15th Sep 2015 08:41
LONDON (Alliance News) - Rockhopper Exploration PLC Tuesday said its pretax loss widened in the first half of 2015, but the company booked a large tax gain after reaching a deal with the government of the Falkland Islands as it progresses the Sea Lion project with its partners.
Rockhopper is also aiming for near term production from its portfolio in the Mediterranean, which should provide sufficient cashflow to cover the company's overheads whilst it develops the substantial project offshore the Falkland Islands.
The oil and gas company reported a pretax loss of USD5.1 million in the first six months of 2015, widening from the USD3.2 million loss made a year earlier despite revenue rising to USD1.8 million from USD821,000.
The loss widened as its gross margin was squeezed. Rockhopper booked USD1.8 million in cost of sales, generating a USD45,000 gross loss compared to a cost of sales of USD238,000 and a gross profit of USD535,000 a year earlier.
The company did lower its administrative costs and exploration expenses, but these were offset by the USD2.7 million foreign exchange gain booked last year falling to only USD339,000 in the first half of 2015.
However, Rockhopper reported a USD42.2 million profit after tax, compared to a USD3.2 million loss a year earlier after it reached a binding agreement with the Falkland Islands government to secure a tax deferment related to the company's tax arising from its farm-out to FTSE 250-listed Premier Oil PLC back in 2012.
Rockhopper sold a 60% stake in the Sea Lion project offshore the Falkland Islands, which Premier Oil now operates. Since then, fellow-listed Falkland Oil and Gas Ltd has also entered into the project.
Premier Oil is still the operator of the Sea Lion project, but now holds a 36% stake, with Falkland Oil and Gas holding a 40% stake and Rockhopper Exploration PLC holding the balance.
The trio have made the Zebedee and Isobel Deep oil discoveries from the project, which is located north of the Islands.
"Agreement of our Capital Gains Tax liability with the Falkland Island Government is yet another step forward and provides fiscal certainty, enhancing our ability to engage with external debt providers as part of the overall financing plan for the Sea Lion development," said Chairman Pierre Jungels.
"We have enjoyed a fantastic start to our 2015 North Falkland Basin exploration campaign with two material oil discoveries and, through the Isobel Deep well, the opening of a new play in a previously underexplored part of the basin," he added.
The trio will recommence exploration drilling in the North Falkland basin in late September, where two more wells will be drilled before the end of 2015. The companies are also aiming to award a front-end engineering and design contract for the Sea Lion project in the fourth quarter of 2015.
"Given the very encouraging results seen at the Isobel Deep well, consideration is being given to further drilling at Isobel Deep, which may replace the planned Jayne East well," the company said.
Rockhopper is fully carried for the costs of all drilling on the Sea Lion project in 2015, worth up to USD48.0 million.
Away from the Falklands, Rockhopper has a 20% interest in the Guendalina gas fieldosshore Italy with partner and Italian major Eni. That field has been in production since 2011. It also wholly-owns the onshore Civita field in Italy which should be in production before the end of 2015.
Rockhopper also holds a 100% stake in the Ombrina Mare oil & gas discovery offshore Italy, which has had the environmental impact assessment recently accepted by authorities.
Moving forward, the company said it will continue to invest in its Falkland assets " despite the challenging oil price environment". Its assets in Italy will also provide sufficient operating cash flow to cover the group's overheads going forward as projects enter production.
Rockhopper shares were up 0.6% to 43.75 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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