Rockrose Energy : Interim Results and Declaration of Dividend

RNS Number : 3734N RockRose Energy plc 24 September 2019

24 September 2019

INTERIM RESULTS AND DECLARATION OF DIVIDEND

INTERIM RESULTS FOR

THE SIX MONTHS ENDED 30 JUNE 2019 AND DECLARATION OF INTERIM DIVIDEND

Highlights for the six months ending 30 June 2019

RockRose Energy met its operational targets for the first half of 2019, achieving significant production growth

and completing the Marathon Acquisition. Significant financial resources are now available to take advantage of current market conditions and continue to grow our portfolio of development and production assets. We are pleased to announce an interim dividend of 60 pence per share and currently anticipate paying a further final dividend of 25 pence per share (the timetable for which will be announced in conjunction with the release of final results for the current financial year).

The record date for the interim dividend of 60p per ordinary share in respect of the year to 31 December 2019 is 4 October 2019 and is payable on 24 October 2019 to shareholders on the register at close of business on 4 October 2019 (the ex-dividend date is 3 October 2019).

Financial

• Production pro forma basis: 22.1 kboepd1
• 2P + 2C reserves as at 31 March 2019: 87.6 MMboe
• Total cash2 as at 31 August 2019: $367.9 million which includes $86.4 million of restricted cash
• Adjusted EBITDA3 for the first sixmonths: $51.6 million (2018: $27.6 million)
• Capital expenditure during the first sixmonths: $25.6 million (2018: nil)
• Interim dividend: 60p per share (anticipated final dividend of 25p per share)

"I am delighted to be able to report another good set of financial results. The Marathon Acquisition completed on 1 July 2019 and I am pleased to announce the successful integration of the business into RockRose. We continue to expand our pipeline of development projects, including the drilling of additional wells at West Brae and Blake. The development of Arran and progress on Tain are on budget and on schedule.

On behalf of our shareholders, we continue to build a first-class business in the North Sea. The Board is pleased to announce our first regular dividend."

Andrew Austin

Executive Chairman

IFRS reporting metrics
	2019	$'m	2018	$'m	Change %
Revenue	93.7		66.7		40
Profit before tax	27.8		5.1		449

Basic earnings per share (cents)	124.0	34.0	265
Net cash generated from operating activities	51.9	9.8	430
Net assets	90.4	73.5	23

• Pro forma information in respect of the enlarged Group, includes the results of the Group and those of the Brae Complex and Foinaven assets (acquired as part of the Marathon Acquisition on 1 July 2019) for the six months ending June 2019

• Non-IFRSmeasures. Refer to the alternative performance measures definition within the glossary to the half-year financial report

• Adjusted EBITDA is calculated on a business performance basis. Refer to the alternative performance measures definition within the glossary to the half-year financial report

Outlook

• Production capacity remains at 22 to 24 kboepd. However, as a result of planned extended maintenance shutdowns, which we anticipate will increase uptime over the coming years, full year production is expected to be around 20 kboepd
• The Tain development and Blake life extension projects are on budget and schedule. The Arran development is on time and below budget thanks to reductions in well and pipeline costs
• Preparatory work continues ahead of the planned drilling of two West Brae subsea development wells. The first of these is planned to spud in the fourth quarter of 2019
• Capital expenditure guidance for the full year is $107-115 million
• Abandonment expenditure guidance for the full year is $13-15 million

Enquiries:
RockRose Energy plc	[phone]
Financial Advisor:
Hannam & Partners (Advisory) LLP
Giles Fitzpatrick / Andrew Chubb	[phone]
Joint Brokers:
Whitman Howard
Hugh Rich / Nick Lovering	[phone] / 1224
Cantor Fitzgerald
David Porter	[phone]
Financial PR:
Celicourt
Mark Antelme / Philip Dennis / Ollie Mills	[phone]

For further information, please visit the Company's website at www.rockroseenergy.com.

Financial Review

For the six months ended 30 June 2019
Unaudited results for six months ending 30 June
		2019	2018	Change
Production	boepd	11,105	5,149	115%
Revenue	$'000	93,736	66,661	40%
Unit opex1	$/boe	22.1	34.8	(37%)
Adjusted EBITDA2	$'000	51,583	27,567	87%
Profit for the period	$'000	16,316	5,063	222%
Earnings per share (basic)	cents	124	34	265%
Net cash generated from operating activities	$'000	51,876	9,797	430%
Average realised oil price3	$bbl	68.3	72.9	(6%)
Average realised gas price3	$boe	31.7	44.6	(29%)
Capital expenditure	$'000	25,559	-
Abandonment expenditure	$'000	712	491

Pro forma information in respect of the enlarged Group

Production4	boepd	22,138
Revenue4	$'000	232,515
Unit opex4	$/boe	28.0
Adjusted EBITDA4	$'000	115,560
Total cash5	$'000	371,816

Note The financial results are prepared in accordance with IFRS, unless otherwise noted below:

• Non-IFRSmeasures. Refer to the alternative performance measures definition within the glossary to the half-year financial report

• Adjusted EBITDA is calculated on a business performance basis. Refer to the alternative performance measures definition within the glossary to the half-year financial report

3 Excludes the impact of realised and unrealised gain on commodity hedges

• Pro forma information in respect of the enlarged Group, includes the results of the Group and those of the Brae Complex and Foinaven assets (acquired as part of the Marathon Acquisition on 1 July 2019) for the six months ending June 2019

5 At financial close, post Marathon Acquisition, including $91 million of restricted cash

Production and revenue

Production on a working interest basis increased by 115% to 11,105 boepd in the first half of 2019, compared to 5,149 boepd in the same period of 2018. This increase primarily reflects the acquisition of Dyas B.V. on 1 October 2018.

The Group's average realised oil price excluding the gains from hedging was $68.3/bbl for the six months ended 30 June 2019. This was 6% lower than the same period in 2018 ($72.9/bbl). Revenue from crude oil sales, for the

six months ending 30 June 2019 totalled $57.2 million, 9% lower than the comparative period in 2018 ($63.1 million). As well as lower prices, the decrease in revenue reflected the timing of the lifting of June 2019 production.

Revenue from the sale of gas in the period was $34.6 million (2018: $3.6 million) reflecting the higher production following the acquisition of Dyas B.V. partially offset by lower wholesale gas prices.

The Group's commodity price hedges and other oil derivatives generated $0.2 million of realised gains (2018: realised loss of $1.5 million).

Unit opex (/boe)

Unit opex was $22.1/boe for the six months ended 30 June 2019, 37% lower than the comparative period in 2018 ($34.8/boe). This reduction was driven by the acquisition of Dyas B.V., where predominantly gas producing assets have a unit opex of $12.7/boe.

Adjusted EBITDA

Adjusted EBITDA for the first six months of 2019 has increased significantly compared to the same period in 2018. This was due to the acquisition of Dyas B.V. which contributed $25.6 million in 2019 (2018: nil).

		Six months	Six months ended
		ended
		30 June 2019	30 June 2018
		$'000	$'000
	Adjusted EBITDA	51,583	27,567
Depreciation and amortisation expense	(19,565)	(11,377)
Unrealised financial instrument gains/(losses)	6,105	(6,385)
Decrease/(increase) in decommissioning estimates	(118)	-
Acquisition related expenditure	(3,233)	-
Share options and rights granted to directors and employees	(108)	-
Operating profit	34,664	9,805

Income tax expense

Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the six months to 30 June 2019 is 41%, compared to 0% for the six months ended 30 June 2018. The difference arises mainly because the Group did not recognise any deferred tax previously. However, based on current projections, some of the Group's subsidiaries are expected to generate sufficient profits to utilise all of their losses carried forward and other temporary differences. In addition, the Group is currently paying corporation tax in the Netherlands.

Capital and abandonment expenditure

Capital expenditure for the first six months of 2019 was $25.6 million (2018: nil). Abandonment expenditure for the

first six months of 2019 was $0.7 million (2018: $0.5 million). Forecast capital and abandonment expenditure for the year ending 31 December 2019 is $107-115 million and $13-15 million respectively.

Cash flow
	Six months	Six months
	ended
	ended	30 June
	30 June 2019
	2018
	$'000	$'000
Cash and cash equivalents at 1 January	67,944	64,955
Net cash generated from operating activities	51,876	9,797
Net cash used in investing activities	(35,716)	(12,860)
Net cash used in financing activities	(455)	(31,816)
Net increase/(decrease) in cash and cash equivalents	15,705	(34,879)
Exchange (losses)/gains	(695)	20
Cash and cash equivalents at 30 June	82,954	30,096

The Group reported net cash generated from operating activities of $51.9 million or $25.8 per boe in the six months to 30 June 2019 compared with $9.8 million or $10.52 per boe a year earlier. Higher production, as a result of the Dyas B.V. acquisition, was the main driver of the improvement. This led to a net increase in cash and cash equivalents of $15.7 million in the period (2018: net decrease of $34.9 million). The increase in investing activities was driven by capital expenditure incurred on the Arran development and Blake life extension project and the payment of a $10.0 million deposit in respect of the Marathon Acquisition.

Going concern

When assessing the going concern status of the Group, the Directors have considered, in particular, its financial position, including its significant balance of cash and cash equivalents. The Directors have also considered the Group's oil and gas price forecasts, expected production, operating cost profile, capital expenditure, abandonment spend, and financing plans. The Directors have taken into consideration the key risks which could impact the prospects of the Group, with the most relevant risk being the oil and gas price outlook. Robust down-side sensitivity analyses have been performed, assessing the impact of a significant deterioration in the oil and gas price outlook. These stress-tests all indicated results which could be managed in the normal course of business. Based on their assessment of the Group's prospects and viability, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the condensed consolidated interim financial statements. Having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing its condensed consolidated interim financial statements.

Reviewof Operations

Summary of operational results (including the results of the Brae Complexand Foinaven assets which were acquired on 1 July 2019).

	Six months ending 30 June 2019	Six months ending 30 June 2018
Production (net)	kboe	boepd	kboe	boepd
Blake & Ross	518	2,862	508	2,807
Nelson & Howe	185	1,025	226	1,249
B Block	142	784	148	818
Brae Complex1	1,233	6,812