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 June 2, 2015 - 4:28 PM EDT
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Nighthawk Energy plc ("Nighthawk" or "the Company") Final Results for the year ended 31 December 2014

LONDON, June 2, 2015 /PRNewswire/ -- Nighthawk, the US focused oil development and production company (AIM: HAWK and OTCQX: NHEGY), announces its final results for the year ended 31 December 2014.

Operational Highlights

  • Record production and sales volumes in 2014
    • Gross oil sales for 2014 of 703,414 bbls (575,275 bbls net to Nighthawk's net revenue interest1), nearly double 2013 sales volumes (2013: 358,294 gross bbls; 290,664 net bbls)
    • Gross daily oil sales for 2014 averaged 1,927 bbls/day (1,576 bbls day net to Nighthawk)
  • 12 new wells successfully drilled and completed
  • New oil discoveries in the Company's Snow King field and successfully brought production online from the Marmaton zone in both the Arikaree Creek and Salen areas
  • Completed a comprehensive review of the Company's forward drilling inventory
  • Since the year end, Nighthawk has successfully completed two new strategic Joint Ventures with Cascade Petroleum

Financial Highlights

  • Group revenues increased 81% to US$47.5 million (2013: US$26.2 million)
  • Normalised EBITDA2 for 2014 of US$27.4 million or US$39.01/bbl per gross barrel sold (year ended 31 December 2013: US$15.8 million or US$44.05/bbl) reflecting the highly profitable nature of the Group's oil producing assets
  • Non-cash impairment charge recognised in exceptional administrative expenses of US$20.3 million, of which US$12.7 million arose as a result of the negative impact of the lower oil commodity price environment on the estimated present value of producing wells and US$6.7 million relates to seven wells plugged and abandoned in 2014. The remaining US$0.9 million relates to legacy field infrastructure.
  • Senior secured reserves based lending facility with a headline facility amount of up to US$100.0 million closed in September 2014, with an initial borrowing base of US$35.0 million, substantially reducing the Group's cost of debt
    • On 29 May 2015, the Group received a credit commitment from Commonwealth Bank of Australia to increase the borrowing base to US$37.0 million.
  • The Group commenced a commodity hedging program in 2014 to provide more certainty around future operational cash flows and liquidity

Commenting on the final results, Rick McCullough, Chairman, said:

"Despite the deteriorating oil price in Q4, 2014 was a successful year with record production and sales levels.  Production nearly doubled over 2013 levels and revenues increased by 81%.  We also successfully drilled and completed 12 wells during the period, with new oil discoveries in our Snow King field.

"Since the year end, we completed what we believe will prove to be two very valuable strategic joint ventures and shot 3D seismic over these areas.  Although the analysis of the data is still ongoing we have already been encouraged by the certain features we have identified similar to those in our Arikaree Creek and Snow King fields. We expect that these JVs will provide many more drilling locations to add to our inventory.

"As we outlined earlier this year, following processing and interpretation of the 3D seismic and selection and permitting of well locations, we expect to complete the first four wells of our six well drilling commitment later this year."

The audited report and accounts will be available on the Company's website at www.nighthawkenergy.com later today and will be posted to Shareholders, as applicable, together with the notice of Annual General Meeting and Form of Proxy shortly.

 

Definitions:




1.

Net revenue interest (NRI) - Nighthawk's share of oil, gas, and associated hydrocarbons produced, saved, and marketed, after satisfaction of all royalties, overriding royalties, or other similar burdens on or measured by production of oil, gas, and associated hydrocarbons



2.

Normalised EBITDA is operating profit adjusted for depreciation, amortisation, contribution from test revenue, exceptional expenses and, in 2013, a gain on stepped acquisition.



"Group" 

Nighthawk Energy plc and its subsidiaries



"Parent Company" 

Nighthawk Energy plc



Enquiries:




Nighthawk Energy plc


Rick McCullough, Chairman 

+1 303 407 9600

Richard Swindells, Chief Financial Officer

+44 (0) 20 3582 1350



Westhouse Securities Limited

+44 (0) 20 7601 6100

Alastair Stratton


Robert Finlay




Canaccord Genuity

+44 (0) 20 7523 8000

Manuel Santiago


Henry Fitzgerald-O'Connor




FTI Consulting

+44 (0) 20 3727 1000

Ben Brewerton

ben.brewerton@fticonsulting.com

Ed Westropp

edward.westropp@fticonsulting.com

Adam Cubbage

adam.cubbage@fticonsulting.com

 

Chairman's Statement

This past year was, on balance, another successful year for Nighthawk, with both successes and setbacks during a challenging period for our industry.  The Company had approximately US$48 million in revenues and generated US$28 million in annual operating cash flows, both of which were records.  Fortunately, we had this forward momentum just as the collapse of the world oil markets occurred in late November and early December 2014.   I joined the Board as Executive Chairman on October 1, 2014 and was completing an analysis of our acreage position, drilling inventory and historical drilling success as oil prices collapsed.  Our forward production, revenue momentum along with the Group's commodity hedge position exiting 2014, combined with our team's thorough understanding of the Company's future growth prospects served us well as I began preparation of our first capital and operating budgets with the Nighthawk team. 

Overall over the last two years, when the Company drilled a Mississippian Spergen well with the use of 3D seismic, the success rate has been in the range of 70% to 80%.  On the flip side of the ledger, the Nighthawk team drilled some marginal and unsuccessful wells during 2014 in the John Craig area and the Knoss 9-20 and Snow King 12-33 wells. 

With low oil prices at the end of 2014 we, like many other oil exploration and production companies in the US and UK have written down the carrying value of some of the Company's assets.  Of the total US$20.3 million non-cash exceptional administrative expense, US$6.7 million relates to the plugging and abandonment of old wells drilled in earlier years when there was more exploratory risk associated with our drilling program, and two wells drilled in 2014.  The balance of the impairment charge includes US$12.7 million arising mainly as a result of a lower oil price being applied in determining the carrying value of assets and we would expect that some of carrying value of these wells could be written back up in future years with higher oil prices.  The remaining US$0.9 million relates to legacy field infrastructure.

Let's look at some of the major accomplishments of 2014 and since, and discuss a few of them in more depth:

  • Nighthawk grew net production to 575,275 barrels, a near 100% increase over 2013 levels;
  • The Company successfully completed its first reserves-based revolving credit line in September 2014;
  • We successfully drilled and completed 12 new vertical wells during the year, the most in the Company's history;
  • An oil hedging program was successfully implemented in late 2014. We have realized approximately US$2.7 million in hedging revenues during the first four months of 2015;
  • We completed new 3D surveys of our Snow King field and Salen areas;
  • We made new oil discoveries, in the Company's Snow King field and successfully brought production online from the Pennsylvanian Marmaton zone in both the Arikaree Creek and Salen areas;
  • The Company completed a comprehensive review of its forward drilling inventory, completed the its first operational and drilling budgets and established five new corporate metrics for measuring performance; and
  • Since the year end, Nighthawk has successfully completed two new strategic Joint Ventures with Cascade Petroleum.

During 2014, we began to transition our focus towards a balanced approach of both quasi-developmental drilling combined with continued exploration efforts.  We concluded that we must always have the benefit of 3D seismic and our related evaluation of drilling locations before we drill.  This was not always the case in 2014, when the commitment to keep the drilling rig running had to be balanced with the need for 3D seismic.  Now, our focus is on maintaining and growing a clearly identified forward inventory of drilling locations.

Today, we are encouraged by the extent of our forward drilling inventory and believe it can drive growth in the future.  In early 2015, we completed what we believe will prove to be two very valuable strategic joint ventures (JVs) with Cascade Petroleum. The acreage that we tied up in these JVs, particularly the Monarch JV that we operate, is on the same geological structure that runs through our Arikaree Creek and Snow King fields.  While we must complete the analysis of the 3D seismic that was recently shot over these two JVs, we have already been encouraged by the similar pop up features that we see in the Monarch JV acreage using our 2D seismic data. We have also used our previously evaluated 3D seismic for our Snow King field and we see a number of potential new Mississippian Spergen locations where our field and the JV overlap.  As we outlined earlier this year, following processing and interpretation of the 3D seismic and selection and permitting of well locations, we will complete the first four wells of our six well drilling commitment later this year. We expect that these JVs will provide many more drilling locations to add to our inventory.

2015 has been a challenging year to date with very low oil prices and the unusually high number of well maintenance projects we encountered during the first quarter.  We will continue to pursue our capital efficient well solvent clean up and behind pipe projects.

Despite the challenging, but improving, oil price environment, we believe that Nighthawk's highly attractive well economics, the de-risking of the Group's acreage and its growing new well location inventory mean it is well positioned to continue to grow and deliver value for shareholders. 

Finally, I would like to thank the Board, employees, shareholders and suppliers for their support during the year.

Rick McCullough
Executive Chairman

 

Chief Financial Officer's Statement






Financial highlights







Year

ended

31 December

2014

Year

ended

31 December

2013




Revenue

47,541,974

26,154,210

Cost of sales

(19,927,152)

(8,676,437)




Gross profit

27,614,822

17,477,773




Administrative expenses

(7,274,890)

(5,468,951)




Normalised operating profit1

20,339,932

12,008,822




Depreciation, amortisation and contribution from test revenue

7,103,010

3,773,812




Normalised EBITDA2

27,442,942

15,782,634




Gross barrels sold

703,414

358,294

Net barrels sold

575,275

290,664

Daily average barrels sold (gross)

1,927

982

Average sales price per barrel

$83.02

$91.05




Normalised EBITDA per gross barrel sold

US$39.01

US$44.05



1.

Normalised operating profit is operating profit adjusted for exceptional administrative expenses and, in 2013, a gain on stepped acquisition.

2.

Normalised EBITDA is operating profit adjusted for depreciation, amortisation, contribution from test revenue, exceptional administrative expenses and, in 2013, a gain on stepped acquisition.

3.

Sales based taxes have been reclassified from current taxes to cost of sales in 2013 for consistent presentation with 2014.  Foreign exchange gains have been reclassified from administrative expenses to finance income in 2013 for consistent presentation with 2014.

 

Revenues
Group revenues for the year were US$47.5 million (year ended 31 December 2013: US$26.2 million), an increase of 81% on the prior calendar year.

Gross oil sales during the year ended 31 December 2014 were nearly double those of 2013 and averaged 1,927 bbls/day (year ended 31 December 2013: 982 bbls/day).  The average sales price per barrel in the year was US$83.02 per barrel (year ended 31 December 2013: US$91.05 per barrel), reflecting the fall in oil prices, particularly in the last quarter of 2014.

Costs
Cost of sales during the year was US$19.9 million (year ended 31 December 2013: US$8.7 million).  In addition to lease operating expenses on wells classified as commercial for IFRS purposes, cost of sales also includes US$4.3 million of sales based taxes which in prior periods had been accounted under current taxation in the income statement.  Sales based taxes of US$1.0 million have been reclassified from current taxes to Cost of Sales in 2013 in these financial statements for consistent presentation with 2014. Cost of sales in 2014 also includes US$1.3 million of production profit shares and royalties on mezzanine loans, US$5.4 million of depreciation charges and US$1.7 million contribution from test revenue (being an IFRS measure).

Lease operating expenses across all wells during the year on a non-IFRS basis amounted to US$7.2 million (year ended 31 December 2013: US$4.3 million), equivalent to US$10.26 per gross barrel sold or US$12.54 per net barrel sold (year ended 31 December 2013: US$11.89 per gross barrel sold or US$14.66 per net barrel sold).

On-going administrative expenses during the year were US$7.3 million (year ended 31 December 2013: US$5.5 million).  The increase in administrative expenses in 2014 over 2013 is largely accounted for by employment related costs for personnel added during 2013 and costs of consultants and advisers, consistent with the growth in the Group's business during the year.  Foreign exchange gains of US$1.1 million have been reclassified from administrative expenses to finance income in 2013 for consistent presentation with 2014.

Inevitably the lower oil commodity price environment had an impact on the carrying value of the Group's assets at 31 December 2014.  A total impairment charge has been recognised in exceptional administrative expenses of US$20.3 million, of which US$6.7 million relates primarily to seven wells plugged and abandoned during the year and US$12.7 million mainly arises as a result of a reduction in the oil price assumption used in estimating the future discounted cash flows of wells and may be reversed subsequently with higher oil prices.  The remaining US$0.9 million relates to legacy field infrastructure.

Normalised EBITDA
Normalised EBITDA ("NEBITDA") is operating profit adjusted for depreciation, amortisation, test revenue contribution adjustments, exceptional administrative expenses and, in 2013, a gain on stepped acquisition and is a measure of the underlying performance of the business.  For the year ended 31 December 2014 NEBITDA was US$27.4 million (year ended 31 December 2013: US$15.8 million) reflecting the highly profitable nature of the Group's oil producing assets.  This is also represented by normalised EBITDA per gross barrel sold across all the Group's wells which was US$39.01/bbl (year ended 31 December 2013: US$44.05/bbl) despite the rapid deterioration in oil prices in the second half of 2014.

Loss for the year
The Group reported a loss after tax of US$3.9 million for the year (year ended 31 December 2013: profit after tax US$12.2 million).  The movement from profit after tax in the prior year to loss after tax in 2014 was driven by the non-cash impairments included as exceptional administrative expenses explained above under "Costs".

The Directors do not recommend the payment of a dividend for the year (year ended 31 December 2013: US$nil).

Taxation
Group current income tax expense in the US and the UK for the year was US$0.2 million (year ended 31 December 2013: US$0.2 million).  Additionally, a deferred tax credit of US$2.1 million (year ended 31 December 2013: US$nil) was recorded in respect of net operating losses in the US which is matched by a deferred tax charge of the same amount in other comprehensive income in respect of fair value gains on hedging instruments.

During the year, the Group undertook a detailed review of the Group's capital deductions under US taxation. As a result, a prior year restatement has been recorded to reflect the impact of such capital deductions on deferred tax. In 2013, the Group recorded a deferred tax asset of US$7.0 million which has been restated to a net deferred tax of US$nil.

The Group carries total net operating losses for US tax purposes, some of which are immediately available for offset against US taxation charges.

See note 4 for further details of the current tax charge and further details of the prior year restatement of deferred tax.  Additionally, sales based taxes of US$1.0 million have been reclassified from current taxes to Cost of Sales in 2013 in these financial statements for consistent presentation with 2014.

Cash flow, investment and liquidity
Cash inflow from operating activities for the year ended 31 December 2014 was US$28.2 million (year ended 31 December 2013: inflow US$14.4 million), reflecting the increase in NEBITDA.

Net cash flow used in investing activities during the year of US$40.8 million (year ended 31 December 2013: US$34.1 million) comprised principally capital expenditure in the drilling and completion of new wells.

In September 2014, the Group entered into a senior secured reserves based lending facility with Commonwealth Bank of Australia with a headline facility amount of up to US$100.0 million. Under this facility, the initial borrowing base was US$35.0 million, which is subject to regular re-determinations based upon factors including but not limited to petroleum reserves and oil prices.  The available borrowing base is subject to a US$5.0 million withholding by the bank such that the Group at all times maintains a minimum liquidity requirement. On 29 May 2015, the Group received a credit commitment from Commonwealth Bank of Australia to increase the borrowing base to US$37.0 million. Today the borrowing base is drawn at US$28.0 million.

Upon the initial draw of the borrowing base in September 2014, the Group repaid US$10.0 million of debt provided by major shareholders and extended US$10.0 million 15% coupon debt and £8.30 million of convertible loan notes to March 2019, together with extensions to the related warrants.

Net cash flow from financing activities during the year totalled US$15.9 million (year ended 31 December 2013: US$19.2 million) and comprised principally US$27.9 million raised via debt facilities, US$10.0 million in debt repayments and US$2.8 million in debt servicing payments.

At 31 December 2014, the Group held cash balances of US$5.0 million (31 December 2013: US$1.7 million) and had drawn US$23.0 million under its reserves-based lending facility.

As part of managing the Group's liquidity position, during 2014 we commenced a commodity hedging program in order to provide more certainty around future operational cash flows and liquidity.  As at 1 June 2015, the Group held the following oil commodity derivative hedge positions:

 


June to
December

2015

Calendar
2016

 

Calendar
2017

 

Swap contracts




Total volume (bbls)

212,556

138,104

17,350

Price (WTI NYMEX; average)

$69.80

$65.44

$75.30





Collar Contracts




Total volume (bbls)

-

28,986


Ceiling

-

$70.10


Floor

-

$55.00


Note: All commodity derivative hedge prices are WTI NYMEX, averaged across the total contracts for Swap Contracts

 

Commensurate with our increased commodity hedging activities, the Group has elected to apply IFRS hedge accounting in respect of the Group's commodity derivative hedge positions.  Hedge accounting mitigates the profit and loss volatility through the income statement that can arise through the use of derivatives. The Group's oil commodity derivative hedges were designated as cash flow hedges and accordingly it is expected that much of the derivative volatility arising from mark-to-market positions on open contracts at period ends will be recorded as an equity movement in the cash flow hedge reserve rather than through the income statement. On utilisation of the oil swaps when the oil sales take place, the amounts held in equity are recycled to revenue.

Shareholders' equity
As at 31 December 2014 there were 962,376,330 ordinary shares of 0.25 pence each in issue.

Additionally, as at 31 December 2014, a total of up to 446,050,000 new ordinary shares may be issued pursuant to the exercise of share options, warrants or convertible loan notes. 

Cautionary Statement
This announcement contains certain judgements/assumptions and forward-looking statements and assumptions that are subject to the normal risks and uncertainties associated with the exploration, development and production of hydrocarbons.  Whilst the Directors believe that expectations reflected throughout this announcement are reasonable based on the information available at the time of approval of this announcement, actual outcomes and results may be materially different due to factors either beyond the Group's reasonable control or within the Group's control but, for example, following a change in project plans or corporate strategy.  Therefore absolute reliance should not be placed on these judgements/assumptions and forward-looking statements.

Richard Swindells
Chief Financial Officer

 



Consolidated Income Statement

for the year ended 31 December 2014






Restated


Notes

2014


2013*



US$


US$

Continuing operations:










Revenue

2

47,541,974


26,154,210

Cost of sales


(19,927,152)


(8,676,437)






Gross profit


27,614,822


17,477,773






Administrative expenses


(7,274,890)


(5,468,951)

Exceptional administrative expenses

3

(20,306,352)


(1,794,086)






Total administrative expenses


(27,581,242)


(7,263,037)






Gain on stepped acquisition

3

-


3,160,171











Operating profit


33,580


13,374,907






Finance income


367


1,112,712

Finance costs


(5,783,018)


(2,095,430)











(Loss) / profit before taxation


(5,749,071)


12,392,189






Taxation

4

1,855,837


(180,424)






(Loss)/profit for the financial year


(3,893,234)


12,211,765











Attributable to:





Equity shareholders of the Company


(3,893,234)


12,211,765
















Earnings per share from continuing operations

5









Basic (loss) / earnings  per share (cents)


(0.40)


1.29






Diluted (loss) / earnings  per share (cents)


(0.40)


0.99






* Oil sales severance tax of US$1.0 million has been reclassified in 2013 from current tax expense to Cost of Sales for consistent presentation with 2014.  Exchange gains on financial liabilities of US$1.1 million has been reclassified in 2013 from administrative expenses to finance income for consistent presentation with 2014 where exchange losses on financial liabilities are included within finance costs.  Refer to note 4 for details of the prior year restatement in respect of deferred tax.

 

 


Consolidated Statement of Comprehensive Income and Expenditure

for the year ended 31 December 2014










Restated



2014


2013*



US$


US$






(Loss) / profit for the financial year


(3,893,234)


12,211,765






Other comprehensive income










Items that may be reclassified subsequently to profit or loss:





   Foreign exchange gains / (losses) on consolidation


1,206,835


(1,798,107)

   Gain on hedging instruments designated in cash flow hedges


6,136,124


-

   Gain reclassified to profit or loss


(276,012)


-

Deferred tax on hedging instruments designated in cash flow hedges


(2,086,282)


-











Other comprehensive income / (expense) for the financial year, net of tax


4,980,665


(1,798,107)











Total comprehensive income for the financial year


1,087,431


10,413,658






* Refer to note 4 for details of the prior year restatement in respect of deferred tax.

 

 

Consolidated Balance Sheet

as at 31 December 2014










Restated


Notes

2014


2013



US$


US$

Assets





Non-current assets





Property, plant and equipment

6

47,129,451


35,162,676

Intangible assets

7

51,392,916


47,632,151

Derivative financial assets


620,000


-








99,142,367


82,794,827

Current assets





Inventory


1,051,192


1,098,342

Derivative financial assets


5,516,124


31,403

Trade and other receivables


3,525,601


3,836,167

Cash and cash equivalents


5,019,527


1,681,163








15,112,444


6,647,075






Total Assets


114,254,811


89,441,902

Equity and liabilities





Capital and reserves attributable to the Company's equity shareholders





Share capital


4,001,288


3,940,516

Share premium account


1,279,014


-

Foreign exchange translation reserve


6,465,810


5,258,975

Special (restricted) reserve


29,760,145


29,760,145

Retained earnings


4,376,618


5,454,326

Share-based payment reserve


5,420,455


3,101,951

Equity option on convertible loans


3,592,505


2,480,398

Cash flow hedging reserve


3,773,830


-






Total equity


58,669,665


49,996,311






Current liabilities





Trade and other payables


10,430,245


7,616,300

Current tax payable


-


175,000

Borrowings


-


14,194,117








10,430,245


21,985,417

Non-current liabilities





Borrowings


40,082,974


13,517,606

Provisions


5,071,927


3,942,568








45,154,901


17,460,174






Total liabilities


55,585,146


39,445,591






Total equity and liabilities


114,254,811


89,441,902


* US$1.0 million of oil sales severance tax liabilities in 2013 have been reclassified from current tax payable to trade and other payables for consistent presentation with 2014.  Refer to note 4 for details of the prior year restatement in respect of deferred tax.

 

 


Consolidated Statement of Changes in Equity

for the year ended 31 December 2014












Share
capital

Share
premium
account

Foreign
exchange
translation
reserve

Special (restricted) reserve

Retained
earnings

Share
based
payment
reserve

Equity option on convertible loans

Cash flow hedging reserve

Total


US$

US$

US$

US$

US$

US$

US$

US$

US$

Balance at 1 January 2014 (Restated)

3,940,516

-

5,258,975

29,760,145

5,454,326

3,101,951

2,480,398

-

49,996,311

For the year ended 31 December 2014










Loss for the year

-

-

-

-

(3,893,234)

-

-

-

(3,893,234)

Other comprehensive income:









Foreign exchange gain on consolidation

-

-

1,206,835

-

-

-

-

-

1,206,835

Gain on hedging instruments designated in cash flow hedges

-

-

-

-

-

-

-

6,136,124

6,136,124

Gain reclassified to profit or loss

-

-

-

-

-

-

-

(276,012)

(276,012)

Deferred tax on hedging instruments designated as cash flow hedges

-

-

-

-

-

-

-

(2,086,282)

(2,086,282)

Total comprehensive income

-

-

1,206,835

-

(3,893,234)

-

-

3,773,830

1,087,431

Share-based payments

-

-

-

-

-

702,695

-

-

702,695

Issue of share capital for cash

19,404

410,258

-

-

-

-

-

-

429,662

Exercised and expired options and warrants

-

-

-

-

145,660

(145,660)

-

-

-

Extension of convertible loan notes and borrowings

-

-

-

-

2,646,477

1,761,469

1,152,342

-

5,560,288

Conversion of convertible loan notes

41,368

868,756

-

-

23,389

-

(40,235)

-

893,278

Balance at 31 December 2014

4,001,288

1,279,014

6,465,810

29,760,145

4,376,618

5,420,455

3,592,505

3,773,830

58,669,665












Share
capital

Share
premium
account

Foreign
exchange
translation
reserve

Special (restricted) reserve

Retained
earnings

Share
based
payment
reserve

Equity option on convertible loans

Merger
reserve

Total


US$

US$

US$

US$

US$

US$

US$

US$

US$

Balance at 1 January 2013

3,918,859

149,617,140

(4,110,561)

-

(116,351,818)

2,331,794

2,233,017

180,533

37,818,964

For the period ended 31 December 2013










Profit for the year

-

-

-

-

12,211,765

-

-

-

12,211,765

Other comprehensive income:









Foreign exchange loss on consolidation

-

-

(1,798,107)

-

-

-

-

-

(1,798,107)

Total comprehensive income

-

-

(1,798,107)

-

12,211,765

-

-

-

10,413,658

Share-based payments

-

-

-

-

-

858,474

-

-

858,474

Issue of loan with detachable warrants

-

-

-

-

-

110,275

-

-

110,275

Issue of convertible loan notes

-

-

-

-

-

-

255,517

-

255,517

Exercised and expired options and warrants

-

-

-

-

198,592

(198,592)

-

-

-

Conversion of convertible loans

8,622

181,053

-

-

745

-

(8,136)

-

182,284

Issue of share capital for cash

13,035

344,104

-

-

-

-

-

-

357,139

Capital reduction

-

(150,142,297)

11,167,643

29,760,145

109,395,042

-

-

(180,533)

-

Balance at 31 December 2013 (Restated)

3,940,516

-

5,258,975

29,760,145

5,454,326

3,101,951

2,480,398

-

49,996,311












 

 

Consolidated Cash Flow Statement

for the year ended 31 December 2014







Notes

2014


2013



US$


US$






Cash flow from operating activities

8

28,224,478


14,446,061











Cash flow from investing activities





Purchase of intangible assets


(27,253,794)


(10,112,405)

Purchase of property, plant and equipment


(15,002,661)


(12,279,284)

Acquisition of business


-


(12,000,000)

Proceeds on disposal of intangible assets


-


236,295

Proceeds on disposal of property, plant and equipment


1,501,828


45,221

Interest received


367


18,541











Net cash used in investing activities


(40,754,260)


(34,091,632)






Cash flow from financing activities





Proceeds on issue of new shares


429,662


357,139

Proceeds from issue of derivative financial instruments


843,639


-

Payments on derivative financial instruments


(509,275)


-

Repayment of loans


(10,000,000)


(3,000,000)

Proceeds on issue of loans net of issue costs


27,886,400


5,000,000

Proceeds on issue of loans with detachable warrants


-


12,000,000

Proceeds on issue of convertible loan notes


-


5,779,787

Interest paid


(2,787,068)


(925,629)











Net cash generated from financing activities


15,863,358


19,211,297











Net increase / (decrease) in cash and cash equivalents


3,333,576


(434,274)






Cash and cash equivalents at beginning of financial year


1,681,163


2,271,788






Effects of exchange rate changes


4,788


(156,351)











Cash and cash equivalents at end of financial year


5,019,527


1,681,163






 

 

Notes




1.

Basis of Accounting and Presentation of Financial Information




Whilst the financial information included in this announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, it does not contain sufficient information to comply with IFRS as adopted by the European Union. Full financial statements that comply with IFRS as adopted by the European Union will shortly be available to be downloaded from the Company's website at www.nighthawkenergy.com.




The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2014 or the year ended 31 December 2013. The financial information for the year ended 31 December 2014 and the year ended 31 December 2013 are extracted from the statutory accounts of Nighthawk Energy plc. The Company's auditors reported on those accounts and their report was unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report.




The Annual Report for the year ended 31 December 2014, including the auditors' report, and the notice of Annual General Meeting ("AGM") will be posted to shareholders, as applicable, shortly and will be available from the Company's website at www.nighthawkenergy.com.  The AGM will be held at the offices of Simmons & Simmons LLP, CityPoint, One Ropemaker Street, London EC2Y 9SS on 25 June 2015 at 9.30 a.m.



2.

Revenue




An analysis of the Group's revenue for the year (excluding finance income) from continuing operations is as follows:




2014


2013


US$


US$

Continuing operations




Sales revenue

47,265,682


26,147,162

Gains on oil price swaps on designated hedging instruments in cash flow hedges of sales revenue reclassified from equity to profit or loss

276,012


-

Royalty income

280


7,048










47,541,974


26,154,210







3.

Exceptional administrative expenses




2014


2013


US$


US$

Exceptional Administrative Expenses:




Impairment of exploration and production assets

20,306,352


1,794,086










20,306,352


1,794,086









Gain on stepped acquisition

-


3,160,171








During the year decisions were taken to plug and abandon a total of 7 wells. As a result of these decisions, the associated assets have been fully impaired as at 31 December 2014 resulting in an exceptional charge to the income statement of US$6.7 million.  An additional impairment charge of US$13.6 million has also been taken to the income statement at 31 December 2014, of which US$12.7 million represents a partial impairment of certain wells which arises primarily due to the reduction in the spot and forward oil price assumptions used in estimating the future discounted cash flows for each well.  The balance of US$0.9 million relates to the full impairment of legacy field infrastructure deemed to have no value. Refer to notes 6 and 7.




During the prior year Nighthawk acquired a further 25.0% working interest in the Jolly Ranch Project taking its working interest in all leases and wells to 100.0%. The consideration paid for the acquired 25% was US$12 million which indicated the fair value of the existing 75% working interest to be US$36 million resulting in a gain of US$3.16 million recognised on stepped acquisition in 2013.



4.

Taxation




The Parent Company is subject to taxation in the United Kingdom at 21.5% (2013: 23.25%), and the Group's subsidiaries are subject to taxation in the United States at 39.63% (2013: 39.63%).




There was a current tax charge of US$230,445 arising in the US in the financial year (period ended 31 December 2013: US$180,424). No tax charge arose in the in the UK (period ended 31 December 2013: US$nil)




The reasons for the differences between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to (losses) / profits for the year are as follows:






Restated

Reconciliation of the effective tax charge

2014


2013*


US$


US$





(Loss)/profit before taxation

(5,749,071)


12,392,189

(Loss)/profit before tax multiplied by standard rate of corporation tax in the UK of 21.5% (2013: 23.25%)

(1,236,050)


2,881,184





Tax effects of:




Other expenses not deductible for tax purposes

3,112,941


487,915

Different tax rates applied in overseas jurisdictions

330,729


2,424,512

Tax losses utilised within the year

(2,086,282)


(5,613,187)

Unrecognised tax losses

(1,977,175)


-





Tax in income statement and effective tax rate

(1,855,837)


180,424





Income statement tax expense relates to:




Current tax expense

230,445


180,424

Deferred tax credit

(2,086,282)


-





Amounts recorded in other comprehensive income:




Deferred tax charge on hedging instruments

2,086,282


-




* Oil sales severance tax has been reclassified in 2013 from current tax expense to cost of sales for consistent presentation with 2014 and given the taxes are determined based on production. In addition, see below for details of the prior year restatement in respect of deferred tax.




The main UK Corporation tax rate from 1 April 2013 of 23% was reduced to 21% from 1 April 2014, resulting in an effective corporation tax rate of 21.5% (2013: 23.25%) for the year. A number of changes to the UK Corporation tax system were announced in March 2012 Budget Statement. The Finance Act 2013 which was substantially enacted on 2 July 2013 includes legislation reducing the main rate of corporation tax from 24% to 23% from 1 April 2013 and further reducing the main rate of corporation tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015.










Restated

Deferred tax

2014


2013


US$


US$





Deferred tax liabilities:




Accelerated tax deductions

(9,298,946)


(8,312,255)

Fair value of derivatives

(2,086,282)


-





Deferred tax assets




Losses recognised

11,385,228


8,312,255









Net deferred tax

-


-








No deferred tax asset has been recognised for tax losses of US$94.6 million (2013: US$95.6 million) available in the USA due to uncertainty over the timing of future profits and on account of the fact that the Group's ability to utilise some of these tax losses is restricted under S382 of the IRS Code to an amount of US$0.4 million per annum. The unrecognized taxable losses in the USA can be carried forward for U.S. Federal and Colorado State income tax purposes for 20 years. These losses if not utilized will begin to expire in the year 2026 through 2032.




A deferred tax asset in respect of US$15,502,898 (2013: US$11,258,815) taxable losses available in the UK has not been recognised due to the uncertainty over timing of future profits. The taxable losses available in the UK can be carried forward indefinitely.




Prior year restatement




During the year, the Group undertook a detailed review of the Group's capital deductions under US taxation. As a result, a prior year restatement has been recorded to reflect the impact of such capital deductions on deferred tax. In 2013, the Group recorded a deferred tax asset of US$6,978,000 which has been restated to a net position of US$nil.




The impact is as follows at 31 December 2013:






As previously
reported


As restated

 


US$


US$





Deferred tax asset

6,978,000


-

Non-current assets

89,772,827


82,794,827

Total assets

96,419,902


89,441,902





Retained earnings

12,432,326


5,454,326

Total equity

56,974,311


49,996,311





Taxation

5,858,616


(180,424)

Profit for the year

19,189,765


12,211,765




The movement in taxation charge includes the reclassification detailed above. The restatement does not affect periods prior to 2013.



5.

Earnings per share




Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.






Restated


2014


2013


US cents


US cents

Basic earnings per share




(Loss) / earnings per share from continuing operations

(0.40)


1.29





Diluted earnings per share




(Loss) / earnings per share from continuing operations

(0.40)


0.99








Due to the Group's reported loss in the year share options and warrants were not taken into account when determining the weighted average number of ordinary shares in issue during the year for the diluted earnings per share and therefore the basic and diluted earnings per share were the same.




Subsequent to the balance sheet date, 700,000 shares were issued as a result of share options being exercised on 12 January 2015. These transactions would not have a material impact on the number of ordinary shares outstanding and no impact on the number of potential ordinary shares outstanding at the end of the year.




The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:






Restated


2014


2013


US$


US$





(Loss) / earnings used in the calculation of total basic and diluted earnings per share from continuing operations

(5,979,516)


12,211,765










2014


2013

Number of shares




Weighted average number of ordinary shares for the purposes of basic earnings per share

964,301,962


943,710,215








Taking the Company's share options and warrants into consideration in respect of the Company's weighted average number of ordinary shares for the purposes of diluted earnings per share, is as follows:





Number of shares




Dilutive  effect of share options, conversion shares and warrants

-


284,300,076





Weighted average number of ordinary shares for the purposes of diluted earnings per share

964,301,962


1,228,010,291







The Group had 360,093,407 potentially dilutive shares in issue, in respect of share options, warrants and conversion rights which are anti-dilutive in 2014.



6.

Property, Plant and Equipment




Leasehold

land

US$


Plant and
equipment

US$


Office
equipment

US$


Production
assets

US$


Total

US$

Cost










At 31 December 2012

32,834,397


8,984,578


176,283


11,411,353


53,406,611

Additions

9,840,517


6,285,564


18,911


1,180,997


17,325,989

Transfers (note 7)

-


-


-


4,851,487


4,851,487

Disposals

(1,301,232)


(1,541,404)


(72,382)


(4,294,501)


(7,209,519)

Foreign exchange variance

-


-


149


-


149











At 31 December 2013

41,373,682


13,728,738


122,961


13,149,336


68,374,717

Additions

4,622,904


10,914,161


77,203


664,603


16,278,871

Transfers (note 7)

-


-


-


14,574,709


14,574,709

Disposals

(1,422,101)


-


(1,089)


-


(1,423,190)

Foreign exchange variance

-


-


(401)


-


(401)











At 31 December 2014

44,574,485


24,642,899


198,674


28,388,648


97,804,706











Accumulated Depreciation










At 31 December 2012

22,700,029


4,556,168


78,933


4,737,700


32,072,830

Charge

3,582,486


322,657


27,186


2,932,904


6,865,233

Disposals

(1,301,232)


(1,541,404)


(67,211)


(4,294,501)


(7,204,348)

Impairment

-


-


-


1,478,251


1,478,251

Foreign exchange variance

-


-


75


-


75











At 31 December 2013

24,981,283


3,337,421


38,983


4,854,354


33,212,041

Charge

4,246,917


862,103


35,952


4,908,603


10,053,576

Disposals

-


-


(250)


-


(250)

Impairment

251,545


776,035


-


6,382,603


7,410,183

Foreign exchange variance

-


-


(295)


-


(295)











At 31 December 2014

29,479,745


4,975,559


74,390


16,145,561


50,675,255











Net book value










At 31 December 2014

15,094,740


19,667,340


124,284


12,243,087


47,129,451





















At 31 December 2013

16,392,399


10,391,317


83,978


8,294,982


35,162,676





















At 31 December 2012

10,134,368


4,428,410


97,350


6,673,653


21,333,781














Impairments indicated during the current financial period in relation to Property, Plant and Equipment, relate to the decision taken to plug and abandon certain wells, a reduction in oil prices used to estimate the value of wells and an item of legacy field infrastructure being deemed to have no value. Consequentially, certain full and partial impairments, as appropriate, of the remaining values have been recognised, as disclosed in note 3. The Group determines the recoverable amount for individual assets on a well by well basis.




At the balance sheet date there were no further indications of impairment in respect of any of the projects. US$4,698,448 of the depreciation charge for the year has been capitalised within intangible assets (period ended 31 December 2013: US$3,936,897).



7.

Intangible Assets




Exploration
costs


Royalty
interests


Total

 


US$


US$


US$

Cost






At 31 December 2012

62,865,774


859,391


63,725,165

Additions

26,441,499


-


26,441,499

Revaluation on stepped acquisition

3,160,171


-


3,160,171

Transfers (note 6)

(4,851,487)


-


(4,851,487)

Disposals

-


(500,000)


(500,000)







At 31 December 2013

87,615,957


359,391


87,975,348

Additions

33,284,025


-


33,284,025

Transfers (note 6)

(14,574,709)


-


(14,574,709)







At 31 December 2014

106,325,273


359,391


106,684,664







Amortisation and impairment






At 31 December 2012

39,153,458


292,134


39,445,592

Charge

-


4,035


4,035

Contribution to match revenue

841,441


-


841,441

Impairment

315,835


-


315,835

Disposals

-


(263,706)


(263,706)







At 31 December 2013

40,310,734


32,463


40,343,197

Charge

-


4,036


4,036

Contribution to match revenue

1,743,846


-


1,743,846

Impairment

13,200,669


-


13,200,669







At 31 December 2014

55,255,249


36,499


55,291,748







Net book value






At 31 December 2014

51,070,024


322,892


51,392,916













At 31 December 2013

47,305,223


326,928


47,632,151













At 31 December 2012

23,712,316


567,257


24,279,573










Management review each exploration project for indication of impairment at each balance sheet date based on IFRS 6 criteria. Indicators of impairment were considered to exist at 31 December 2014, including leases being allowed to expire, decisions to abandon certain wells and the impact of oil prices on the potential commercial viability of the assets.




The impairments which have been recorded during the current financial period in relation to Exploration Costs, relate to the decisions taken to plug and abandon certain wells, lease expiries, and to a reduction in oil prices used to estimate the value in use of wells. Consequentially, certain full and partial impairments, as appropriate, of the remaining values have been recognised, as disclosed in note 3.




At the balance sheet date there were no further indications of impairment in respect of any of the projects.



8.

Cash Flow from Operating Activities




2014


2013


US$


US$





Profit / (loss) before tax

(5,749,071)


12,392,189

Finance income

(367)


(1,112,712)

Finance costs

5,783,018


2,095,430

Share-based payment

702,695


858,474

Gain on disposal of property, plant and equipment

(78,887)


(40,050)

Fair value gain on royalty liability

(294,910)


-

Unrealised revenue on hedge accounted derivatives

(276,012)


-

Gain on derivative financial instruments not accounted for as hedges

(192,489)


(31,403)

Gain on stepped acquisition

-


(3,160,171)

Impairment of intangible assets net of provision released for asset retirement costs

12,896,169


315,835

Impairment of property, plant and equipment

7,410,183


1,478,251

Depreciation

5,355,128


2,928,336

Amortisation and contribution from test revenue

1,747,882


845,476






27,303,339


16,569,655

Changes in working capital




(Increase) / decrease in inventory

47,150


(611,039)

(Increase) / decrease in trade and other receivables

310,566


(2,960,398)

Increase in trade and other payables

793,868


1,453,267






28,454,923


14,451,485

Tax paid

(230,445)


(5,424)





Net cash flow from operating activities

28,224,478


14,446,061







9.

Events since the balance sheet date




On 12 January 2015, a former director exercised share options over 700,000 shares at 5 pence per share, resulting in a share premium of US$50,430 (£33,250) being recognised.




On 28 January 2015, the Group drew a further US$1.0 million on its reserves based loan facility with Commonwealth Bank of Australia.




On 30 January 2015, the Group announced that it had entered into two joint venture agreements ("JV's") (the Monarch Joint Venture and the El Dorado Joint Venture) in northern Lincoln County, Colorado with Cascade Petroleum LLC ("Cascade"). The transactions involved unincorporated Joint Ventures and are Joint Arrangements under IFRS.




Under the Monarch Joint Venture, Nighthawk entered into a joint development agreement ("JDA") with Cascade pursuant to which each party cross-assigned half of its interest in the acreage within the boundaries of the joint venture to the other party.  This resulted in Nighthawk cross-assigning a 50% Working Interest in 6,197 net mineral acres to Cascade and Nighthawk receiving from Cascade a 50% Working Interest in 17,422 net mineral acres.  All acreage cross-assigned by both parties under the joint venture is non-producing at this time.




In order to earn in to this joint venture, under the terms of the agreement with Cascade, Nighthawk is required to bear 100% of the cost of the first six wells to be drilled within the boundaries of the joint venture, the first four of which must be drilled on or before December 31st 2015, and the remaining two on or before June 30th 2016.  Nighthawk expects that the drill and completion cost of each well will be in the range $1.5 million to $2.0 million. Nighthawk will earn a 50% share of the JV's Net Revenue Interest in the wells estimated to be approximately 40% of the gross revenues of each of these first six wells.  After the initial earn in by Nighthawk, the parties will share on a 50:50 basis all future cost incurred for drilling of additional wells.




Additionally, as announced on 30 January 2015, Cascade initiated a 3D seismic acquisition program over the entire area covered by both Joint Ventures and, under the terms of the JDA, Nighthawk will bear 100% of the permitting, acquisition and processing cost of the 3D seismic program over the Monarch Joint Venture area, which was expected to amount to approximately $2.3 million. Nighthawk has a proportional percentage ownership in the entire 3D covering both joint venture areas.




Under the El Dorado Joint Venture, Nighthawk entered into a JDA with Cascade pursuant to which each party cross-assigned to the other its acreage within the joint venture area based upon each party's proportionate share of the acreage.  This resulted in Nighthawk cross-assigning a 85% Working Interest in its 5,281 net mineral acres to Cascade and Nighthawk receiving from Cascade 15% Working Interest in 35,091 net mineral acres.  All acreage cross-assigned by both parties under joint venture is non-producing at this time.




On 6 March 2015, the Group drew a further US$2.0 million on its reserves based loan facility with Commonwealth Bank of Australia.




On 21 April 2015, the Group drew a further US$2.0 million on its reserves based loan facility with Commonwealth Bank of Australia, taking the total amount drawn under the facility to US$28.0 million.




On 1 May 2015, the Group announced that the borrowing base under the reserves based loan facility with Commonwealth Bank of Australia had been reduced to US$33.0 million.  On 29 May 2015, the Group received a credit commitment from Commonwealth Bank of Australia to increase the borrowing base under the same facility to US$37.0 million.



10.

Litigation update




The Company previously made announcement on 21 May 2014 regarding a lawsuit brought by Running Foxes Petroleum, Inc. against a subsidiary of the Company, in a Colorado court in the United States. Nighthawk believes that the case is completely without merit and the Court recently dismissed of one of the plaintiff's claims. Nighthawk recently filed a motion for summary judgment to dispose of the remaining claims. The facts and governing law do not give rise to any valid legal claim by Running Foxes Petroleum Inc. against Nighthawk, or otherwise raise a valid business issue that needs to be resolved between the companies. Nighthawk believes that the allegations contained in the complaint are baseless, and that the complaint is a groundless action. Nighthawk will vigorously defend against the complaint and seek all available legal remedies.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/nighthawk-energy-plc-nighthawk-or-the-company-final-results-for-the-year-ended-31-december-2014-300092964.html

SOURCE Nighthawk Energy plc


Source: PR Newswire (June 2, 2015 - 4:28 PM EDT)

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