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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hurricane Energy Plc | LSE:HUR | London | Ordinary Share | GB00B580MF54 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 7.79 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMHUR
RNS Number : 3639R
Hurricane Energy PLC
21 September 2017
21 September 2017
Hurricane Energy plc
("Hurricane" or the "Company")
Half-year Results 2017
Hurricane Energy plc, the UK-based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, announces the publication of its interim report and financial statements for the six months ended 30 June 2017. A copy of the report is available on the Company's website at www.hurricaneenergy.com.
Highlights of successful drilling campaign
-- Concluded highly successful 265-day drilling programme in March 2017 including:
o 205/21a-7 appraisal well and 1km 205/21a-7Z horizontal development well on the Lancaster field
o 205/23-3a exploration well on the Halifax prospect - identified extensive hydrocarbon column of 1,156m TVT
o 205/26b-12 exploration well on the Lincoln prospect - identified ODT of 2,258m TVDSS demonstrating that Lincoln is a separate accumulation to Lancaster and potentially part of a large basement feature including Lincoln and Warwick
-- Updated CPR on Lancaster published in May 2017
o Lancaster best case oil in place more than doubled to 2,326 MMstb
o First 2P reserves attributed of 37 MMbbls from two-well EPS over 6 years; rising to 62 MMbbls if extended to 10 years
o Updated CPR incorporating new data from Halifax and Lincoln wells expected to be published by end of year
EPS highlights - on track for first oil in 1H 2019
-- Second phase FEED studies completed and a number of key long lead items related to the FPSO were ordered (subsea umbilical, risers and flowlines)
-- Integrated EPCI agreement entered into with TechnipFMC for fabrication, installation, testing and commissioning of subsea equipment including SURF, SPS and installation of the buoy and mooring system
-- Agreements with Bluewater became effective for the upgrade, lease and operation of the 'Aoka Mizu' FPSO
o Vessel has set sail for Dubai for upgrade works
-- Regulatory approval for EPS expected shortly
Financial highlights - fully funded to first oil
-- Announced financing of US$547 million, primarily to fund capital expenditure for the Lancaster EPS
o US$17 million from warrant grant in May 2017
o US$530 million from combined equity and convertible bond placing announced in June 2017, closed in July 2017
-- Operating expenses were US$6.0 million (1H 2016: US$4.2 million)
-- Loss after tax (after foreign exchange gain of US$1.7 million) of US$4.2 million (1H 2016: loss after tax (after foreign exchange gain of US$1.6 million) of US$2.6 million)
-- Group had cash and cash equivalents at 30 June 2017 of US$29.1 million (excluding US$3 million in escrow (31 December 2016: US$98.6 million) - balance sheet significantly enhanced post period-end following completion of equity and convertible bond placing in July 2017
Dr Robert Trice, CEO of Hurricane, commented:
"The first half of 2017 saw the conclusion of a highly successful 265-day drilling campaign that completed the well stock required for the Lancaster EPS, provided further invaluable reservoir data and increased the Company's resource estimates exponentially.
The equity and convertible bond placing announced in June 2017 now fully funds the first phase of development on Lancaster which will not only generate significant cash for the Company but, importantly, will provide key production and reservoir data to enable a full field development of this very substantial oil field and unlock the potential of our wider fractured basement portfolio.
We are grateful for the support of existing and new shareholders in the placing. To have closed such a large capital raise against a backdrop of historically low oil prices and a challenging equity market was a significant endorsement of Hurricane's development of fractured basement reservoirs West of Shetland.
"We look forward over the coming months to announcing further key milestones in the EPS progression; and to publishing the revised CPR on Halifax, Lincoln and Warwick. We remain on track for first oil in 1H 2019 and look forward to updating our shareholders as this exciting development progresses."
Contacts:
Hot Features
Premium
+44 (0) 1483
Hurricane Energy plc 862 820
Dr Robert Trice (Chief Executive
Officer) / Alistair Stobie
(Chief Financial Officer)
+44 (0) 207 710
Stifel Nicolaus Europe Limited 7600
Nominated Adviser, Broker
Callum Stewart / Nicholas Rhodes
/ Ashton Clanfield
+44 (0) 207 830
Vigo Communications 9704
Public Relations Adviser hurricane@vigocomms.com
Patrick d'Ancona / Ben Simons
About Hurricane
Hurricane was established to discover, appraise and develop hydrocarbon resources associated with naturally fractured basement reservoirs.
Hurricane's acreage is concentrated on the Rona Ridge, West of Shetland. The Lancaster licence, the Company's most appraised asset, has combined 2P Reserves and 2C Resources of 523 million barrels. In addition, the Company has 205 million barrels of oil equivalent on its Whirlwind licence (under the Whirlwind oil case).
During the 2016-2017 drilling campaign the Company made two significant discoveries* at Halifax and Lincoln, indicating that the Greater Lancaster Area and the Greater Warwick Area have the potential to be two large accumulations.
* Discovery under SPE PRMS definitions
Technical Information
All Reserves and Resources definitions and estimates shown in this report are based on the 2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System ("PRMS").
The technical information in this release has been reviewed by Dr Robert Trice, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Dr Robert Trice, Chief Executive Officer of Hurricane Energy plc, is a geologist and geoscientist with a PhD in geology and has over 30 years' experience in the oil and gas industry.
Inside Information
This announcement contains inside information as stipulated under the market abuse regulation (eu no. 596/2014). Upon the publication of this announcement via regulatory information service this inside information is now considered to be in the public domain.
Forward Looking Statements
Forward looking statements and dates referenced in this announcement, in relation to Hurricane's exploration and development assets are estimates and subject to change. Oil and gas operations, particularly those relating to development stage assets are subject to varying inputs that may impact timing, including inter alia permitting; environmental regulation; changes to regulators and regulation; third party manufacturers and service providers and the weather. The Company's estimates of timing for forward looking operations are based on the best information it has to hand at the time, however these timings may change with little or no notice to the Company. The Company will update the market as and when it becomes aware of a material change to any of the operations or timings referenced in this announcement.
Glossary/Definitions
CPR Competent Person's Report
EPCI Engineering, Procurement, Construction
and Installation
EPS Early Production System
FEED Front End Engineering and Design
FPSO Floating Production, Storage and
Offloading vessel
MMbbls Million Barrels
MMstb Millions of Stock Tank Barrels
ODT Oil Down To
SURF Subsea Umbilicals, Risers and Flowlines
SPS Subsea Production System
TVDSS Total Vertical Depth Subsea
TVT True Vertical Thickness
Chief Executive's Report
I am pleased to provide a summary of the first half of 2017, an exciting period in Hurricane's history. During the period, the Company announced a transformative fundraising of US$530 million, fully financing the first phase of development of the Lancaster oil field ("Lancaster"), the Early Production System ("EPS"). The fundraising closed after the period end. Subsequently, the Company has taken the final investment decision and development and production regulatory approval for the Lancaster EPS is expected shortly.
We successfully completed our 2016-2017 drilling campaign with the Halifax well. We also recorded our first third-party verified Reserves as the results from the Lancaster wells, which started the drilling campaign, were incorporated into a new Competent Person's Report ("CPR") on the Lancaster field.
The Company is now focussed on delivering first oil on the target schedule of 1H 2019.
Operations Update
2016/17 Drilling Programme
In March 2017, Hurricane concluded a 265-day drilling programme using the Transocean Spitsbergen semi-submersible drilling rig. The programme included the successful drilling of one appraisal well on the Lancaster field (205/21a-7), one horizontal development well on the Lancaster field (205/21a-7Z), two exploration wells (205/26b-12 / Lincoln and 205/23-3a / Halifax), and carrying out an intervention on the 2014 horizontal well (205/21a-6) in preparation for well completions in Q2 2018.
The Halifax exploration well, drilled in proximity to Arco's 1988 Bombardier well (205/23-2), resulted in the discovery of an extensive oil column. Hurricane's analysis of Arco's Bombardier well had indicated the presence of hydrocarbons in the basement. This was confirmed by the Halifax well, which identified a hydrocarbon column of 1,156 metres TVT ("True Vertical Thickness"). The ODT ("Oil Down To") was significantly below structural closure, and the Company believes that Lancaster and Halifax are potentially a single large accumulation, the "Greater Lancaster Area". However, in the absence of data identifying pressure communication between Lancaster and Halifax, the single large accumulation concept will need to be confirmed through further analysis and drilling.
The Lincoln well (205/26b-12) was completed in late December 2016. Following interpretation of data and further technical analysis, the Company announced that the ODT of 2,258m true vertical depth subsea ("TVDSS") demonstrates that the Lincoln discovery is a separate hydrocarbon accumulation to Lancaster, separated by the Brynhild Fault Zone. Furthermore, the ODT at Lincoln has provided the Company with sufficient evidence to believe that the undrilled Warwick prospect is likely to be part of a large basement feature comprising both Lincoln and Warwick ("Greater Warwick Area").
An updated CPR, incorporating new data from the Halifax and Lincoln wells and giving resource estimates for the Greater Lancaster Area and Greater Warwick Area, is expected to be released by the end of the year.
Lancaster CPR
The Company commissioned an updated CPR utilising results from the 2014 and 2016 wells on Lancaster and engineering studies carried out for the EPS. The report, produced by RPS Energy Consultants Limited ("RPS"), attributed 2P Reserves to Lancaster for the first time and detailed a highly significant increase in certified oil in place figures and Contingent Resources.
The volumetric assessment carried out by RPS incorporated results from the 2016 pilot well (205/21a-7), which confirmed the presence of hydrocarbons below local structural closure. Best case oil in place figures more than doubled to 2,326 MMstb (2013 CPR: 1,056 MMstb). RPS assigned 2P reserves of 37 million barrels to production from the two-well EPS over the six-year period currently planned for data gathering and full field development planning. In the event of an extension of the EPS to 10 years, 2P reserves would increase to 62 million barrels.
The assignment of Reserves under the Petroleum Resources Management System is specific to a development plan. At present, the development plan at Lancaster is limited to the EPS. The Company's approach to development is phased, with data collected during the first phase (the EPS) allowing an optimised full field development to be planned. A full field development is expected to include an upgrade to surface and subsea infrastructure, to allow for increased rates of production, as well as a gas export or injection solution. A revision to Reserves would be expected once sufficient data has been collected from extended production from the EPS to be able to define a full field development plan. The CPR only concerned the Lancaster field within Licence P.1368 Central.
Early Production System
Hurricane's primary focus throughout the period has been on progressing plans for the EPS. We have continued to work with our main contractors, Bluewater Energy Services ("Bluewater") and TechnipFMC, on agreeing the commercial constructs of the development and progressing engineering.
Second phase FEED ("Front End Engineering and Design") studies were completed and a number of key long lead items related to the FPSO ("Floating Production Storage and Offloading vessel") and SURF ("Subsea Umbilical, Risers and Flowlines") were ordered.
An integrated EPCI ("Engineering, Procurement, Construction and Installation") agreement was entered into with TechnipFMC for fabrication, installation, testing and commissioning of the subsea equipment including SURF and SPS ("Subsea Production System") and installation of the buoy and mooring system. Following the end of the period, orders have been placed for these systems under this contract. Agreements with Bluewater and related group entities for the upgrade, lease and operation of the FPSO ("Aoka Mizu"), signed during the period are now effective. These include an EPC contract ("Engineering Procurement and Construction"), a bareboat charter and a POSA ("Production Operation and Services Agreement").
Following the end of the period, the vessel has set sail for Dubai, where upgrade works are planned to be carried out, and fabrication of the buoy has commenced (also in Dubai). The Company remains on track for scheduled first oil in 1H 2019.
EPS Financing
The Company announced total financing during the period of approximately of US$547 million. This included an issue of warrants conducted during May with one of the Company's brokers which resulted in gross proceeds of US$17 million. The remaining US$530 million of this financing was announced on 29 June 2017, in a combined equity and convertible bond placing ("Fundraising"), which has now successfully closed, following approval at a General Meeting of shareholders. The net proceeds of the Fundraising are primarily being used by the Company to fund capital expenditure in relation to the EPS, in addition to other expenses including finance costs, and corporate G&A.
Hurricane is grateful for the participation of existing and new shareholders in the Fundraising. The Company considers successful closure of such a large capital raise against a backdrop of low oil prices and a challenging equity market, as a significant endorsement of Hurricane's development of fractured basement reservoirs west of Shetland. The Company is now fully funded to meet its target for first oil on the Lancaster EPS in 1H 2019, at which point significant cash generation is expected, given Lancaster's low breakeven costs.
Farm-out
The Company had closed the data room to potential farm-in partners in 2016, to await the result of the 2016/17 drilling programme. The data room was reopened in early 2017 following completion of the drilling programme and has remained open following completion of the Fundraising. There has been, and continues to be, engagement with a number of financially and operationally capable counterparties. Completion of the Fundraising allows the Company to continue discussions with potential farm-in partners from a stronger negotiating position. A farm-out will only be pursued if the Company believes that the terms offered deliver suitable value to shareholders.
Financial review
During the period, the Group has changed its presentation currency and the functional currency of all entities in the Group from British Pounds Sterling to United States Dollars ("USD"). This decision was made given an increasing portion of the Group's expenses are denominated in USD, particularly those in relation to the EPS. Furthermore, the Group's revenues are expected to be almost exclusively in USD and it is believed that presenting results in USD will improve investors' ability to compare the Company's financial results with other publicly traded businesses in the oil and gas industry. In this report, 2016 annual and interim figures are restated in USD, for comparison.
Operating expenses for the Group were US$6.0 million (1H 2016: US$4.2 million), an increase of 43% compared to the year prior, reflecting the increased level of activity in the period. After a foreign exchange gain of US$1.7 million (1H 2017: $1.6 million), the Group recorded a loss for the period of US$4.2 million or 0.35 per share (1H 2016: US$2.6 million).
The Group ended the period with US$29.1 million in cash and cash equivalents, not including US$3.0 million of cash held in escrow. This was prior to the closing of the Fundraising described above and is below the equivalent figure of US$98.6 million (excluding $2.9 million of cash held in escrow) at 31 December 2016 due to expenditures on drilling, long lead items for the EPS, and other Group activities. The value of the Group's intangible exploration and evaluation assets increased in the period by US$71.0 million to US$373.5 million.
Risk Management
The Executive Directors continually monitor the Group's risk exposures and report to the Audit Committee and Board of Directors as required. The principal risks of the Group remain as detailed on pages 19 - 21 of the 2016 Annual Report and Group Financial Statements.
Dr Robert Trice
CEO
20 September 2017
Independent Review Report
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated statement of profit & loss and comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 13. We have read the other information contained in the half-yearly 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 is made solely to the company 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. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly 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 inquiries, 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 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 half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with accounting policies the group intends to use in preparing its next annual financial statements and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Statutory Auditor
London, UK
20 September 2017
Condensed Consolidated Statement of Profit & Loss and Comprehensive Income for the 6 months ended 30 June 2017
6 months 6 months 12 months
ended ended ended
Notes 30 Jun 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited)(1) (Audited)(1)
$'000 $'000 $'000
Operating expenses (5,989) (4,171) (8,865)
Operating loss (5,989) (4,171) (8,865)
Investment revenue 66 48 89
Foreign exchange gains 5 1,734 1,601 2,493
Finance costs (37) (45) (88)
Loss before tax (4,226) (2,567) (6,371)
Tax - - 7,272
(Loss) / profit for
the period (4,226) (2,567) 901
----------- -------------- ------------
Exchange difference
on translation - (30,974) (56,330)
Total comprehensive
loss (4,226) (33,541) (55,429)
(Loss) / Earnings per 6 (0.35) (0.35) 0.10 cents
share, basic and diluted cents cents
(1) Balances have been restated to USD. See note 3 for details.
All of the Group's operations are classed as continuing.
Condensed Consolidated Balance Sheet as at 30 June 2017
Notes 30 Jun 31 Dec 1 Jan 2016
2017 2016
(Unaudited) (Audited)(1) (Audited)(1)
$'000 $'000 $'000
Non-current assets
Property, plant and
equipment 18 18 133
Intangible exploration
and evaluation assets 7 373,493 302,539 260,555
Other receivables 170 161 193
Other non-current assets 3,034 2,875 3,431
----------- ------------ ------------
376,715 305,593 264,312
Current assets
Inventory 1,434 443 607
Trade and other receivables 3,611 7,273 622
Cash and cash equivalents 29,090 98,607 11,284
----------- ------------ ------------
34,135 106,323 12,513
Total assets 410,850 411,916 276,825
Current liabilities
Trade and other payables 8 (10,202) (26,338) (401)
(10,202) (26,338) (401)
Non-current liabilities
Decommissioning provisions 9 (6,975) (5,959) (4,768)
----------- ------------ ------------
Total liabilities (17,177) (32,297) (5,169)
----------- ------------ ------------
Net assets 393,673 379,619 271,656
----------- ------------ ------------
Equity
Share capital 10 1,892 1,860 1,082
Share premium 524,459 508,510 347,815
Share option reserve 17,932 15,648 12,876
Own shares held by SIP
Trust (351) (366) (314)
Equity shares to be
issued - - 801
Foreign exchange reserve (92,659) (92,659) (36,329)
Accumulated deficit (57,600) (53,374) (54,275)
----------- ------------ ------------
Total equity 393,673 379,619 271,656
----------- ------------ ------------
(1) Balances have been restated to USD. See note 3 for details.
Condensed Consolidated Statement of Changes in Equity for the 6 months ended 30 June 2017
Share Share Share Own Equity Foreign Accumulated Total
capital premium option shares Shares exchange deficit
reserve held to be reserve
by SIP issued
Trust
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2016 1,082 347,815 12,876 (314) 801 (36,329) (54,275) 271,656
(Audited)(1)
Shares allotted 506 71,732 - - - - - 72,238
Share options
charge - - 1,213 - - - - 1,213
Own shares
held by
SIP Trust - - - (52) - - - (52)
Equity shares
to be issued - - - - (801) - - (801)
Loss for
the period - - - - - - (2,567) (2,567)
Other
comprehensive
loss for
the period - - - - - (30,974) - (30,974)
At 30 June
2016 1,588 419,547 14,089 (366) - (67,303) (56,842) 310,713
(Unaudited)(1)
-------- -------- -------- ------- ------- -------- ----------- --------
Shares allotted 272 88,963 - - - - - 89,235
Share options
charge - 1,559 - - - - 1,559
Profit for
the period - - - - - - 3,468 3,468
Other
comprehensive
loss for
the period - - - - (25,356) - (25,356)
-------- -------- -------- ------- ------- -------- ----------- --------
At 31 December
2016 1,860 508,510 15,648 (366) - (92,659) (53,374) 379,619
(Audited)(1)
-------- -------- -------- ------- ------- -------- ----------- --------
Shares allotted 32 15,949 - - - - - 15,981
Share option
charge - - 2,284 - - - - 2,284
Own shares
held by
SIP Trust - - - 15 - - - 15
Loss for
the period - - - - - - (4,226) (4,226)
-------- -------- -------- ------- ------- -------- ----------- --------
At 30 June
2017
(Unaudited) 1,892 524,459 17,932 (351) - (92,659) (57,600) 393,673
-------- -------- -------- ------- ------- -------- ----------- --------
(1) Balances have been restated to USD. See note 3 for details.
The share option reserve arises as a result of the expense recognised in the income statement to account for the cost of share-based employee compensation arrangements.
Condensed Consolidated Cash Flow Statement for the 6 months ended 30 June 2017
6 months 6 months 12 months
ended ended ended
Notes 30 Jun 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited)(1) (Audited)(1)
$'000 $'000 $'000
Net cash inflow / (outflow)
from operating activities 11 1,124 (2,966) (5,577)
Investing activities
Interest received 51 52 78
Expenditure on property,
plant and equipment (8) (9) (17)
Expenditure on intangible
exploration and evaluation
assets (87,196) (1,455) (63,459)
Expenditure on inventory (991) - -
----------- -------------- ------------
Net cash used in investing
activities (88,144) (1,413) (63,398)
Financing activities
Interest paid (3) (2) (5)
Proceeds from issue
of share capital and
warrants 15,931 71,465 160,735
Deferred bonus arrangements
settled in cash - (268) (253)
Net cash provided by
financing activities 15,928 71,195 160,477
----------- -------------- ------------
Net (decrease) / increase
in cash and cash equivalents (71,092) 66,816 91,502
----------- -------------- ------------
Cash and cash equivalents
at the beginning of
the period* 101,482 14,715 14,715
Net (decrease) / increase
in cash and cash equivalents (71,092) 66,816 91,502
Effects of foreign exchange
rate changes 1,734 (10,733) (4,735)
----------- -------------- ------------
Cash and cash equivalents
at the end of the period* 32,124 70,798 101,482
----------- -------------- ------------
(1) Balances have been restated to USD. See note 3 for details.
* Cash and cash equivalents includes $3,034,000 (30 June 2016: $2,869,000; 31 December 2016: $2,875,000) of cash held in escrow which has been included in the balance sheet in other non-current assets.
Notes to the Interim Financial Statements for the 6 months ended 30 June 2017
1. General information
Hurricane Energy plc is a public company, limited by shares, incorporated in the United Kingdom and registered in England and Wales under the Companies Act 2006 (registered company number 05245689). The nature of the Group's operations and its principal activity is exploration for oil and gas reserves principally on the UK Continental Shelf. The address of Hurricane Energy plc's registered office is The Wharf, Abbey Mill Business Park, Lower Eashing, Godalming, Surrey, GU7 2QN. Hurricane Energy plc's shares are listed on the AIM market of the London Stock Exchange.
This Interim Report and Financial Statements was approved by the Board of Directors and authorised for issue on 20 September 2017.
This set of Interim Financial Statements for the 6 months ended 30 June 2017 is unaudited and does not constitute statutory accounts as defined by the Companies Act. The information for the year ended 31 December 2016 contained within these Interim Financial Statements does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The Group Financial Statements for the year ended 31 December 2016 have been delivered to the Registrar of Companies. The auditor's report on those Financial Statements was unqualified although the auditors drew attention to a material uncertainty in the application of the going concern basis of accounting, by way of an emphasis of matter. The auditor's report did not contain a statement made under Section 498 of the Companies Act 2006.
2. Basis of preparation
The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The Interim Financial Statements have been prepared using accounting bases and policies consistent with those used in the preparation of the audited Financial Statements of the Group for the year ended 31 December 2016 (except for the change in presentation currency described in note 3) and those to be used for the year ending 31 December 2017.
The Interim Financial Statements have been prepared under the historical cost convention, except for share based payments, which have been measured at fair value, and in accordance with the requirements of the AIM Rules.
3. Change in functional and presentation currency
These consolidated interim financial statements are presented in US Dollars. On 1 January 2017, the functional currency of Hurricane Energy plc and Hurricane Exploration (UK) Limited changed from Pounds Sterling to US Dollars. This change was triggered by the intention to proceed with the Early Production System in 2017 which will lead to an increased level of expenditure being incurred in US Dollars and ultimately the receipt of revenues which are expected to be almost exclusively in US dollars.
On 1 January 2017, the presentational currency of Hurricane Energy plc and Hurricane Exploration (UK) Limited was also changed from Pounds Sterling to US Dollars.
The change in presentation currency is to better reflect the Group's business activities and to improve investors' ability to compare the Company's financial results with other publicly traded businesses in the oil and gas industry. In making this change to the US dollar presentation currency, the Company followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates and have applied the change retrospectively. For the 2016 comparative balances, assets and liabilities have been restated into the presentation currency (US dollars) at the rate of exchange prevailing at the respective balance sheet date, with equity balances restated at historical rates on the date of issue of said equity instrument. The comparative income statements and cash flow statements were restated at the average exchange rates for the reporting period. The average rates for the reporting period approximated the exchange rates as at the date of the transactions. Exchange differences arising on translation were taken to the foreign exchange reserve in shareholders' equity. The Company has presented a third statement of financial position as at 1 January 2016 in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The resulting effect of the change in presentation currency of $92,659,000 on the comparative figures is reflected in the foreign exchange reserve.
Exchange rates used USD / GBP 6 months ending 30 June 2016 average rate 1.434 12 months ending 31 December 2016 average rate 1.355 Spot rate at 1 January 2016 1.480 Spot rate at 31 December 2016 1.234 4. Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive's Report. The financial position of the Group, its cash flows and liquidity position are set out in the Interim Financial Statements. The Group has no source of operating revenue and currently obtains working capital primarily through equity or debt financing. The Group is therefore dependent on future fundraising, capital receipts or other forms of finance in order to continue in operation in the long term and the Group's work programme for developing its core assets is dependent on this future fundraising activity. At 30 June 2017 the Group has no external borrowings and ended the period with $29.1 million of cash and cash equivalents (excluding amounts held in decommissioning escrow) available to meet its outstanding trade and other payables of $10.2 million at 30 June 2017. On 24 July 2017 the Group completed a fundraise providing gross funds of $530 million split between $300 million of Ordinary Shares and $230 million from the issue of Convertible Bonds. This fund raise is sufficient to cover the costs relating to the Lancaster Early Production System, other exploration activity (including licence costs) and prospective general and administration (G&A) costs for at least the next twelve months based on the Group's cash flow forecasts.
The Directors have considered sensitivities to the Group's forecasts, including the effect of the work programme for the Lancaster EPS for which the additional capital has been raised. These sensitivities indicate that the Group is fully funded for the Lancaster EPS, other exploration activity (including licence costs) and prospective G&A costs for at least the next twelve months based on the Group's cash flow forecasts.
Therefore, having considered reasonable possible sensitivities the Directors believe that the Group will be able to operate and meet all commitments as they fall due for at least the next twelve months. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Interim Financial Statements.
5. Foreign exchange gains and losses
Foreign exchange gains of $1.7 million (6 months ended 30 June 2016: gain of $1.6 million; 12 months ended 31 December 2016: gain of $2.5 million) relate to fluctuations in the US Dollar to Pounds Sterling exchange rate. The Group's cash and cash equivalents are predominately held in Pounds Sterling.
6. (Loss) / Earnings per share
The basic and diluted (loss) / earnings per share has been calculated using the loss for the period and a weighted average number of ordinary shares in issue less treasury shares.
6 months 6 months 12 months
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited)(1) (Audited)(1)
$'000 $'000 $'000
(Loss) / profit after
tax (4,226) (2,567) 901
Number Number Number
of shares of shares of shares
Weighted average shares
in issue (basic) 1,207,828,832 730,800,130 889,529,040
Effect of dilutive potential
ordinary shares:
Warrants - - 15,022,831
Weighted average shares
in issue (diluted) 1,207,828,832 730,800,130 904,551,871
Cents Cents Cents
------------- -------------- ------------
(Loss) / earnings per
share (basic and diluted) (0.35) (0.35) 0.10
------------- -------------- ------------
(1) Balances have been restated to USD. See note 3 for details.
7. Intangible exploration and evaluation assets
6 months 12 months
ended ended
30 Jun 31 Dec
2017 2016
(Unaudited) (Audited)(1)
$'000 $'000
At start of period 302,539 260,555
Effects of translation of currency - (43,336)
Additions 69,973 83,411
Effects of additions / changes to
decommissioning estimates (note 9) 981 1,909
At end of period 373,493 302,539
----------- ------------
(1) Balances have been restated to USD. See note 3 for details.
Intangible exploration and evaluation expenditure comprises the book cost of licence interests and exploration and evaluation expenditure within the Group's licensed acreage in the West of Shetlands.
The Directors have fully considered and reviewed the potential value of licence interests, including carried forward exploration and evaluation expenditure. The Directors have considered the Group's tenure to its licence interests, its plans for further exploration and evaluation activities in relation to these and the likely opportunities for realising the value of the Group's licences, either by farm-out or by development of the assets. The Directors have concluded that no impairment is necessary at this time.
8. Trade and other payables
30 Jun 31 Dec 1 Jan 2016
2017 2016
(Unaudited) (Audited)(1) (Audited)(1)
$'000 $'000 $'000
Trade payables 1,593 8,329 105
Other payables 114 973 116
Accruals 8,495 17,036 180
----------- ------------ ------------
10,202 26,338 401
----------- ------------ ------------
(1) Balances have been restated to USD. See note 3 for details.
9. Decommissioning provisions
6 months 12 months
ended ended
30 Jun 31 Dec
2017 2016
(Unaudited) (Audited)(1)
$'000 $'000
At start of period 5,959 4,768
Effects of translation of currency - (793)
Unwinding of discount rate 35 75
Additions 981 1,694
Changes to decommissioning estimate - 215
----------- ------------
At end of period 6,975 5,959
----------- ------------
(1) Balances have been restated to USD. See note 3 for details.
The provision for decommissioning relates to the costs required to decommission the suspended wells previously drilled on the Lancaster, Whirlwind and Halifax exploration assets. The expected decommissioning cost for these assets is based on the Directors' best estimate of the cost of decommissioning the assets at the end of 2026 discounted at 1.31% per annum (2016: 1.31%). The addition in 2017 was due to the inclusion of the costs required to decommission the suspended well drilled on the Halifax asset.
30 June 31 Dec 1 Jan 2016
2017 2016
(Unaudited) (Audited)(1) (Audited)(1)
$'000 $'000 $'000
Allotted, called up and
fully paid
30 June 2017: 1,227,988,123;
(31 December 2016: 1,202,860,397;
1 January 2016: 633,112,533)
Ordinary Shares of GBP0.001
each 1,892 1,860 1,082
----------- ------------ ------------
10. Called up share capital
(1) Balances have been restated to USD. See note 3 for details.
The Company does not have an authorised share capital.
On 21 January 2017 127,726 new Ordinary Shares were issued to the Hurricane Energy plc Share Incentive Plan (SIP) at a subscription price of GBP0.49 per share.
On 12 May 2017 the Group issued warrants to Stifel Nicolaus Europe Limited (Stifel) to subscribe for up to 25,000,000 new Ordinary shares at a price equal to 95% of the volume weighted average price of the Ordinary shares, calculated over the trading day prior to exercise (the "Warrants"). Fees for the placing of Ordinary shares issued on exercise of the Warrants were paid to the Group's (then) joint brokers. GBP141,000 was paid to Stifel and GBP413,000 was paid to Cenkos Securities plc.
Between 12 May 2017 and 17 May 2017 all of the above Warrants were exercised and new Ordinary shares were issued at an average price of GBP0.52.
11. Reconciliation of operating loss to net cash inflow / (outflow) from operating activities
6 months 6 months 12 months
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
(Unaudited) (Unaudited)(1) (Audited)(1)
$'000 $'000 $'000
Operating loss (5,989) (4,171) (8,865)
Adjustments for:
Depreciation of property,
plant and equipment 8 35 54
Share based payment charge 2,349 1,341 2,827
----------- -------------- ------------
Operating cash outflow
before working capital
movements (3,632) (2,795) (5,983)
Increase in receivables (2,123) (1,207) (1,047)
Increase in payables 1,088 1,036 541
----------- -------------- ------------
Cash used in operating
activities (4,667) (2,966) (6,488)
----------- -------------- ------------
Corporation tax received(2) 5,791 - 911
----------- -------------- ------------
Net cash inflow / (outflow)
from operating activities 1,124 (2,966) (5,577)
----------- -------------- ------------
(1) Balances have been restated to USD. See note 3 for details.
(2) Corporation tax received is a research and development tax credit claimed under the SME Research & Development tax relief scheme.
12. Capital commitments
As at 30 June 2017 the Group had capital commitments of $69.0 million (31 December 2016: $7.4 million).
13. Subsequent events
On 24 July 2017 the Company raised US$300 million (at a USD/GBP exchange rate of 1.2821) by way of a non-pre-emptive placing of 731,222,213 new ordinary shares in the capital of the Company at an issue price of GBP0.32 per share. Concurrently the Company raised US$220 million from the successful placement of Convertible Bonds. The bonds were issued at par and carry a coupon of 7.5% per annum payable quarterly in arrears. The Bonds can be converted into fully paid ordinary shares of the Company with the initial conversion price set at $0.52, representing a 25 per cent. premium above the placing price of the Concurrent Equity Placement, being GBP0.32 (converted into U.S. dollars at a USD/GBP 1.30 rate). Unless previously converted, redeemed, or purchased and cancelled, the Bonds will be redeemed at par on 24 July 2022.
The Convertible Bonds contain a covenant relating to a restriction on incurrence of indebtedness. This restriction shall not apply in respect of:
-- any indebtedness in respect of the Convertible Bonds ("Bond Debt");
-- any other indebtedness where the aggregate principal amount of such other indebtedness, when combined with the aggregate principal amount of all other indebtedness of the Group from time to time (excluding the Bond Debt), would not cause the total indebtedness of the Group on a consolidated basis to exceed US$45 million (or the equivalent thereof in other currencies at then current rates of exchange); and
-- any permitted indebtedness (as more fully described in the Terms and Conditions of the Convertible Bonds)
An over allotment option in respect of US$10 million of Bonds was exercised in full on the same date. Following exercise of the Option, the aggregate principal amount of the Bonds was US$230 million.
As at 31 August 2017 the Group's capital commitments had increased to $290 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FBLLLDKFFBBX
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September 21, 2017 02:01 ET (06:01 GMT)
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