs, resulting in a field with highly attractive and robust economics. 

An independent report, commissioned by Navitas, confirms that the first 312mmbbls of the total 791mmbbls of the field (on a 2C basis) has a gross NPV 10 of over US$4bn on a pre tax, post FIG royalty at US$77 Brent.  The life of field cash breakeven is currently estimated to be US$25/bbl making the project financially attractive at a range of commodity prices.

An updated Environmental Impact Statement was submitted to FIG in July 2024 and the statutory public consultation period has now concluded. The next step will be for FIG to consider the responses provided by the Operator.  Simultaneously we are engaged with FIG on licence extensions, prior to their expiry in November 2024.

We continue to engage with the Operator as they look to secure a financing package for Sea Lion phase 1 and work towards FID. We will inform the market as and when we receive material updates from the Operator, including associated timing, in this regard.

Ombrina Mare

As announced on 24 August 2022, the arbitration panel unanimously held that Italy breached its obligations under the Energy Charter Treaty and awarded Rockhopper compensation of approximately €190 million plus interest and EURIBOR + 4% compounded annually from 29 January 2016 until the time of payment (except for the four month period immediately following the date of the Award).

Having announced a transaction to monetise the Award in December 2023 (the "Monetisation"), the Monetisation completed in June 2024 and Rockhopper received the first payment of €19 million that month. All of Rockhopper's costs associated with the Award from the date of signature in December 2023 are covered by the new funder ("Specialist Fund").

A hearing was held in Madrid in April 2024 as part of Italy's request to have the Award annulled following which post hearing submissions were made in response to questions raised by the Committee.  Additionally, during September 2024 submissions detailing costs incurred both by Rockhopper and Italy were made to the Committee.

Whilst there is no formal timetable, we continue to be hopeful that a decision is possible before the end of 2024 but otherwise expected in H1 2025.

Corporate matters

Following completion of the Monetisation, our balance sheet is the strongest it has been for some time, and we ended the period with approximately US$27.8 million in cash and term deposits.

We maintain a small core team with unparalleled historic knowledge of the Sea Lion field and its associated Falkland Islands oil and gas operations.

Environmental, Social and Governance ("ESG")

ESG and Corporate Responsibility continue to be a key focus for Rockhopper. As an oil and gas exploration and production business, our role is to discover and produce hydrocarbons in an environmentally responsible manner, supporting energy requirements during the energy transition.

As noted previously, FIG established an independent environment trust to receive and administer future off-setting payments from the Sea Lion project and distribute those funds for activities aimed at ensuring a positive environmental legacy in the Falkland Islands.

Once FID on Sea Lion has been achieved, the Company commits to defining measures, reporting transparently, and mitigating our own emissions as far as practicable.

Outlook

The completion of the Award Monetisation puts our balance sheet in the best position it has been for a number of years and we now await the outcome of the annulment request from Italy.

Meanwhile, Navitas continues to progress our core asset, Sea Lion, having not only completed the EIS public consultation period but also developed the field development plan to a highly advanced stage.  We continue to believe that our 35% interest in the field and all associated upside represents a potentially hugely valuable asset.

In addition, we continue to focus on ways in which we can strengthen and protect the Company's balance sheet.

As a result, the coming 12 months could see some of the most exciting developments at the Company for some considerable time.

FINANCIAL REVIEW

Results for the period

For the period ended 30 June 2024, the Group reported a profit after tax of US$16.5 million (H1 2023: loss of US$2.6 million).

The Monetisation

From a financial perspective the main event during the period was the completion of the Monetisation. This has resulted in an after tax profit contribution of US$18.7 million in the period.

On completion of the Monetisation, the Group received the Tranche 1 payment of €19 million. Whilst legally Rockhopper has retained the legal and beneficial ownership of the Award, accounting follows the substance of the transaction which is akin to a disposal. As such this Tranche 1 payment has been recorded as other income and expenses of US$20.6 million.

No income has been recorded for the Tranche 2 and Tranche 3 payments as they are contingent on future events, in particular, successfully contesting the attempted annulment of the Award

Revenue and cost of sales

The Group's production ceased during 2022, as such there were no revenues in the period (H1 2023: US$nil). Even though there has been no revenue in the period there are costs associated with maintaining the various production concessions whilst potential options for additional development are investigated.

Operating activities

The decrease in Administrative expenses ("G&A") for the period to US$1.5million (H1 2023: US$2.1 million) almost entirely relates to legal fees associated with the Ombrina Mare Arbitration. Since the end of 2023 the cost associated with the Arbitration have been borne by the Specialist Fund.

Previously the Group made the decision to use existing resources to fund all legal costs arising from contesting the request by Italy for annulment whilst it explores all funding possibilities. In the prior period, costs were incurred contesting Italy's request for a stay of enforcement as well as initial fees drafting the Group's counter memorial on annulment itself. Excluding these, G&A costs have remained flat.

The foreign exchange loss in the period is US$0.3 million (H1 2023: gain of US$0.6 million). These mainly arise on GBP and Euro denominated cash and term deposit balances in both the current and prior period.

Finance expenses in the period of US$0.2 million (H1 2023: $US0.7 million) relate to the unwinding of discounts on provisions. The previous period finance expense included US$0.5 million from fair valuing of derivative financial liabilities. This related to warrants issued as part of the placing in 2022 and were all exercised or lapsed in the prior year.

Cash movements and capital expenditure

At 30 June 2024, the Group had cash and term deposits of US$27.8 million (31 December 2023: US$8.0 million).

Cash and term deposit movements during the period:

Miscellaneous includes foreign exchange, interest and movements in working capital during the period.

Oil and gas assets

The Sea Lion development remains central to the Group's plans and the additions in the period of US$9.2 million almost entirely relate to this project. The majority of these costs are covered through a loan from Navitas and are included in other payables. As part of the transaction to bring Navitas onto the licences, Navitas agreed to provide loan funding to the Group to cover the majority of its share of Sea Lion phase one related costs from Transaction completion, in September 2022, up to FID and has interest charged at 8% per annum (the "Pre-FID Loan"). Subject to a positive FID, Navitas will provide a second interest free loan to fund two-thirds of the Group's share of Sea Lion phase one development costs (for any costs not met by third party debt financing).

Certain costs, such as licence costs, are excluded in both instances. Funds drawn under the loans will be repaid from 85% of Rockhopper's working interest share of free cash flow.

Taxation

The charge in the period of US$1.9 million relates to the estimate of tax due on the first Tranche of proceeds from the monetisation of the Ombrina Mare Arbitration Award.

Liquidity, counterparty risk and going concern

The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management.

At 30 June 2024, the Group had cash resources of US$27.8 million. Historically, the Group's largest annual expenditure has related to pre-sanction costs associated with the Sea Lion development. The Group benefits from loan funding for its share of all Sea Lion pre-sanction costs (other than licence fees and taxes).

The Group has prepared the financial statements on the basis that it will continue to operate as a going concern. The Directors consider that there are no material uncertainties that may cast significant doubt over this assumption. They have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less than 12 months from the end of the reporting period.

Principal risk and uncertainties

A detailed review of the potential risks and uncertainties which could impact the Group are outlined in the Strategic Report of the Group's annual consolidated financial statements. The Group identified its key risks at the end of 2023 as being:

·    oil price volatility;

·    availability and access to capital;

·    joint venture partner alignment; and

·    failure of joint venture partners to secure the requisite funding to allow a Sea Lion Final Investment Decision

CONDENSED CONSOLIDATED income statement

for the six months ended 30 June 2024

CONDENSED CONSOLIDATED statement of comprehensive income

for the six months ended 30 June 2024

CONDENSED CONSOLIDATED balance sheet

as at 30 June 2024

These condensed consolidated interim financial statements were approved by the directors and authorised for issue on 25 September 2024 and are signed on their behalf by:

Samuel Moody

Chief Executive Officer