rockhopper exploration plc report and a ccounts · 06 our business model ... area 3 fornovo di taro...

REPORT And AccOunTs for the period ended 31 december 2014

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BuILdInG A WELL-FundEd,FuLL-cYcLE, EXPLORATIOnLEd E&P cOMPAnY

[email protected]

@RockhopperExplo

Company Reg. No. 05250250

Rockhopper Exploration plcHilltop ParkDevizes RoadSalisbury SP3 4UF Telephone +44 (0)1722 414 419

Mediterranean office: Via Cornelia, 49800166 RomaItaliaTelephone +39 06 62290270

designed and produced by JacksonBone Limited.Printed in England by synergy Group.

Contents

STRATEGIC REPORT02 Highlights04 Ataglance06 Ourbusinessmodel07 ChairmanandChiefExecutiveOfficer’sReview10 KeyPerformanceIndicators(KPIs)11 Marketoverview12 ChiefOperatingOfficer’sReview16 ChiefFinancialOfficer’sReview20 Internalcontrolsandriskmanagement21 Principalrisksanduncertainties23 Health,Safety,EnvironmentalandSocialManagement

GOVERNANCE24 Chairman’sGovernanceReport26 BoardofDirectors28 CorporateGovernanceStatement32 Directors’RemunerationReport44 Statutoryinformation46 Independentauditreporttothe

membersofRockhopperExplorationplc

ACCOUNTS47 Groupincomestatement47 Groupstatementofcomprehensiveincome48 Groupbalancesheet49 Groupstatementofchangesinequity50 Groupcashflowstatement51 Notestothegroupfinancialstatements

Parent company financial statements74 Companybalancesheet75 Notestothecompanyfinancialstatements

80 Shareholderinformation

02 Report & Accounts for the period ended 31/12/14 Rockhopper Exploration plc

Strategic Report

Highlights

2010

2011

2012

Sea Lion AppraisalFollowing the successful flow test in late 2010 a further eight exploration and appraisal wells were drilled by Rockhopper across the complex, six of those being discoveries. In addition, Rockhopper participated in a further five non-operated wells

Farm-OutIn July, Rockhopper announced it had entered into a farm-out agreement with Premier Oil plc (“Premier”), whereby Premier acquired a 60% operated interest in Rockhopper’s North Falkland Basin licences in exchange for:≥ an upfront cash payment of US$231m≥ a contribution of US$722m to Rockhopper’s

share of Sea Lion development costs ≥ a net exploration carry of up to US$48m

In addition, Premier agreed to provide a standby finance facility for any development costs not covered by the carry. In recognition of Rockhopper’s understanding of the basin, it was agreed that Rockhopper would retain the sub-surface lead in relation to exploration activities

2014 HIGHLIGHTS

TIMELINE

Sea Lion DiscoveryIn February, the Ocean Guardian drilling rig arrived in Falkland waters to carry out a multi-well programme on behalf of multiple operators. In the spring, Rockhopper (as operator) drilled its first exploration well on the Sea Lion prospect which resulted in an oil discovery. The well was successfully flow tested in September

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Gas Production

Oil & gas discovery

Exploration

Application

GuendalinaProgressing recently acquired Greater Mediterranean portfolio ≥ Plans advancing to

increase production at Guendalina

≥ Civita onshore gas project sanctioned

Completion of recommended offer for Mediterranean Oil & Gas plc

Revised commercial arrangements agreed with Premier Oil subject to documentation

≥ Full Exploration Carry available for 2015 campaign

≥ Deferment of 50% of Development Carry to subsequent phases of developmentPhased, lower cost development solution

adopted for the Sea Lion field ≥ Targeting North East corner of field in Initial Phase≥ Leased FPSO with peak production 50-60,000 bopd≥ Commercialisation of 160 mmbbls in Initial Phase

Rig secured for four well exploration drilling campaign in NFB

Highly disciplined approach to growth in Greater Med ≥ Award of acreage in Croatia

in partnership with Eni≥ Participation in Montenegro

licencing roundCash resources at 31 December 2014

$200m

Report & Accounts for the period ended 31/12/14 03Rockhopper Exploration plc

Strategic Report

2013

2014

2015

Consolidates interests in NFB acreage Rockhopper consolidates its interests in the Falklands through the farm-in to acreage held by Desire Petroleum. As a result, Rockhopper increases its interests in licences PL004a, PL004b and PL004c to 24%

Acquisition of MOG In May, Rockhopper announced a recommended cash and share offer to acquire AIM listed Mediterranean Oil & Gas plc. The transaction completed in August.Through the acquisition Rockhopper acquired 2P/2C resource base of 32.5 million barrels of oil equivalent and a portfolio of production, development, appraisal and exploration interests in Italy, Malta and France

In November, and in response to a significant reduction in the global price for oil, Rockhopper and Premier announce a lower cost, phased development concept for Sea Lion

Exploration in NFB commences In February, Rockhopper announced that the drilling unit Eirik Raude has begun its mobilisation to the North Falkland Basin (“NFB”) from West Africa

Sea Lion

NFB Exploration

NFB

2015 2016 2017

Civita

GuendalinaSide track wellQ4 2015/Q1 2016

MEDITERRANEAN

Faseto

Malta Area 3

FPSO FEED Contract

Zebedee Isobel Jayne Chatham

Submission of draft Field Development Plan to FIGEnd 2015

Project SanctionMid 2016

Construction commencesJanuary 2015

First gasQ4 2015

Exploration WellQ3 2015

3D SeismicApril (Contingent activity)

Croatia3D SeismicH2 (Contingent activity)

OUTLOOK

North Falkland drilling campaign commenced≥ Exploration success at Zebedee well≥ Isobel Deep well spudded

Post 31 December 2014:

Confirmation of Falkland Island Capital Gains Tax Liability Deferment


Strategic Report

At a glance

NORTH FALKLAND BASIN

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Falkland IslandsSea Lion phase 1a (PL032)• 40% working interest• 160 mmbbls gross,

64 mmbbls net to Rockhopper• Targeting FID in mid 2016• First oil anticipated late 2019

Sea Lion phase 1b (PL032)• 40% working interest• 160-220* mmbbls gross,

64-88* mmbbls net to Rockhopper

NFB Exploration (PL004)• 24% working interest• Contains Zebedee, Isobel Deep

and Jayne prospects

*Dependent on outcome of West Flank gas cap well.

Rockhopper Exploration plc (AIM: RKH) is an oil and gas exploration and production company with interests in the North Falkland Basin and the Greater Mediterranean region.

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Strategic Report

Head OfficeLondon and Salisbury, UK

Regional OfficeRome, Italy

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ItalyGuendalina• 40% working interest• Northern Adriatic production

Ombrina Mare• 100% working interest• Central Adriatic appraisal

Civita• 100% working interest• Onshore gas development

Monte Grosso• 23% working interest• Exploration

MaltaArea 3• 40% working interest• Exploration

CroatiaBlock 9 • 40% working interest• Exploration

Reserves (2P) 1Contingent Resources (2C) 182Prospective Resources (P2) 622

Reserves and Resources (mmboe)

All reserves and resource numbers are management estimates


Strategic Report

Our business model: Building a well-funded, full cycle, exploration led E&P company

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Balanced portfolio in core geographical areas

CREATINGVALUE

ROCKHOPPER BUSINESS MODEL

We aim to do this by: > Maintaining balance sheet strength and flexibility> Rockhopper has a robust balance sheet with $200 million cash (December 2014)

and is fully funded through the initial phase of Sea Lion development through a combination of Development Carry and Standby Loan from Premier

> Building a balanced portfolio of assets in our core geographical areas of the North Falkland Basin and the Greater Mediterranean/North African region> Taking advantage of the current market environment to opportunistically add

production assets and cashflow to our portfolio

> Leveraging our technical skill set to target value accretive exploration in proven hydrocarbon basins


Strategic Report

Chairman and Chief Executive Officer’s Review

Despite a difficult commodity price backdrop, Rockhopper has had a busy period both in building up to a new exploration campaign in

the Falklands whilst continuing to progress the Sea Lion development.

The dramatic fall in the global price of oil during the second half of 2014 introduced significant risks and challenges for the wider industry with a resultant impact on sentiment towards the listed oil & gas sector.

However, Rockhopper responded quickly to the changing market environment, most notably, through the adoption of a revised development concept on Sea Lion and is now well placed to capture the opportunities that are likely to emerge as a result. Such opportunities include capturing lower costs for the Sea Lion project and leveraging our relative balance sheet strength to target value accretive growth opportunities.

Our long anticipated exploration campaign has now commenced and Rockhopper will participate in all four wells drilled in the North Falkland Basin. This campaign, which we believe is probably one of the most exciting taking place across the industry in 2015, commenced with the successful Zebedee well which initial management estimates suggest discovered in excess of 50 mmbbls recoverable oil in the Zebedee reservoir alone. Work is ongoing to determine the upside in the Hector and Ninky South reservoirs.

In addition, we were pleased to finalise our tax deferral arrangements with the Falkland Island Government which is addressed in more detail in the Chief Financial Officer’s Review.

North Falkland exploration campaign commencedHaving retained the subsurface lead for exploration in our joint venture with Premier, we are delighted that our 2015 North Falkland exploration campaign, which has been years in the planning, has now commenced.

In June 2014, we announced that the Eirik Raude drilling unit had been contracted for a joint campaign across the North and South Falkland Basins. A temporary dock facility located in Stanley Harbour has been built to support the exploration campaign. The rig commenced mobilisation from West Africa in late January 2015 and arrived in Falkland waters in late February, ahead of schedule.

The exploration campaign will consist of at least four wells in the North Falkland Basin (“NFB”), with each well targeting multiple stacked fans in licences PL004 and PL032.

Planned drilling order:

Well RKH% Location

1 Zebedee 24.0% NFB, Licence PL004b

2 Isobel Deep 24.0% NFB, Licence PL004a

3 Humpback — SFB, southern licence area

4 Jayne East 24.0% NFB, Licence PL004c

5 Chatham 40.0% NFB, Licence PL032

6 Second Noble — South or East FB, operated well to be decided

On 2 April 2015, we were delighted to announce that the Zebedee well had successfully made an oil & gas discovery, encountering 27.9 metres of net oil pay and 18.5 metres of net gas pay. The second well in the program, Isobel Deep, was spudded on 8 April.

As a result of accessing the full Exploration Carry from Premier, Rockhopper’s expected share of costs for the four wells in PL004 and PL032 is estimated at $25 million.

Phased, lower cost development concept for Sea LionIn November 2014, the company announced a phased, lower cost development solution for Sea Lion with the initial phase targeting the commercialisation of approximately 160 mmbbls in the North East segment of the field over a 15 year period.

PIERRE JUNGELS SAMUEL MOODY


Strategic Report

Chairman and Chief Executive Officer’s Review continued

The concept is likely to consist of 14 wells (comprising 8 producers, 5 water injectors and 1 gas producer/injector) with production via a leased floating, production, storage and offloading vessel (“FPSO”) and will target a gross plateau of 50,000 to 60,000 barrels of oil per day from a single subsea drill centre.

Based on cost analysis as at November 2014, the capital expenditure to first oil for the initial phase is anticipated at approximately $1.8 billion, significantly less than previous estimates for the Tension Leg Platform (“TLP”) concept.

One direct impact of the fall in oil prices is the reduction in the cost of services to the industry – a good example of this is the day rate for drilling rigs. Based on the November analysis, approximately a third of Sea Lion project costs are estimated to be drilling costs and we have seen these costs fall by between 30% and 40% since mid 2014. As the Sea Lion project progresses towards sanction over the course of 2015 and early 2016 we anticipate taking advantage of the weaker supply and service market to negotiate further cost savings prior to project sanction.

Phase 1A cost estimates (Nov 2014) US$bn

Pre-sanction 0.1

SURF and installation 0.7

Project management 0.4

Pre-first oil drillex 0.6

Total (pre-first oil) 1.8

The project continues to make good progress through the pre-FEED stage with over 80 people within the operator’s Falkland Island Business Unit contributing to various aspects of the project’s development. The joint venture partners approved a budget for pre-sanction spend on Sea Lion during 2015 of $70 million gross.

Looking ahead, a FEED contract award is expected in the second quarter of 2015 with the submission of a draft Field Development Plan (“FDP”) to the Falkland Island Government (“FIG”) anticipated around the end of the year. Project sanction for the first phase of development is targeted during mid 2016 and the precise timing will be driven by not just the cost reductions that can be achieved but the long-term oil price outlook at that time.

Premier has confirmed that while a project of this size could likely be funded from existing facilities and cash flows, they will continue to seek a partner for the Sea Lion development.

Revised commercial termsIn light of the move to a phased development, Rockhopper and Premier have agreed to amend their commercial arrangements, under which:

• Rockhopper to access the full $48 million Exploration Carry for the 2015 drilling campaign

• Rockhopper to fund its share of pre-sanction costs, currently estimated at $100 million gross ($40 million net to Rockhopper)

• Rockhopper to retain $337 million Development Carry for the initial phase; a further $337 million Development Carry deferred to the next phase of development

• Existing Standby Finance arrangements to be simplified to a more traditional loan of up to $750 million

The amendments outlined above are subject to negotiating fully termed agreements but importantly, Rockhopper remains fully funded through a combination of Development Carry and amended loan from Premier.

As a consequence of the move to a phased development Rockhopper and Premier have made a request to FIG to extend the validity of the Discovery Area in PL032 to October 2016. Such request has been approved by FIG and the Secretary of State and is currently being documented.


Strategic Report

Building a second core area in the Greater Mediterranean/North Africa RegionIn August 2014 we completed the acquisition of AIM listed Mediterranean Oil & Gas plc (“MOG”). Through MOG, Rockhopper acquired a portfolio of production, development and exploration interests in Italy, Malta and France with a combined 2C contingent resource of over 32 million barrels of oil equivalent. The acquisition price represented less than $1 per barrel of oil equivalent.

Since the acquisition of MOG, steady progress has been made in advancing the portfolio and new legislation passed through the Italian Parliament suggests that development projects in the country should now be easier to progress.

Technical work on the Monte Grosso prospect in the Southern Appennine confirms our view that this remains a highly attractive exploration target, on trend with the world class Val D’Agri and Tempa Rossa oil fields. Discussions continue with a wide variety of stakeholders to expedite the planning and drilling process.

In addition, in January 2015 we were pleased to be awarded an offshore Block in the Croatian licencing round in partnership with Eni.

OutlookThe Zebedee well result represents a fantastic start to the 2015 Falklands drilling campaign and provides early proof of the significant remaining potential of the North Falkland Basin.

The adoption of a phased, lower cost development solution for Sea Lion significantly de-risks the project and should allow us to capture further cost savings as we progress through the FEED and draft FDP submission processes in 2015 and early 2016.

While the spot price for Brent oil today is below $60 per barrel, when assessing the economics of projects such as Sea Lion it is the long-term price outlook which is most important. We could well find ourselves in a position that we will sanction Sea Lion in a low oil price-low cost environment but start producing oil in 2019 or 2020 when the oil price could be materially higher.

Rockhopper’s balance sheet remains strong with cash resources of $200 million as at 31 December 2014 and the company is well placed to take advantage of potential growth opportunities which may present themselves as a result of the current market environment.

Dr Pierre Jungels cbe Samuel MoodyChairman Chief Executive Officer

8 April 2015

“ Rockhopper responded quickly to the changing market environment (through the adoption of a revised development concept on Sea Lion) and is well placed to capture the opportunities that are likely to emerge as a result”

KPI #1

2015

KPI #2

KPI #3

Completion of a safe and successful exploration campaign in the North Falkland Basin

Achievement of specific milestones for the Final Investment Decision on the Sea Lion development

New venture activity to enhance the Company’s portfolio of assets in its strategic areas of interest

Definition

KPI #4 Progressing funding alternatives for the uncarried Sea Lion development costs


Strategic Report

KPI #1

2014

KPI #2

KPI #4

Key Performance Indicators (KPIs)

Complete all operations in accordance with commonly accepted health and safety standards with no materially adverse environmental impact caused by the operations.

Securing a rig contract to allow the group to pursue its exploration strategy in the Falkland Islands.

Pursue new venture opportunities with a view to enriching the group’s asset portfolio.

There have been no HSE incidents.

Eirik Raude rig contracted in July 2014. Exploration campaign commenced in March 2015.

The acquisition of AIM listed Mediterranean Oil & Gas plc (“MOG”) was completed in August 2014 providing the company with a portfolio of producing, development and exploration interests in Italy, Malta and France. Subsequent to the acquisition of MOG, the company has been awarded an interest in an exploration block in Croatia and participated in the Montenegro licencing round.

Definition Performance Attainment

KPIs provide a guide of management ability to successfully deliver against pre-defined strategic objectives.

KPIs for the period ended 31 December 2014 were based around certain short term targets designed to ensure the company achieves its long term strategy.

For the year ending 31 December 2015, KPIs have again been set based on short term targets designed to ensure the company achieves its long term strategy.

Fully achieved

Fully achieved

Fully achieved

KPI #3 Achieving substantial progress towards FID for the Sea Lion development.

Partially achieved

Adoption of a lower cost, phased development concept together with revised commercial arrangements with Premier (subject to negotiation of fully termed documentation) substantially de-risked the Sea Lion development.

KPI #5 Establish the group’s financing alternatives for the Sea Lion Development.

Following the adoption of a phased development concept for Sea Lion, the anticipated gross cost to first oil has been reduced from $3.8bn to $1.8bn. Discussions with a range of alternative capital providers are advancing in light of the revised development concept and commercial arrangements adopted.

Fully achieved


Strategic Report

Market overview

MARKET OVERVIEW

Economic overview• Global economic recovery continued in 2014• Recovery driven primarily by growth in the United

States, where GDP increased 2.5% year-on-year• Europe, in contrast, continued to struggle• Chinese growth cooling

Oil price• Relative stability of oil prices in H1 2014, with

Brent crude trading between $100-$115 per barrel• Brent price falls below $45 per barrel in January

2015• Oil price decline driven by a combination of

reduced global demand, rising US production and maintained production levels from OPEC

• Outlook for oil prices provides comfort on a recovery with Brent futures curve pointing to oil prices between $75-$80 per barrel by the end of 2019

Equity markets• 2014 was a volatile year globally for equity markets• Investor sentiment for the conventional

international oil & gas sector muted with increased focus on US unconventional resource plays

• Significant sell-off across the sector during Q3 2014 as global oil prices decline

Industry costs• Service costs remained high during H1 2014 in

line with oil prices• In response to falling oil prices in mid 2014, capital

expenditure cuts announced across the industry• Reduced demand for products and services

crystalised a dramatic fall in industry costs• Oil service sector responded by initiating a round

of industry consolidation (eg corporate combination of Halliburton and Baker Hughes)

• Further weakness in industry cost structure expected throughout 2015

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A summary of the global oil and gas market

Chief Operating Officer’s Review

NFB EXPLORATION

“ The Zebedee well result represents a fantastic start to the 2015 Falklands drilling campaign and provides early proof of the significant remaining potential of the North Falkland Basin”


Strategic Report

NFB Exploration commencedRockhopper were delighted to be able to announce in early April 2015 the results of the Zebedee Well (the first well of 2015 exploration programme in the North Falklands Basin) as a successful oil and gas discovery.

Having retained the sub-surface lead for exploration in the farm out to Premier Oil in 2012, Rockhopper had proposed a series of well locations of which Zebedee was the first to be drilled. All seven reservoir targets were penetrated on or close to prognosis with an eighth reservoir (Ninky South) being tagged at its margin.

Three of the eight sands were proven to be hydrocarbon bearing through wireline logging and formation testing. A total of 18.5m of net gas pay and 27.9m of net oil pay were encountered in the well in sands of the F2 stratigraphic interval and good oil shows were recorded throughout the deeper F3 stratigraphic section.

Hector The Hector sand was encountered on prognosis near the crest of the structure and penetrated a gross reservoir package of 27.6m. Net gas pay was 18.5m and initial indications are of good reservoir properties.

No gas oil contact was observed within the reservoir, and pressure data indicates that the gas gradient is offset from the gas gradient observed previously in the Beverley and Casper South reservoirs. Hector therefore may be oil bearing in a downdip location (the Hector ‘oil rim’) and potential oil volumes are being generated. The well also proved an additional Pmean recoverable gas resource of approximately 280bcf (approximately 50mmboe).

ZebedeeThe Zebedee sand was encountered on prognosis, penetrating a gross reservoir package of 29.3m with net oil pay of 25.3m. This reservoir was the principal target of the well, and proves the presence of a further fan system to the south of Sea Lion and the previously discovered satellites.

The reservoir quality is amongst the best encountered to date and no oil water contact was observed in the well. The entire section of the Zebedee formation was cored and the results of core data analyses will benefit the planning of the future development.

Initial management estimates of discovered recoverable resources in the Zebedee reservoir are in excess of 50 mmbbls.

Ninky South In addition to the two principal reservoirs a further F2 reservoir was encountered above the Zebedee fan at 2,436.6m measured depth which was also oil bearing. The well gross reservoir thickness was 6.4m and net oil pay was 2.6m.

The sand, which Rockhopper currently map to form part of the Ninky South prospect which is fully developed south of the well, was tagged in a very marginal position and was not therefore included in the pre-drill stack prognosis but which has the potential to contain recoverable resources (within the better developed reservoir area) of around 20mmbbls.

F3 Reservoirs Whilst good oil shows were recorded throughout the F3 sequence and the Parker, Catriona and Jayne West (Orinoco) reservoirs were all penetrated, the reservoir quality at this location means that only limited oil pay was measured. Wireline logs indicate 1.4m of net oil pay developed in the Jayne West reservoir. The Company were however much encouraged that there is an apparent deeper hydrocarbon system operating to the south of Sea Lion.

All hydrocarbon volumes quoted are Rockhopper Management initial estimates and in the case of oil volumes utilise a 30% RF on STOIIP volumes. Gas volumes converted at 5.6 bcf = 1 mmboe STOIIP: Stock Tank Oil Initially In Place, GIIP: Gas Initially in Place, RF: Recovery Factor


Strategic Report

FIONA MACAULAY

NFB DRILLING SCHEDULE 2015

OperationsThe Zebedee well has now been plugged and abandoned as a successful exploration well. The rig has now moved to the second well of the campaign, the Isobel Deep well, which spudded on 8 April 2015.

The Isobel Deep well is located on licence PL004a in which Rockhopper has a 24% working interest and is an exploration well on the Isobel Deep prospect. This well will be the first test of the F3 fan system entering the basin from the South East margin and developed as a sequence of stacked reservoirs. This well will be targeting the Isobel Deep fan in an area of maximum mapped reservoir thickness and has a GCoS of 20%. The well is targeting Gross Pmean resources of 72mmbbls (range 9-207mmbbls) although the complex as a whole in this area has gross Pmean prospective resources of just over 500mmbbls.

Drilling operations are expected to take approximately 30 days and no coring or testing is planned for this well.

Success at Isobel Deep could, subject to partner agreement, lead to a follow-on appraisal well on the wider Elaine/Isobel complex.

Impact of exploration campaign on Sea Lion developmentWhile the outcome of this exploration campaign, which has the potential to significantly increase the discovered resource in the North Falkland Basin, will have limited impact on the initial phase of Sea Lion development, it will determine the shape of subsequent development phases in the area.

In particular, in the event that the Chatham/West Flank gas cap well is successful, we would expect to add at least 60 million barrels gross to the already discovered 160 million barrels that we expect to commercialise through Phase 1b.

The Phase 2 development will be impacted by success at Jayne East while success at Isobel Deep expands the development area significantly.

Sea Lion development phases


Strategic Report

Chief Operating Officer’s Review continued

Building a Greater Mediterranean presenceIn May 2014, Rockhopper announced a recommended cash and share offer to acquire AIM listed Mediterranean Oil & Gas plc. The transaction completed in August 2014.

Through the acquisition Rockhopper acquired 2P/2C resource base of 32.5 million barrels of oil equivalent and a material portfolio of production, appraisal and exploration assets. Key assets in the portfolio include:

Guendalina, Italy (Rockhopper 20%)Operated by Eni, the Guendalina gas field, located in the Northern Adriatic, has been on production since 25 October 2011.

Rockhopper are working closely with Eni to sidetrack one of the two gas production wells on the Guendalina field that has been shut in following damage to the wellbore experienced in 2012. The sidetrack is anticipated to enhance production levels and is currently scheduled to commence in Q4 2015.

Ombrina Mare, Italy (Rockhopper 100%)Operated by Rockhopper, the Ombrina Mare oil & gas discovery is an appraisal/development project located off the Abruzzo region in the shallow waters of the Central Adriatic. Subject to necessary approvals and the granting of the field concession permit, Rockhopper would be hoping to be in a position to drill an appraisal well on the field by the end of 2016 following which it would be able to optimise the development plans for the asset.

Monte Grosso, Italy (Rockhopper 23%)Operated by Rockhopper, the Monte Grosso oil prospect is located in the Southern Appennine thrust-fold belt on trend with the largest on shore oil production and development area in Western Europe of Val D’Agri and Tempa Rossa. Monte Grosso remains one of the largest undrilled prospects onshore in Western Europe and, with its partners Eni and Total, Rockhopper is progressing the permitting process to enable drilling.

Civita, Italy (Rockhopper 100%)Operated by Rockhopper, the Civita gas field development is located onshore Abruzzo in the Aglavizza concession. Development activities are commencing for the pipeline and site facilities construction, with the aim of production commencing in Q4 2015.

Area 3, Malta (Rockhopper 40%)A 2D seismic survey was completed in April 2014 and the processing of such seismic has recently been completed. The seismic has identified a number of leads of sufficient size to potentially be of interest. The joint venture has agreed to request a one year extension of the Exploration Study Agreement prior to making a decision to enter a Production Sharing Contract.

Block 9, Croatia (Rockhopper 40%)In January 2015, Rockhopper was awarded a 40% interest in offshore Block 9 in Croatia in partnership with Eni (60% interest and operator). The block is located in the relatively shallow water of the prolific Northern Adriatic gas province and contains the previously discovered Ksenija accumulation along with the Klaudija prospect. The anticipated work programme consists of seismic acquisition, processing and re-processing during the first exploration phase (3 years) with the drilling of a well in the second exploration phase (if Rockhopper elects to proceed to the second phase). Signature of a Production Sharing Contract with the Croatian Hydrocarbon Authority is now expected in mid 2015.

Montenegro licensing roundRockhopper has applied for acreage in the first offshore licensing round in Montenegro. Rockhopper awaits the outcome of such application but to date no awards have been made.

Fiona MacAulayChief Operating Officer

8 April 2015

“ Through the acquisition (of MOG), Rockhopper acquired 2P/2C resource base of 32.5 million barrels of oil equivalent and a portfolio of production, appraisal and exploration assets”


Strategic Report

Ombrina Mare, Central Adriatic

Civita, Abruzzo

60°N

40°N

20°N

20°S

40°S

60°S

60°N

40°N

20°N

0°0°

20°S

40°S

60°S

60°N

40°N

20°N

20°S

40°S

60°S

60°N

40°N

20°N

0°0°

20°S

40°S

60°S



58°0'W60°0'W

48°0'S

49°0'S

50°0'S

51°0'S

52°0'S

0 100

Kilometers





STANLEYSTANLEY

10°0'E

40°0'N

MONTENEGRO

CR

OA

TI

A

IT

AL

YI

TA

L

Y

CR

OA

TI

A

MONTENEGRO

0 100

Kilometers

Ombrina Mare

AC 19PI

AR 81FR

AC 35AG

BLOCK 9

CivitaAglavizza

Scanzano

Ombrina Mare

AC 19PI

AR 81FR

AC 35AG

BLOCK 9

AREA 3

Fornovo di Taro

Monteardone

San BasileCivita

Aglavizza

Torrente Celone

Monte Verdese

Torrente la Vella

Scanzano

300510

Casteldi Lama

CorropoliVilla

Mazzarossa

Agnone San Buono

Serra SanBernando

MasseriaLa Rocca

MonteGrosso

OmbrinaMare

Gas Production

Oil & gas discovery

Exploration

Application

Guendalina


Strategic Report

Chief Financial Officer’s Review

STEWART MACDONALD

From a finance perspective, the most significant events of the year include:

– Revision of the commercial terms for Sea Lion with Premier

– Confirmation of Falkland Islands Capital Gains Tax Liability Deferment

– The acquisition of Mediterranean Oil & Gas plc (“MOG”)

Revised commercial terms on Sea LionAs outlined in the Chairman’s and CEO’s review, in light of the move to a phased development, Rockhopper and Premier have agreed, subject to negotiation of fully termed documentation and respective board approvals, to amend their commercial arrangements, under which:

• Rockhopper to access the full $48 million Exploration Carry for the 2015 drilling campaign

• Rockhopper to fund its share of pre-sanction costs, currently estimated at $100 million gross ($40 million net to Rockhopper)

• Rockhopper to retain $337 million Development Carry for the initial phase; a further $337 million Development Carry deferred to the next phase of development

• Existing Standby Finance arrangements to be simplified to a more traditional loan of up to $750 million

Documentation of the revised commercial arrangements is progressing.

Based on the Operator’s November 2014 cost estimates, capital expenditure to first oil on Sea Lion is expected to be $1.8 billion gross ($720 million net to Rockhopper). As such, Rockhopper remains fully funded through a combination of the $337 million Development Carry and simplified $750 million loan from Premier.

Tax settlement with Falkland Island GovernmentRockhopper has agreed binding documentation with the Falkland Islands Government (“FIG”) in relation to the tax arising from the Company’s 2012 farm-out to Premier.

The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and reflects the principles agreed between Rockhopper and FIG in December 2013 and is made under Falkland Islands Extra Statutory Concession 16. The highlights of which include:

• Outstanding tax liability confirmed at £64.4 million (approximately $95.7 million) and payable on the first royalty payment date on Sea Lion (or earlier subject to certain events)

• First royalty payment date anticipated to occur within six months of first oil production which itself is estimated to occur in late 2019 (assuming Sea Lion project sanction in mid 2016)

• Outstanding tax liability amount may be revised downwards if the Falkland Islands’ Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier is used to fund exploration activities in the Falkland Islands license areas; or (ii) any element of the Development Carry from Premier becomes “irrecoverable”

• Rockhopper provides certain “creditor protection” undertakings to FIG while the tax liability remains outstanding including (i) restriction on dividends or distributions; (ii) granting of first ranking security over Rockhopper assets; and (iii) while such security is in place, restrictions, subject to conventional carve outs, on granting further security

• Intention that at the point Rockhopper is able to secure senior debt for the Sea Lion project, the security provided to FIG will be released and FIG will be provided with a standby letter of credit to preserve its creditor position


Strategic Report

Under the amended commercial arrangements with Premier, Rockhopper intend to access the full $48 million of Exploration Carry during the 2015 drilling campaign. In the event that the full Exploration Carry is utilised, under the terms of the Tax Settlement Deed we expect the outstanding tax liability to reduce by up to £4.7 million (approximately $7.0 million).

Further details of the Tax Settlement DeedQuantum• Total Tax Liability agreed at £90.3 million with

£26.0 million already paid by Rockhopper resulting in a Outstanding Tax Liability of £64.4 million (figures subject to rounding)

• Outstanding Tax Liability intended to be binding and final, subject to the satisfaction of the Falkland Islands’ Commissioner of Taxation as to the following:

– If as anticipated the Exploration Carry is used to fund exploration work or appraisal work in the Falkland Island licences, Rockhopper will be entitled to make a deduction from the computation of the Outstanding Tax Liability

– If any part of the Development Carry from Premier becomes “irrecoverable”, Rockhopper will be entitled to make an adjustment to the Outstanding Tax Liability

Timing• Outstanding Tax Liability payable on the earlier of: – First royalty payment date, which is expected to

occur within six months of the date of first oil (first oil anticipated in late 2019)

– The date on which Rockhopper disposes of all or a substantial part of the Company’s remaining interest in the Licences, or otherwise realises value from the Licences

– A change of control of Rockhopper Exploration plc

Security and undertakings• Rockhopper to grant to FIG fixed and floating

security over all of its assets (with limited carve outs where such security would conflict with applicable law or the terms of an existing agreement)

• While such security is in place, restrictions, subject to conventional carve outs, on granting further security

• Such security to be terminated upon earlier of: – The Outstanding Tax Liability being paid – Rockhopper procuring a standby letter of credit

in an amount equal to the full amount of the then outstanding Deferred Tax Liability from a bank or other corporate entity

• Rockhopper agrees to maintain a minimum 20% interest in licence PL032

• Rockhopper undertakes not to make any dividends or distributions while the tax liability remains outstanding (in whole or in part)

As a result of the tax settlement, the tax liability will be re-classified as a non-current liability in the Group’s next balance sheet and discounted.

Acquisition of Mediterranean Oil & Gas plc (“MOG”)The acquisition of MOG completed in August 2014. Through MOG, Rockhopper acquired a portfolio of production, development and exploration interests across Italy, Malta and France with a combined 2C contingent resources of over 32 mmboe at an acquisition price of less than $1 per barrel.

Under the terms of the agreement announced on 23 May 2014, shareholders of MOG received 4.875 pence in cash and 0.0172 shares of the company per MOG share.

“ As a result of the tax settlement, Rockhopper now has much greater certainty in respect of both the quantum and timing of the tax liability. The security arrangements and undertakings agreed provide credit protection to FIG while preserving Rockhopper’s strong balance sheet and ability to obtain senior debt for the Sea Lion development on a cost effective basis”


Strategic Report

Chief Financial Officer’s Review continued

The transaction has been accounted for by the purchase method of accounting with an effective date of 11 August 2014 being the date on which the group gained control of MOG. Information in respect of the assets and liabilities acquired and the fair value allocation to the MOG assets in accordance with the provisions of “IFRS3 – Business Combinations” has been determined and is as follows:

Recognised values on acquisition $’000

Intangible exploration and appraisal assets 30,288

Property, plant and equipment 15,663

Long term other receivables 625

Inventories 2,683

Trade and other receivables 4,634

Restricted cash 268

Trade and other payables (6,845)

Long-term provisions (23,872)

Net identifiable assets and liabilities 23,444

Goodwill 12,074

Satisfied by:

Cash ($35,700,000 less $11,663,000 of cash acquired) 24,037

Equity instruments 7,481,816 ordinary shares 11,481

Total consideration 35,518

The fair value of equity instruments has been determined by reference to the closing share price on the trading day immediately prior to the completion of the acquisition.

Goodwill arises due to the difference between the fair value of the net assets and the consideration transferred and relates to the portfolio of exploration and appraisal assets, which together have the optionality and potential to provide value in excess of this fair value as well as the strategic premium associated with a significant presence in a new region.

Since the acquisition date, MOG has contributed $1.9 million to group revenues and added $4.4 million to the group loss. This contribution to group loss includes depreciation and impairments. The EBITDA of MOG since acquisition is actually a much smaller loss of $0.5 million.

Impairment testingGiven recent declines in oil and gas prices, Rockhopper has tested the carrying value of our assets for impairment. Carrying values are compared to the fair value of the assets based on discounted cash flow models.

With no cash flow generation from Sea Lion anticipated until 2019, the impact of the current low oil price environment on the fair value calculations is limited as Rockhopper has maintained its longer-term oil price assumption on the basis of the current oil futures market. As such, no impairment arises on the group’s Sea Lion project.

A modest impairment of $1.5 million has been recognised on the Mediterranean portfolio acquired through MOG. The impairment relates to the expected reduction in price realised from the sale of gas as well as a small increase in expected capital costs and revised production outlook for Guendalina.

Cash and cash movementRockhopper’s cash resources at the year end are $200 million (31 March 2014: $247 million). The group has no borrowings.

$m

Opening cash balance (1 April 2014) 247

MOG acquisition consideration and costs (26)

NFB exploration and pre-development spend (10)

Admin and miscellaneous expenses (11)

Closing cash balance (31 December 2014) 200


Strategic Report

OutlookWith $200 million of cash on our balance sheet, Rockhopper is well positioned to fund its share of expenditure on the North Falkland exploration campaign and Sea Lion pre-sanction costs, which are estimated at $25 million and $28 million respectively during 2015. Capital expenditure on the Mediterranean portfolio is estimated at approximately $10 million primarily related to the side-track well on Guendalina and the completion of the Civita onshore gas development, both of which are expected to be completed during Q4 2015 and have a positive impact on the group’s revenue and cash flow generation going forward.

As a result of the tax settlement, Rockhopper now has much greater certainty in respect of both the quantum and timing of the tax liability. The security arrangements and undertakings agreed provide credit protection to FIG while preserving Rockhopper’s strong balance sheet and ability to obtain senior debt for the Sea Lion development on a cost effective basis.

As we progress towards the award of the FEED contract during Q2 2015 and now that we have the certainty of the tax settlement in place, our ability to progress discussions with external debt providers (as an alternative to the standby loan from Premier) for our uncarried portion of Sea Lion development costs is significantly enhanced.

Stewart MacDonaldChief Financial Officer

8 April 2015

“ With $200 million of cash on our balance sheet, Rockhopper is well positioned to fund its share of expenditure on the North Falkland exploration campaign and Sea Lion pre-sanction costs, which are estimated at $25 million and $28 million respectively during 2015”


Strategic Report

The directors are responsible for the group’s system of internal control and for reviewing its effectiveness. The group’s system of internal control is designed to manage rather than eliminate

the risk of failure to achieve the group’s business objectives and therefore provides reasonable, rather than absolute, assurance against material misstatement or loss. The group operates a series of controls to meet its needs. The group receives reports from the external auditor concerning the system of internal control and any material control weaknesses. The board considers that there is no necessity at the present time to establish an independent internal audit function given the current size and complexity of the business.

The process of monitoring and updating internal controls and procedures continues throughout the year and a risk management process is in place. Existing processes and practices are reviewed to ensure that risks are effectively managed around a sound internal control structure. A fundamental element of the internal control structure involves the identification and documentation of significant risks, the likelihood of those risks occurring, their potential impact and the plans for managing and mitigating each of those risks. These assessments are reviewed by the board. The plans are regularly discussed, updated and reviewed at board meetings, and any matters arising from internal reviews or external audit are also considered.

Internal controls and risk management

INTERNAL CONTROLSThe Board is responsible for establishing and maintaining the system of internal controls which has been in place throughout 2014

Executive Committee

ProcessRisks and mitigation validated with the Executive Committee and presented to Audit & Risk Committee for review

Audit & Risk Committee

Review and confirmationReview and confirmation by the Board

Senior Management

Review and confirmationIdentify key risks and develop mitigation actions

Rockhopper Board

Ongoing review and controlThere is ongoing review of the risks

and controls in place to mitigate these risks by the Audit & Risk Committee


Strategic Report

Description Impact Mitigants

Strategic Risks

Sea Lion project not executed on schedule and budget

• Increased costs• Delay in future cash flow• Reduced value creation• Loss of investor confidence

• Active engagement with the operator, partners and regulators to establish constructive and trusted working relationships

• Active participation in technical meetings to challenge, influence and/or support partners to establish a cohesive JV view and decision making

Concentration risk through focus on the North Falkland Basin

• Over-reliance on a single operating region

• Changes in operating, sovereign, political or fiscal matters could have a material impact on the Group’s operations

• Diversify portfolio through asset additions outside of the North Falkland Basin – recently completed acquisition of Mediterranean Oil & Gas plc

• Recent award of acreage in Croatian offshore licence round

Lack of exploration success

• Loss of investor confidence• Limited or no value creation

• Highly competent technical and geoscience team tasked with high grading the company’s inventory of prospects and leads and supporting drilling decisions

• Recent discovery at Zebedee

The oil & gas industry is highly competitive

• Acquisition of assets/licences• Procurement of oil & gas services• Access to human resources

• The Group has a strong balance sheet which puts it in a favourable position to be able to compete effectively and move quickly when looking to acquire assets

• The Group has strong technical and business development capabilities to ensure it is well positioned to identify potential acquisition opportunities

• The Group maintains good relations with oil and gas service providers• Human resources are key to the Company’s success

The sovereign status of the Falkland Islands is disputed

• Open aggression is not expected• Certain service providers and financial

institutions may choose not to provide services for fear of the impact an association may have on their business interests in Argentina

• The British Government has issued strong rebuttals to the Argentine claims and strongly supports the Falkland Islanders’ right to self-determination

• The Group is in regular contact with the Foreign & Commonwealth Office

Operational Risks

The company no longer operates its significant interests and is therefore reliant on JV operators for asset performance

• Cost/schedule overruns• Poor performance of assets• HSE performance

• Actively engage with all JV partners to establish trusted working relationships• Active participation in technical meetings to challenge, apply influence and/or

support partners to establish a cohesive JV view and decision making

The North Falkland Basin is remote and at the end of a long supply chain

• Cost/schedule overruns• Ability to secure certain contractors

• Active co-operation with operators and partners in the South Falkland Basin to achieve operational and cost synergies through rig and infrastructure sharing

• Supply chain well understood given history of operations in the basin

The assumptions used to estimate hydrocarbon resources may prove incorrect or inaccurate

• Presence or absence of a gas cap on the Western Flank of Sea Lion impacts recoverable resources and may impact development planning

• Exploration and appraisal efforts may target ultimately uncommercial volumes of hydrocarbons

• The Group employs qualified and experienced technical personnel• External consultants are regularly commissioned to support technical evaluations

or provide independent assessments• A prudent range of possible outcomes are considered within the planning

and budgeting process – current development scenario planning for Sea Lion conservatively assumes the presence of a gas cap

• Analysis of commerciality thresholds is inherent in exploration planning and licence acquisition analysis

The Group has production risk following the acquisition of Mediterranean Oil & Gas plc

• Lower than expected reservoir performance may have a material impact on the Company’s results

• Certain assets have single completions and are therefore more at risk to production issues

• Experienced local operations team acquired as part of the acquisition• Non operated assets have experienced operators and partners• Continual assessment of the condition of production assets • Individual production asset size is not material

Principal risks and uncertainties


Strategic Report

Principal risks and uncertainties continued

Description Impact Mitigants

Financial Risks

Uncertainty over tax liability related to 2012 farm-out to Premier Oil plc

• Uncertain financial outcome

• Tax Settlement Deed with FIG provides much greater certainty on quantum and timing of tax payment

Uncertainty of fiscal regime and regulatory requirements; Sea Lion remains the only commercial oil discovery in the Falkland Islands

• Schedule risk• Loss of value• Uncertain financial outcome

• Regular engagement with regulators• Legal agreements in place to protect interests• Seek appropriate legal and tax advice

Inability to access capital to fund operations

• Potential loss of assets

• Through the 2012 farm-out and subsequent revisions which are subject to documentation, Rockhopper secured a $337 million Development Carry for the initial phase of development of Sea Lion, a $337 million Development Carry for the subsequent phase of development of Sea Lion, $48 million Exploration Carry and a $750 million Standby Loan facility from Premier Oil

• Active engagement with alternative capital providers to secure funding on more attractive (cost and flexibility) terms

Uncertainty and volatility of commodity prices

• Impact on expected future revenues• Impact on capital and operating costs

• Contingency built into planning and budgeting process to allow for downside movements in commodity prices (and expected impact on costs)

• The company may consider it appropriate in the future to hedge a proportion of its production, particularly if the company is reliant on such production to service debt

Health, Safety and Environment Risks

Health, safety and environment incidents

• Serious injury or death• Environmental impacts• Loss of reputation• Regulatory penalties

• Regular review of HSE policies and procedures to ensure full compliance with industry “best practice” as well as all appropriate international and local rules and regulations

• For our non operated ventures, one of our key roles is to ensure that the operator maintains high standards of HSE protection, in line with management systems

Organisational Risks

Staff recruitment and retention

• Disruption to business• Loss of key knowledge and experience

• The Remuneration Committee regularly evaluates compensation and incentivisation schemes to ensure they remain competitive

International business

• Whilst the majority of the Group’s assets are effectively managed in the UK (e.g. Falkland Island assets) the newly acquired assets are located in Italy, Malta and France. The business of these assets is similar to those already owned but carry additional risks and regulatory processes

• As part of the acquisition of Mediterranean Oil & Gas an experienced team was retained in Italy

• Existing Company policies and control procedures have been applied to the newly acquired operations

• Ongoing monitoring of transactions, financial results and budgeting procedures to ensure compliance with Company guidelines


Strategic Report

Health, Safety, Environmental and Social Management

Rockhopper’s strategy is to explore, appraise and develop its operated and non operated acreage both safely and responsibly. The two key elements

of this strategy involve maintaining high standards of Health, Safety and Environmental (HSE) protection throughout its operations and communicating clearly with its stakeholders, both operational and within the local community.

Maintaining high standards of Health, Safety and Environmental (HSE) protectionThis is achieved through:• Strong leadership and clearly defined

responsibilities and accountabilities for HSE at all levels of the organisation;

• Selection of competent personnel to manage activities;

• Compliance with regulatory and other applicable requirements, or where regulations do not exist, application of industry standards;

• Identifying, assessing and managing HSE risks and preventing pollution;

• Developing specific HSE plans for each operational project;

• Selecting competent contractors and ensuring that they are effectively managed;

• Preparing and testing response plans to ensure that any incident can be quickly and efficiently controlled, reported and investigated to prevent recurrence;

• Continual improvement of HSE performance through monitoring, regular reporting and periodic audits; and

• Periodic management reviews to identify and implement improvements to our HSE systems.

This policy is implemented through our HSE Management System, which has been prepared to be consistent with international standards for HSE management including ISO14001 and ISO18001.

Our HSE Management System is used to guide all our activities and will not be compromised by other business priorities.

Application of the HSE Management System will include preparation of detailed Environmental Impact Statements (“EISs”) for all of the group’s activities. The preparation of the EIA includes consultation with interested parties and the local Government as well as public meetings to present findings and obtain feedback from the local community.

For our non operated ventures one of our key roles is to seek to ensure (wherever possible) that the operator maintains high standards of HSE protection in line with our management systems.

Operational stakeholdersWhere we have operating responsibility all contractors are selected taking into account their skills, experience and HSE performance. There is a contractor selection and management section in the HSE management system and we are closely involved in day-to-day operations and closely monitor contractor performance.

Local Community stakeholdersThe Falkland Islands has a population of approximately 3,000 people and each member is considered a stakeholder in the group’s strategy. We recognise that a key element in maintaining stakeholder support is regular communication at all levels.

Our primary point of contact is the Falkland Islands Government Department for Mineral Resources and since inception we have had good communication with all of the team there. Since the start of operations, we have increasingly liaised with other government departments, such as the Secretariat and the Tax Office as well as the Governor.

Approval of Strategic ReportThis Strategic Report was approved by the directors and signed on their behalf on 8 April 2015 by:

Samuel Moody Chief Executive Officer

HSE

“ Our HSE Management System is used to guide all our activities and will not be compromised by other business priorities”

HSE MANAGEMENT SYSTEM

Health and Safety

Environment

Business conduct

Employees

Local communities


Governance

Chairman’s Governance Report

“ The Group is committed to maintaining high standards of corporate governance to ensure that it is managed with openness, honesty and transparency.”

The board’s corporate governance policy is to apply best practice and to adhere to the UK Corporate Governance Code (the “Code”) applicable to FTSE

350 companies as far as practicable given the size of the company. However, the company is an AIM listed company and is not therefore required to comply with any provision in the Code for so long as it remains on AIM. Further details are given below of how the company addresses the principles set out in the Code.

The BoardThe board’s structure and composition complies with the provisions of the Code. The board consists of three executive and five non-executive directors, four of whom are independent. The board has a qualified company secretary and all directors have access to her for advice and services.

R J Peters was the senior independent director for the financial period under review. The Group’s website contains an email contact for K G Lough, chairman of the audit & risk committee, should shareholders have concerns which have not been adequately addressed by the chairman or chief executive officer. The email address is also disclosed at the back of these accounts.

The board meets regularly throughout each financial year and there is a schedule of matters reserved for its approval ensuring that it exercises control over the group’s strategy, key financial and compliance issues and significant operational and management matters. These include capital structure, communication with shareholders, board and senior management appointments and major contracts. Executive management has a number of financial and operational responsibilities delegated to it. These include day-to-day operation of the business, implementation of health & safety measures, contract negotiation and liaison with the regulator and shareholders. From time to time sub-committees of the board are established to approve the detail of matters tabled at full board meetings. The company secretary ensures that the board and its committees are supplied with papers of sufficient quality to enable them to consider matters in good time for meetings and to discharge their duties properly.

A clearly defined organisational structure exists, with lines of responsibility and delegation of authority to executive management and board approved defined roles for the chairman and chief executive officer.

The board supports directors who wish to receive ongoing training and education relating to their duties. It makes available independent legal advice, at the Group’s expense, when necessary.

Each year an internal performance evaluation of the board and its committees is undertaken. The performance appraisal consists of a questionnaire. Comments are tabled at a board meeting and actions agreed. The appraisal of the chairman’s performance is coordinated by the company secretary.

The board’s chairman, P J Jungels, was independent upon appointment but has not been considered independent thereafter. For an initial period, P J Jungels was executive chairman and during that time he was awarded share options. Effective 30 September 2010 he became non-executive chairman and, with the agreement of the remuneration committee and support of the board, he continues to retain those share options, the remainder of which will expire in August 2015. He meets with the non-executive directors, without management present, from time to time and in the forum of the nomination committee. The board considers the other non-executive directors, D McManus, R J Peters, K G Lough and A J Summers to be independent. Other than any shareholdings in the company and fees, the non-executives have no financial interests in the company or business relationships that would interfere with their independent judgement.

The appointment of directors is a formal process involving all members of the board which considers the recommendations of the nomination committee.

The notice period for all executive directors is 12 months. The board believes that this is reasonable and appropriate for the size of the group and is in line with market practice. All directors stand for re-election at the annual general meeting.


Governance

Board of Directors

Day-to-day running of Rockhopper

Board composition

and succession

Framework and individual Director packages

Female directors 13%Male directors 87%

Gender

Integrity of financial information

and internal controls

Findings and recommendations

in relation to financial reporting

Ongoing dialogueShareholders

ExternalAuditiors

Audit & RiskCommittee

Remuneration Committee

NominationCommittee

Chief Executive Officer

Executive Committee

Various Committees

Executive directors 38%Non-executive directors 62%

Board composition Non-executive director tenure

Less than 3 years 40%3-6 years 40%6-9 years ��—More than 9 years 20%

Board of Directors

Day-to-day running of Rockhopper

Board composition

and succession

Framework and individual Director packages

Female directors 13%Male directors 87%

Gender

Integrity of financial information

and internal controls

Findings and recommendations

in relation to financial reporting

Ongoing dialogueShareholders

ExternalAuditiors

Audit & RiskCommittee

Remuneration Committee

NominationCommittee

Chief Executive Officer

Executive Committee

Various Committees

Executive directors 38%Non-executive directors 62%

Board composition Non-executive director tenure

Less than 3 years 40%3-6 years 40%6-9 years ��—More than 9 years 20%

HOW yOur bOard WOrks

bOard dIVErsITy


Governance

bIOGraPHy

APPOINTED TO BOARD

BOARD MEETINGS ATTENDED

COMMITTEE MEMBERSHIP

EXTERNAL APPOINTMENTS

Board of Directors

dr Pierre Jungels cbeChairman

Dr Jungels, a certified engineer with a PhD from CALTECH, was CEO of Enterprise Oil Plc, from 1996 to 2001 and prior to that was MD of Exploration and Production for BG Plc in 1995 and worked for 23 years with Petrofina SA including eight years on the main board. He was twice President of the Institute of Petroleum, from 1987 to 1989 and 2002 to 2003.

71

February 2005

10/10

Nomination

Director: Baker Hughes Inc.Chairman: Velocys plc

samuel MoodyChief Executive Officer

Sam is a co-founder of Rockhopper and has been responsible for building and managing the group from its formation in early 2004. He previously worked in several roles within the financial sector, including positions at AXA Equity & Law Investment Management and St Paul’s Investment Management.

45

February 2005

10/10

—

—

stewart MacdonaldChief Financial Officer

Prior to joining Rockhopper, Stewart was a Director in Rothschild’s global oil and gas group and spent 12 years advising clients in the sector on a range of M&A transactions as well as debt and equity financings.

34

March 2014

10/10

—

—

Fiona MacaulayChief Operating Officer

Fiona is a geologist with over 25 years of experience in the oil and gas industry including time at Mobil, Amerada Hess and BG. She joined Rockhopper in 2010 immediately following the Sea Lion discovery and was an integral member of the senior team which managed the appraisal of the Sea Lion field and discovered the Casper, Casper South and Beverley fields.

51

March 2013

10/10

—

—

aGE


Governance

robert Peterssenior Independentdirector

Bob is a solicitor with a long career in industry and legal practice. He joined Imperial Chemical Industry Plc’s group legal department in 1975 and became Deputy Group General Counsel in 1993 until 2000 when he joined Mayer Brown as Corporate Partner. During the 1980s he was a director and counsel of ICI’s E&P business.

67

September 2010

10/10

Audit & Risk Remuneration Nomination

—

david McManusNon-Executive director

David is a petroleum engineer with a degree from Heriott Watt University with 36 years experience in the Oil and Gas industry, with Shell, Ultramar, ARCO and BG group.

61

September 2010

9/10

Remuneration Nomination

Director: Hess CorporationCaza Oil & Gas IncCostain plcChairman: FLEX LNG

keith LoughNon-Executivedirector

Keith has over 30 years experience in the natural resources sector in both senior finance and general management roles with LASMO, Petrokazakhstan, British Energy and Hutton Energy. He was also a founder shareholder and CEO of unconventional gas explorer Composite Energy Limited.

56

January 2014

9/10

Audit & Risk Remuneration Nomination

Director: Rock Solid Images plcPapua Mining plcUK Gas and Electricity Markets Authority

John summersNon-Executivedirector

Dr John Summers is a geologist with degrees from the University of Liverpool. He worked for British Gas / BG Group plc for 29 years holding a variety of roles from Exploration Manager, Vice President Exploration, Chief Geologist, General Manager Technology and Performance and VP New Ventures.

59

February 2014

10/10

Audit & Risk Nomination

—


Governance

Corporate Governance Statement

Audit & Risk, Remuneration and Nomination committeesAudit & risk, remuneration and nomination committees, with formally delegated duties and responsibilities, operate under the chairmanship of K G Lough, D McManus and P J Jungels respectively. The terms of reference of the committees reflect the provisions of the Code where relevant and can be found on the company’s website.

The nomination committee comprises all the non-executive directors with the chief executive officer attending by invitation. The make up of the committee complies with the Code.

The audit & risk committee comprises K G Lough, R J Peters and A J Summers, with other directors attending from time to time as observers by invitation. The make up of the committee complies with the Code.

The remuneration committee comprises D McManus, R J Peters and K G Lough, with other directors attending from time to time as observers by invitation. The make up of the committee complies with the Code.

Remuneration CommitteeThe principal role of the remuneration committee is to consider, on behalf of the board, the remuneration (including compensation payments when they apply) of executive directors and the chairman, the fees of the chairman being subject to board approval. In addition the remuneration committee sets the broad framework and reviews the recommendations of the chief executive officer for salary adjustments and bonus payments for all other members of staff including the company secretary. It also administers and makes awards under the Long Term Incentive Plan (LTIP) and Share Incentive Plan (SIP).

The board considers the members of the remuneration committee to be independent. The members are D McManus as chairman and R J Peters and K G Lough.

The committee met five times during the financial period. Details of the matters discussed are given in the directors’ remuneration report.

Director Remuneration

D McManus – Chairman 5

R J Peters 5

K G Lough 4

P J Jungels †3

Total meetings during year 5

† Invitee.

D McManusRemuneration Committee Chairman

COMMITTEEs


Governance

Nomination CommitteeThe nomination committee’s role is to recommend any new appointments of directors to the board. Any decisions relating to the appointment of directors are made by the entire board based on the merits of the candidates and the relevance of their background and experience, measured against objective criteria, with care taken to ensure that appointees have enough time to devote to the job. Rockhopper is committed to appointing, retaining and developing an experienced team which can effectively manage the company’s objectives and deliver its strategy. The board recognises the benefits of diversity and the nomination committee has regard to this when considering succession planning.

The committee is chaired by the chairman of the board, P J Jungels, with all the non-executive directors as its members. The board considers D McManus, R J Peters, K G Lough and A J Summers to be independent, hence a majority of the committee is considered to be independent.

The nomination committee did not meet during the period under review as it was not considered necessary given the changes to the board in the first quarter of 2014.

P J JungelsNomination Committee Chairman

Audit & Risk CommitteeThe members of the audit & risk committee are K G Lough as chairman, A J Summers and R J Peters. The board considers the members of the audit & risk committee to be independent and is satisfied that at least one member of the audit & risk committee, K G Lough, has recent and relevant financial experience.

The external auditor, the chief financial officer and certain other directors are invited to meetings with observer status.

The core terms of reference of the audit & risk committee include reviewing and reporting to the board on matters relating to:

• the audit plans of the external auditor;

• the group’s overall framework for internal control over financial reporting and for other internal controls;

• the group’s overall framework for risk management;

• the accounting policies and practices of the group; and – the annual and periodic financial reporting carried out by the group.

The audit & risk committee is responsible for notifying the board of any significant concerns that the external auditor may have arising from their audit work; any matters that may materially affect or impair the independence of the external auditor; any significant deficiencies or material weaknesses in the design or operation of the group’s internal controls; and any serious issues of non-compliance. No such concerns were identified during the financial period.

The audit & risk committee recommends to the board the appointment of the external auditor, subject to the approval of the company’s shareholders at a general meeting. Shareholders in a general meeting authorise the directors to fix the remuneration of the external auditor.

The audit & risk committee has established procedures for receiving and handling complaints concerning accounting or audit matters.

The audit & risk committee maintains policies and procedures for the approval of all audit services and permitted non-audit services undertaken by the external auditor, the principal purpose of which is to ensure that the independence of the external auditor is not impaired.

In general, the external auditor will only be used for audit, audit related and tax compliance services. Other services need specific authorisation from the audit & risk committee. The only non-audit services provided during the period were in relation to tax compliance. The status of all services being provided by the external auditor are monitored and the company is satisfied that there were no conflicts during the financial period.


Governance

Corporate governance statement continued

The audit & risk committee was satisfied throughout the financial period that the objectivity and independence of the external auditor were not in any way impaired by the nature of the non-audit work undertaken, the level of non-audit fees charged for such work nor any other factors.

The audit & risk committee’s terms of reference are available on the group’s website and on request from the company secretary.

The audit & risk committee held three formal meetings during the period and informal discussions were also held both with, and without, management present. The committee met with the external auditors without management present.

Following each audit & risk committee meeting, the chairman of the audit & risk committee reported to the board on the principal matters covered at the meeting.

During the year, the business performed and issues considered by the audit & risk committee included:

• the group’s financial disclosures and accounting matters;

• the reports of the external auditor concerning its audit and review of the financial statements of the group and the status of follow-up actions with management;

• the effectiveness of the group’s system of internal controls and its risk monitoring and management;

• accounting for the acquisition of Mediterranean Oil & Gas;

• the systems and processes that management has developed pertaining to risk identification, classification and mitigation including disaster recovery;

• compliance with the Code;

• whistleblowing procedures and shareholder concerns;

• control of insider information;

• the Falkland Islands fiscal regime including capital gains tax;

• the external auditor’s audit and non-audit fees; and

• the effectiveness of the committee.

During the period, the committee reviewed its own performance and the appropriateness of its terms of reference. It concluded that, having considered the size and complexity of the business, the terms of reference were appropriate and that performance was satisfactory.

Internal controls and risk management The directors are responsible for the group’s system of internal control and for reviewing its effectiveness. The group’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve the group’s business objectives and therefore provides reasonable, rather than absolute, assurance against material misstatement or loss. The group operates a series of controls to meet its needs. The group receives reports from the external auditor concerning the system of internal control and any material control weaknesses. The board considers that there is no necessity at the present time to establish an independent internal audit function given the current size and complexity of the business.

The process of monitoring and updating internal controls and procedures is a continual process and a risk management process is in place. Existing processes and practices are reviewed to ensure that risks are effectively managed around a sound internal control structure. A fundamental element of the internal control structure involves the identification and documentation of significant risks, the likelihood of those risks occurring, their potential impact and the plans for managing and mitigating each of those risks. These assessments are reviewed by the board. The plans are regularly discussed, updated and reviewed at each board meeting, and any matters arising from internal reviews or external audit are also considered. The company complies with Rule 21 of the AIM Rules for companies regarding dealings in the company’s shares and has adopted a code on dealing in securities to ensure compliance by the directors and employees.

Director Audit and Risk

K G Lough – Chairman 3

R J Peters 3

A J Summers 3

S MacDonald †3

Total meetings during year 3

† Invitee.

K G Lough Audit and Risk Committee Chairman

COMMITTEEs


Governance

Shareholder relationships During the period the chairman and executive directors met with shareholders and the investment community. This included formal road shows and presentations, one-to-one meetings, analyst briefings and press interviews. The chief executive officer regularly briefs the board on these contacts and relays the views expressed. In addition, copies of analyst research reports, press reports and industry articles are circulated to all directors. The Company’s website is updated regularly with external presentations and corporate updates.

Going concern At 31 December 2014 the group had available resources of $200 million. In addition the group’s main development, Sea Lion, is fully funded through a combination of Development Carries and a loan facility from the operator.

It is for these reasons that the board is of the opinion, at the time of approving the financial statements, that the group and company has adequate resources to continue in operational existence for the foreseeable future, being at least twelve months from the date of approval of the financial statements. Therefore the board has adopted the going concern basis in preparation of the financial statements.


Governance

Directors’ Remuneration Report

Dear Shareholder

On behalf of the board, I am pleased to present the Directors’ Remuneration Report (“Report”) for the period ended 31 December 2014. The Report has been prepared largely in compliance with the requirements of Schedule 8 of the Large and Medium-sized Companies and Group Regulations 2013 where deemed appropriate given the size and structure of the company. The remuneration committee (the “committee”) does not propose that the Report should be subject to shareholder vote as this is not required given the company’s status as an AIM listed company and it does not believe that this is appropriate at this stage given the company’s current size and structure.

The Report is divided into two sections:

– The Policy report which sets out the current Remuneration Policy

– The Report on Remuneration which sets out details of the operation of the committee and details of the directors’ remuneration packages for the period ended 31 December 2014. It also sets out details of the implementation of the Executive Director Policy for the year ending 31 December 2015.

The committee aims to ensure that remuneration is linked to the performance of the company and believes that the introduction of the LTIP, which is based on total shareholder return measured against an appropriate peer group of companies will ensure that management is aligned with shareholders. The committee is satisfied that the outcomes in respect of the incentives and remuneration during the financial year under review are appropriate.

In respect of the current financial period, the committee does not propose any changes to the Remuneration Policy which is laid out on the following pages. The committee will ensure that the Company’s remuneration policy and practices are kept under review to ensure that they remain appropriate for the company at its stage of development and that they do not encourage any unnecessary risk taking by the executive team.

On behalf of the board I would like to thank shareholders for their continuing support.

Yours sincerely

David McManusChairman of the Remuneration Committee

8 April 2015

Remuneration PolicyThis part of the Report sets out the remuneration policy for the company. The policy for the executive directors is determined by the committee and the committee approves any adjustments to salary and bonus awards. The committee also sets the parameters for the remuneration packages of senior and support staff including the company secretary. Authority is delegated to the chief executive officer to implement salary adjustments and make bonus awards for staff within the agreed parameters. The proposals of the chief executive officer in this regard are reviewed by the Chairman of the committee to ensure that they are in line with the parameters set down by the committee. The committee decides on all awards under the company’s Long Term Incentive Plan (“LTIP”) and approves the operation of the Company’s Share Incentive Plan (“SIP”).

The aim of the committee is to ensure that the remuneration packages are sufficiently competitive to attract, retain and motivate individuals of the quality required to achieve the objectives of the group and thereby enhance shareholder value. The committee also aims to ensure that all employees receive rewards that fairly reflect their seniority, level of work and contribution to the company.

Executive Director PolicyThe summary of the remuneration policy for the executive directors is set out below. Full details of the remuneration packages are given in the Report on Remuneration.


Governance

salary

Purpose and link to strategy To provide an appropriate salary level to support retention and recruitment of executive directors and ensure that executive directors are appropriately rewarded in relation to their role and responsibilities.

Operation Following the change in year end, this will now be reviewed annually on 1 January.

Reviewed with reference to average industry movements according to Mercer oil and gas survey of remuneration, each executive’s role and responsibilities and salary adjustments across the Company.

Salaries are checked against LTIP TSR comparator group to ensure they are not out of line.

Opportunity Salary increases will be awarded taking into account the outcome of the performance review and relative salary differentials across the executive team.

Salary increases will usually be in line with increases awarded to other employees but the Committee will make additional adjustments where there has been a change in role or responsibilities or to reflect a gap in market positioning.

Performance metrics Not applicable for base salaries.

benefits

Purpose and link to strategy To provide a competitive and comprehensive range of benefits to assist in the attracting and retaining the calibre of executive directors required for delivery of corporate and strategic objectives.

Operation The benefits package for executive directors includes private medical insurance, critical illness, income protection and life assurance cover. Benefits will be administered internally from 1 April 2015 and a review of providers and prices is conducted every two years to ensure that the level of rates and cover remains competitive.

Opportunity The benefits package is set at a level that the Committee considers is appropriate for the company’s size.

The value of benefits will vary each year according to the cost of provision.

Performance metrics Not applicable for benefits package.

Pension

Purpose and link to strategy To provide an appropriate level of pension contribution for directors whilst minimising the administrative burden for the company.

Operation Contributions are made to a private or group personal pension plan.

Opportunity An annual contribution equal to 10% of salary.

Performance metrics Not applicable for pension contributions.

annual bonus

Purpose and link to strategy To reward the achievement of annual corporate and individual targets.

Operation Objectives are set as early as possible in the financial year.

The executive directors are treated as a team in respect of target setting.

The bonuses are paid in cash after the end of the financial year to which they relate.

Opportunity The maximum annual bonus award is 100% of salary.

The bonus is non-contractual and is discretionary.

Directors’ Remuneration Report continued


Governance

Performance metrics The targets for the executive directors are rolled out from the corporate, strategic and financial objectives agreed by the board.

The committee uses its judgement to decide the extent to which the objectives have been achieved and will have regard to overall company performance when agreeing the bonus payments.

The committee considers whether operations were completed to acceptable HSE standards and considers whether there were any HSE incidents when considering the level of bonus payments.

Long Term Incentive Plan (LTIP)

Purpose and link to strategy To support alignment with shareholders through the use of Total Shareholder Return (“TSR”) measured against a peer group as the performance target for awards under the LTIP.

Operation The LTIP was approved by shareholders in 2013 and has replaced share appreciation rights which were awarded annually under the company’s Employee Share Option Scheme (“scheme”). No further awards will be made under the scheme.

The Committee makes annual awards of free shares in the form of nil cost options or a conditional right to acquire shares which vest after three years subject to the extent that the performance targets attached to the awards have been achieved.

Awards will usually be granted within a period of 42 days from the release of the annual financial results and will be calculated using the market value of the shares at the date of grant.

The LTIP performance period will be three years and the commencement date of the performance period is at the discretion of the committee.

Malus provisions exist so that the awards may be reduced or further conditions imposed in the case of financial misstatement, the misleading of shareholders or management/the board regarding technical or financial performance, serious misconduct or conduct that results in a serious loss to the company.

The committee has discretion to amend the size and constitution of the peer group to ensure that it remains an appropriate comparator group and to reflect any corporate deals.

The company has an employee benefit trust which can purchase shares in the market and/or subscribe for shares to satisfy the exercise/vesting of awards under the LTIP.

Opportunity The maximum annual award is 200% of salary.

Performance metrics Performance measurement will be TSR measured against a peer group based on an average price over a 90 day dealing period to be agreed by the committee measured against the average 90 day dealing period up to the end of the three year performance period.

Awards vest on a sliding scale from 35% up to 133% for performance in the top two quartiles of the peer group. No awards will usually vest for performance in the third quartile but the committee will retain discretion to allow a percentage of awards to vest if it believes that this is justified by overall company performance. No awards will vest for performance in the bottom quartile.

The committee has discretion to scale back the percentage of awards which vests if it considers that this is appropriate having regard to underlying company performance.

share Incentive Plan (sIP)

Purpose and link to strategy To encourage share ownership in the company.


Governance

Operation A tax-advantaged scheme under which employees (including executive directors) can elect to make contributions from gross salary for the purchase of Rockhopper shares which are then matched by the company at a ratio agreed by the Committee at the beginning of each tax year. The committee can also decide to make an award of “free” shares up to legislative limits in any one tax year. The shares need to be held for a term of five years to obtain the full taxable benefit of the SIP. There is a qualification period of three months from joining before employees are eligible to participate.

Opportunity Since the implementation of the SIP, the committee has approved its operation up to the maximum permissible limits so that employees receive two “matching” shares for every one “partnership” share purchased and an annual award of free shares. Directors and senior employees have on occasion been precluded from participating where the Company has been in a close period at the time of the awards.

Performance metrics Not applicable for the SIP.

Cash Incentive Plan (CIP) for Chief Operating Officer (“COO”)

Purpose and link to strategy To act as a retention incentive to the COO whom the board identified as a key contributor to delivery of the company’s objectives.

To reflect the additional responsibilities on her promotion to the role of COO in December 2013.

Operation An exceptional one-off award of 312,849 shares was made to the COO on 23 December 2013.

The award was made on the same basis as the 2013 LTIP awards (see the Report on Remuneration).

Opportunity The award is a one-off award based on 200% of salary.

Performance metrics As for the 2013 LTIP awards.

Further details on the policyPerformance measurementAnnual bonus – the annual bonus is based on a range of objectives that the board have agreed are key to progressing and delivering the company’s strategy. These can be operational, strategic and financial. Performance targets are designed to be stretching but achievable having regard to the company’s strategic priorities and external factors such as the activities of joint venture partners and the economic environment.

LTIP – the LTIP ensures alignment with shareholders being based on relative TSR measured against a peer group of other oil and gas companies comprising FTSE 250, larger AIM oil and gas and Falkland Island oil and gas companies. The committee has determined that the minimum number of companies in the peer group will be nine. The committee will also have regard to the underlying performance of the company when confirming the vesting of LTIP awards to ensure that the impact of external factors is taken into consideration where appropriate.

Remuneration policy for other employees and consultationThe company’s policy for all employees is to provide remuneration packages that reward them fairly for their contribution and role within the company.

All employees are entitled to receive the full range of company benefits but with different qualifying periods and levels of cover depending on seniority. All employees are eligible to receive an annual bonus based on performance against individual targets which are cascaded down from the corporate targets. The maximum level of bonus is 100% of salary but this will only be awarded in exceptional circumstances and where underlying company performance is strong.

All employees are eligible to participate in the SIP. The committee has stated that the LTIP will be used for executive directors and senior staff which ensures that an element of remuneration is deliverable through a scheme which aligns participants with shareholders.

The company does not consult with employees on the effectiveness and appropriateness of the policy but, in considering individual salary increases, the committee does have regard to an employee’s location and to salary increases across the company.


Governance


Recruitment In the case of recruiting a new executive director, the committee can use all the existing components of remuneration as set out in the policy table.

The salary of a new appointee will be determined by reference to the experience and skills of the individual, market data, internal relativities and the candidate’s current remuneration. New appointees may be entitled to receive the full range of company benefits on joining and, if the committee considers it appropriate, a relocation allowance and an annual contribution of up to 10% of base salary to the Group Personal Pension Plan. The new appointee will also be eligible to participate in the SIP after a qualifying period.

In relation to any elements of variable pay, the committee will take the following approach:

Component Approach Maximum annual opportunity

Annual Bonus The annual bonus would operate as outlined in the Policy for existing executive directors. The relevant maximum will be pro-rated to reflect the period of employment over the year. Consideration will be given to the appropriate performance targets at the time of joining

100% of base salary in any financial year

LTIP The LTIP would operate as outlined in the policy for existing directors. An award may be granted on joining subject to the company being in an open dealing period. The committee would retain discretion to decide on the scale, performance period and performance targets attaching to any award.

200% of base salary in any financial year

In the case of an external hire, the committee may deem it appropriate to “buy-out” incentive or benefit arrangements which the new appointee would have to forfeit on leaving their previous employer. The committee would consider the potential value of the arrangement being forfeited and wherever possible would use the existing components of the company’s remuneration structure to compensate the incoming director. The value of any buy-out arrangements would be capped at no higher, on recruitment, than the awards or benefits which the individual forfeited on leaving their previous employer. In the case of an internal hire, the new appointee may retain awards made to him/her under arrangements entered into prior to appointment to the board even if such awards are not within the directors’ remuneration policy as outlined in the policy table.

Service contracts, exit payments and change of control provisions The executive directors have rolling term service agreements with the company. Details of the directors’ service contracts and appointment dates are as follows:

Executive Directors Appointment date Original contract Revised contract

S J Moody 21 February 2005 8 August 2005 8 March 2011

S MacDonald 10 March 2014 27 March 2014 —

F M MacAulay 15 March 2013 10 January 2011 —

The directors’ service contracts are available to view at the company’s registered office and prior to each Annual General Meeting at the venue for the meeting. The notice period for the executive directors is 12 months’ notice in writing by either party. The company has the right to make a payment in lieu of notice of 12 months’ salary and the fair value of any benefits. There is no entitlement to payment for any accrued holiday where a payment in lieu of notice is made. The committee will consider termination payments on a case-by-case basis. It will consider the terms of the director’s contract and the circumstances of the termination and might consider making an ex gratia payment where the circumstances and/or a director’s contribution to the company justifies this. If an ex gratia payment is to be made, the committee will ensure that it is satisfied that it is in the best interests of the company to make such a payment and that there is no “reward for failure”.

The committee also has discretion to settle any other amounts which it considers are reasonably due to the director such as where the parties agree to enter into a settlement agreement and the individual is required to seek independent legal advice. The committee can approve new contractual arrangements with a departing director covering matters such as confidentiality or restrictive covenants and/or consultancy arrangements where it believes this is in the best interests of the company.

Treatment of incentives for leaversIn relation to annual bonuses, a bonus payment will not usually be made if the director is under notice at the bonus payment date or has already left. In the event of a change of control of the company, the committee retains the right to declare a bonus in respect of the part of the year worked prior to the change of control becoming effective.


Governance

In relation to awards granted under the LTIP, awards will generally lapse on the date of cessation of employment except in certain ‘good leaver’ circumstances which are generally defined as retirement, ill-health, disability, death, redundancy, transfer or sale of the employing company or any other circumstances at the discretion of the committee. In these circumstances any unvested award will usually continue and vest on the normal vesting date. The committee will decide the extent to which the unvested award will vest taking into account: (i) the period of time that has elapsed since the start of the performance period; and (ii) the extent to which any performance target is satisfied at the date the director ceases to be employed by the company. Final treatment is subject to the committee’s discretion.

In relation to options and share appreciation rights (SARs) granted under the Employee Share Option Scheme, both options and SARs will generally lapse on the date of cessation of employment except in certain ‘good leaver’ circumstances which are generally defined as retirement, ill-health, disability, death, redundancy, transfer or sale of the employing company or any other circumstances at the discretion of the committee. In the case of death, the option shall be exercisable immediately for a period of one year from the date of death. In other good leaver circumstances any option or SAR will be exercisable for a period of six months from the date of cessation, subject to: (i) the period of time that has elapsed since the start of the performance period; and (ii) the extent to which any performance target is satisfied at the date the director ceases to be employed by the company. Where the committee exercises its discretion to allow a leaver to be a good leaver, the committee may also determine both the proportion of the option that may be exercised and the period during which the option is exercised.

In the event of termination of employment or a change of control, shares held under the SIP will be dealt with in accordance with the SIP rules. The committee does not have any discretion in relation to the operation of the SIP in these circumstances.

External appointmentsExecutive directors are permitted to engage in other activities and businesses outside the group provided that there is no risk of conflict with their executive duties and subject to full board disclosure.

Non-Executive Director PolicyThe Company’s Articles of Association provide that the board can determine the level of fees to be paid to the non-executive directors within limits set by the shareholders. This is currently set at an aggregate of £500,000 per annum. The Policy for the chairman and non-executive directors is as follows:

Fees

Purpose and link to strategy To provide a competitive level of fee which will attract and retain high calibre directors with the range of skills and experience required to support the executive directors and assist the company in delivering its objectives.

Operation The fees for the chairman and non-executive directors are determined by the board as a whole with directors absenting from discussions regarding their own remuneration.

The board has regard to level of fees paid to the non-executive directors of other similar sized companies and the time commitment and responsibilities of the role.

The chairman holds share options granted when he was Executive Chairman, the last of which will expire in August 2015. Neither the chairman nor the non-executive directors participate in any of the Company’s share schemes.

Opportunity The current annual fees are:

Chairman: £140,000.

Non-executive director basic fee: £40,000.

Committee chairmanship: £10,000.

Senior Independent Director: £5,000.

The fee levels will be reviewed on a periodic basis with reference to the time commitment of the role and fee levels in comparative companies.

No benefits or other remuneration are provided.

Performance metrics Not applicable to non-executive directors.



Governance

RecruitmentThe Committee will follow the non-executive director remuneration policy as set out above in relation to the appointment of a new non-executive director.

Terms of appointment The non-executive directors do not have service contracts but have been appointed for terms of three years from 30 September 2013 or their date of appointment if later. The appointment can be terminated at any time by either party giving one month’s notice to the other. Details of appointment are set out below:

Director Appointment date Original engagement letter Revised engagement letter

P J Jungels – Chairman 21 February 2005 8 August 2005 29 October 2013

D McManus 30 September 2010 30 November 2010 29 October 2013

R J Peters 30 September 2010 30 November 2010 29 October 2013

K G Lough 14 January 2014 14 January 2014 —

A J Summers 1 February 2014 3 February 2014 —

Directors are subject to annual re-election by shareholders at the Annual General Meeting in accordance with the UK Corporate Governance Code. The directors’ letters of appointment are available to view at the company’s registered office and prior to each Annual General Meeting at the venue for the meeting.

Report on RemunerationRemuneration Committee membership and meetingsAs at 31 December 2014, the committee comprised three non-executive directors. The committee met five times during the financial period. The members of the Committee during the year and as at the year end and their attendance are summarised below:

Committee member Meeting attendance

D McManus – Committee Chairman 5/5

K G Lough 4/5

R J Peters 5/5

During the financial period, the Committee’s main responsibilities included:

– Confirming the salary adjustments and bonus awards for the year ended 31 March 2014.

– Setting the targets for the bonus awards for the bonus scheme for the forthcoming financial period.

– Approving the Directors’ Remuneration Report for the year ended 31 March 2014.

– Approving the alignment of the remuneration year end with the company’s financial year end.

– Approving the 2014 LTIP awards and reviewing the constitution of the peer group.

– Overseeing the operation of the Employee Benefit Trust.

– Approving the annual implementation of the SIP.

– Considering the company’s recruitment plans.

– Considering the introduction of a minimum shareholding requirement for executive directors.

The company secretary acted as secretary to the committee and provided advice in relation to the operation and implementation of incentive schemes and remuneration packages. The chairman attended committee meetings as appropriate.

The board considers that the membership of the committee is compliant with the UK Corporate Governance Code recommendations. No individual is involved in determining their own remuneration.


Governance

External adviceThe Committee received advice from Addleshaw Goddard in relation to the operation of the share schemes and the operation of the LTIP. The company participates in the Mercer oil and gas remuneration survey and the committee considers the survey results as part of the annual remuneration review across the Company. The committee considers that the advice it received during the financial period was objective and independent.

Total RemunerationThe table below reports a single figure for total remuneration for each executive director:

Long-term Compensation Salary Taxable benefits Annual bonus incentives Pension SIP awards on loss of office Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Nine Nine Nine Nine Nine Nine Nine Nine months Year months Year months Year months Year months Year months Year months Year months Year ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 31 Dec 31 Mar 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014

S J Moody 266.3 341.0 2.2 2.5 221.9 102.3 213.63 1,120.5|3 26.6 34.1 2.7 6.0 — — 733.3 1,606.4

F M MacAulay 232.5 232.9 2.9 3.3 193.8 155.0 — — 23.3 23.2 2.7 6.0 — — 455.2 420.4

S MacDonald1 202.5 16.6 1.4 0.1 168.8 — — — 20.3 1.7 2.5 — — — 395.5 18.4

P J Dixon-Clarke2 — 200.0 — 2.6 — — — 500.03 — 53.6 — — — 277.2 — 1,033.4

1 S MacDonald was appointed as a director on 10 March 2014.

2 P J Dixon-Clarke retired from the board of directors and left the company on 31 January 2014.

3 S J Moody elected to sell sufficient shares from an excercise of options in December 2014 to discharge the cost of exercise and tax and national insurance obligations. The balance of shares was retained. Long-term incentive amounts in the prior period relate to the gross gain on exercise of cash settled SARs granted to the directors on 25 November 2008 and 3 July 2009 at a base price of 19.25 pence and 30.87 pence respectively being the market price at time of grant. The committee exercised its discretion to settle the exercise of SARs in cash. The relevant directors elected to purchase 562,596 shares at a price of £1.353 from net proceeds of £858,849 after meeting the cost of exercising the SARs and payment of tax obligations arising therefrom.

The table below reports a single figure for total remuneration for each non-executive director:

Base fee Additional fees Long term incentives Total £’000 £’000 £’000 £’000

Nine months Year ended Nine months Year ended Nine months Year ended Nine months Year ended ended ended ended ended ended ended ended ended 31 December 31 March 31 December 31 March 31 December 31 March 31 December 31 March 2014 2014 2014 2014 2014 2014 2014 2014

P J Jungels 105.0 140.0 — — — 456.2|5 105 596.2

R J Peters 30.0 40.0 3.8 — — — 33.8 40.0

D McManus2 30.0 40.0 7.5 10.0 — — 37.5 50.0

K G Lough3 30.0 8.6 7.5 — — — 37.5 8.6

A J Summers4 30.0 6.6 — — — — 30.0 6.6

K J Crowle — 40.1 — — — — — 40.1

C J Walton1 — 40.0 — 15.0 — — — 55.0

1 C J Walton acted as Senior Independent Director until 18 March 2014 when he was replaced by R J Peters. C J Walton was Chairman of the Audit & Risk Committee until 18 March 2014 when he was replaced by K G Lough.

2 D McManus was Chairman of the Remuneration Committee.

3 K G Lough was appointed as a director on 14 January 2014.

4 A J Summers was appointed as a director on 1 February 2014.

5 This amount represents the gross proceeds on the exercise of Share Appreciation Rights which were granted to P J Jungles when he was Executive Chairman. P J Jungels reinvested the net proceeds of exercise in shares in the company.

No fees were paid to non-executive directors for membership of a committee or for attending committee meetings. Additional fees were payable of £5,000 for acting as Senior Independent Director and £10,000 as Chairman of the Audit and Risk Committee and Remuneration Committee. The Chairman of the Company does not receive any additional fees for chairing the Nomination Committee.



Governance

Additional information in respect of single figure table of remuneration for nine months ended 31 December 2014BonusIn respect of the financial period, the Committee agreed that the executive director bonus opportunity would be up to 100% of base salary and that the executive directors would be treated as a team for the purpose of objective setting. The following objectives were agreed for the financial period:

– securing a rig contract to allow the Company to pursue its exploration strategy in the Falkland Islands

– achieving substantial progress towards Final Investment Decision for the Sea Lion Development (SLD)

– pursuing new venture opportunities with a view to enriching the Company’s portfolio

– establishing the Company’s financing requirements for the Sea Lion Development.

The Committee considered the extent to which the targets had been achieved as at 31 December 2014. It noted that the rig contract had been successfully awarded and the rig was on schedule to arrive in the Falkland Islands for a spud date of 1 March 2015. The Committee agreed that the acquisition of Mediterranean Oil and Gas plc (MOG) had met the Board’s criteria and had generally been well received by shareholders. It noted that substantial progress had been achieved in establishing the financing requirements for the SLD. In respect of progress to Final Investment Decision, the Committee agreed that the deal between the company and Premier Oil plc to adopt a phased, lower cost development solution for the Sea Lion field represented good progress on the SLD although it was recognised that the development timetable had slipped during the year.

Bonuses were paid in cash and were as follows:

Director Bonus as % of salary Cash £

S J Moody 62.5 221,875

F M MacAulay 62.5 193,750

S MacDonald 62.5 168,750

The bonus payments are subject to the same malus provisions as the LTIP.

LTIP awards granted during the financial periodThe table below summarises the LTIP awards granted to executive directors during the nine month financial period in accordance with the policy.

Maximum Basis of award Share price Number number of (% of base at date of Exercise of shares shares that Face value Director salary) Date of grant grant price awarded may vest of award

S J Moody 150% 13 October 2014 £0.760 — 665,625 133% £505,875

F M MacAulay 200% 13 October 2014 £0.760 — 775,000 100% £589,000

S MacDonald 150% 13 October 2014 £0.760 — 506,250 133% £384,750

The key features of the 2014 LTIP awards are as follows:

– Awards are in the form of nil cost options.

– Performance will be measured over the three year period to 30 September 2017.

– Performance measurement is based on the average price over the 90 day dealing period to 30 September 2017 measured against the 90 day dealing period up to 30 September 2014 (91.35 pence).

– Performance is based on TSR measured against a peer group of 10 other oil and gas companies comprising EnQuest, Salamander Energy, Amerisur Resources, Providence Resources, Ithaca Energy, Petroceltic International, Faroe Petroleum, Bowleven, Borders & Southern and Falkland Oil and Gas. The committee has discretion to amend the size and constitution of the peer group to ensure that it remains appropriate The committee has determined that the minimum size for the peer group will be nine companies.

– Awards will vest on a sliding scale from 35% up to a maximum of 133% for performance in the top two quartiles with the committee retaining discretion to allow a percentage of awards to vest for performance in the third quartile if it believes that this is justified taking into account overall company performance.


Governance

Implementation of executive director remuneration policy for 2015Base salariesAs part of the remuneration review, the committee considered the results of the Mercer oil and gas survey and industry conditions. The Committee agreed an increase of 2% of base salary for S J Moody, 2.5% for F MacAulay and 10% for S MacDonald. The salary increase for S MacDonald reflected his significant contribution since joining the company and was intended to ensure that his remuneration was appropriately aligned with the other executive directors.

BonusFor 2015, the executive director annual bonus opportunity is up to 100% of base salary. The committee has agreed that the executive directors will be treated as a team for the purpose of objective setting and has agreed the following objectives for the financial year ending 31 December 2015:

– completion of a safe and successful exploration campaign in the North Falkland Basin

– achievement of specific milestones for the Final Investment Decision on the Sea Lion Development

– new venture activity to enhance the company’s portfolio of assets in its strategic areas of interest

– progressing funding alternatives for the uncarried Sea Lion development costs.

The committee has agreed that each of the objectives will have an equal weighting.

Long Term Incentive PlanThe Committee intends to grant LTIP awards in 2015 in line with the Policy. The committee will consider the appropriate performance period and quantum at the time of the awards. It is intended that the performance condition will remain as TSR measured against a peer group.

Benefits, pension contributions and share plansThe executive directors will receive the range of company benefits, pension contributions and participation in the SIP in line with the policy.

Implementation of non-executive remuneration Policy for 2014/15Non-executive director fees were reviewed and increased with effect from 1 April 2014. The chairman’s fee was not increased. There is no further review scheduled. Non-executive director fees are set out in the table below:

Role Type of fee From 1 April 2014

Chairman Total fee £140,000

Other non-executive directors Basic fee £40,000

Chairman of Remuneration and Audit & Risk Committees £10,000

Senior Independent Director £5,000

Statement of directors’ shareholdings The table below summarises the interests in shares including those held in the SIP of the directors in office at the period end:

At 31 December 2014 At 31 March 2014 Ordinary 1p shares Ordinary 1p shares

P J Jungels 1,117,644 1,117,644

S J Moody 1,742,260 1,550,037

F M MacAulay 34,085 29,726

S MacDonald 6,643 1,996

R J Peters 14,287 14,287

D McManus 132,803 132,803

K G Lough — —

A J Summers — —

There is currently no minimum shareholding requirement for the executive directors.



Governance

Outstanding awards under the LTIP, Employee Share Option Scheme and Cash Incentive Plan(a) LTIP

Awards Awards Market price Earliest Date of held at held at at date Performance vesting Director grant 1 April 2014 Granted Lapsed Vested 31 Dec 2014 of award period date

S J Moody 08.10.13 508,007 — — — 508,007 £1.3425 01.04.13-31.03.16 31.03.16

13.10.14 — 665,625 — — 665,625 £0.7600 01.10.14-30.09.17 30.09.17

F M MacAulay 08.10.13 312,849 — — — 312,849 £1.3425 01.04.13-31.03.16 31.03.16

13.10.14 — 775,000 — — 775,000 £0.7600 01.10.14-30.09.17 30.09.17

S MacDonald 10.03.14 201,117 — — — 201,117 £1.1525 01.04.13-31.03.16 31.03.16

13.10.14 — 506,250 — — 506,250 £0.7600 01.10.14-30.09.17 30.09.17

(b) Share optionsThe share options outstanding as at 31 December 2014 and held by individuals who were directors during the nine months ended 31 December 2014 are:

Awards held at Exercised during Awards held at Exercise price Director Date of grant 1 April 2014 the period 31 December 2014 £

P J Jungels 08.08.05 1,500,000 — 1,500,000 0.42

S J Moody 11.04.05 425,000 (425,000) — 0.10

08.08.05 1,500,000 — 1,500,000 0.42

3,425,000 (425,000) 3,000,000

(c) Share appreciation rightsThe share appreciation rights outstanding as at 31 December 2014 and held by individuals who were directors during the nine months ended 31 December 2014 are:

Awards held at Exercised during Lapsed during Awards held at Exercise price Director Date of grant 1 April 2014 the period the period 31 December 2014 Pence

S J Moody 11.01.11 76,056 — — 76,056 372.75

17.01.12 77,777 — — 77,777 303.75

30.01.13 91,077 — — 91,077 159.00

F M MacAulay 11.01.11 15,929 — — 15,929 372.75

17.01.12 22,505 — — 22,505 303.75

30.01.13 49,086 — — 49,086 159.00

332,430 — — 332,430

(d) Cash Incentive PlanThe award was made on the same basis as the 2013 LTIP awards in relation to performance measurement and conditions. Details of the award are as follows:

Number of Market price notional shares at date of Performance Earliest vesting Director Date of grant awarded award period date

F M MacAulay 23.12.13 312,849 £1.3425 01.04.13-31.03.16 31.03.16


Governance

Share price movements during period ended 31 December 2014 The mid market closing price of the Company’s shares as at 31 December 2014 was 65.75 pence (31 March 2014: 99.50 pence). The range of the trading price of the Company’s shares during the period was between 52.50 pence and 108.25 pence.

Executive director external appointmentsNone of the executive directors have any external directorships for which they are paid a fee.

By order of the Board D McManusChairman of the Remuneration Committee

8 April 2015


Governance

Statutory information

Principal activityThe principal activity of the group is the exploration and exploitation of its oil and gas acreage. Group strategy is to explore, appraise and develop its acreage both safely and responsibly. Value is created as the group proceeds through the key stages to final investment decision and onwards to production.

Results and dividendsThe trading results for the period, and the group’s financial position at the end of the period are shown in the attached financial statements. The directors have not recommended a dividend for the period (year ended 31 March 2014: £nil).

Key performance indicators “KPIs”See page 10 for more details.

Substantial shareholdersAt 25 March 2015 the company had been notified of the following interests of three percent or more of the company’s voting rights.

Number Percentage of voting of voting Shareholder/Fund manager rights rights

Odey Asset Management 29,242,830 9.98%

FMR LLC & FIL Ltd (Fidelity) 21,400,058 7.32%

UBS Investment Bank 20,824,173 7.11%

Royal London Asset Management 18,215,472 6.23%

Carlson Capital UK 17,516,814 5.98%

Credit Suisse 14,292,898 4.89%

D E Shaw & Co L.P. 13,486,537 4.62%

Barclays PLC 12,533,139 4.29%

Aedos Advisers (London) LLP 12,182,186 4.17%

Hotchkis & Wiley Capital Management 10,670,937 3.65%

GLG Partners 10,546,120 3.61%

Artemis Investment Management LLP 10,450,000 3.58%

Directors The present members of the board are as listed in the board of directors section.

The interests of the directors in office at the period end in the share capital of the company are shown in the directors’ remuneration report along with details of their service contracts and terms of appointment.

Post balance sheet eventsParticulars of important events affecting the group since the financial year end are set out in note 30.

Principal risks and uncertaintiesInformation relating to the principal risks and uncertainties facing the group is set out in the Risk Management report section of the Strategic report and note 31.

Related party transactionsRelated party transactions are disclosed in note 28.

Financial instrumentsFor the period under review the group held no financial instruments, outside of cash and receivables. Financial risk management policies are disclosed in note 31.

Political and charitable contributionsThe group made no charitable donations (year ended 31 March 2014: $nil) and no political donations (year ended 31 March 2014: $nil) during the period.

Creditor payment policyThe group does not follow any specific code or standard on payment practice. However, it is the policy of the group to ensure that all of its suppliers of goods and services are paid promptly and in accordance with contractual and legal obligations. Average creditor days for the period were 46 days (year ended 31 March 2014: 64 days), on the basis of accounts payable as a percentage of amounts invoiced during the period.

Qualifying Indemnity Provisions The company has entered into separate indemnity deeds with each director containing qualifying indemnity provisions, as defined at section 236 of the Companies Act 2006, under which the company has agreed to indemnify them in respect of certain liabilities which may attach to them as a director or as a former director of the company. At the date of this directors’ report indemnity deeds containing qualifying indemnity provisions are in force for all of the company’s directors. The company has also issued an indemnity to directors and the company secretary in respect of any personal liability to Falkland Islands tax by the company or its subsidiaries.

Directors’ and Officers’ Insurance The group maintained directors’ and officers’ liability insurance cover throughout the period. The directors are also able to obtain independent legal advice at the expense of the group, as necessary, in their capacity as directors.

Employees The group had 40 employees at the period end, three of whom are directors. The group seeks to employ people on the basis of merit and ability to perform the required roles. The group does not discriminate on any grounds including race, gender, religion, age, nationality or sexual orientation.

Environment The group’s operations are, and will be, subject to environmental regulation (with regular environmental impact assessments and evaluation of operations required before any permits are granted to the group) in the jurisdiction in which it operates. Although the group intends to be in compliance with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances, that could subject the group to extensive liability.

Further, the group may fail to obtain the required approval from the relevant authorities necessary for it to undertake activities which are likely to impact the environment. The group is unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would materially increase the group’s cost of doing business or affect its operations in any area.


Governance

Change of financial year end The group changed its accounting reference date from 31 March to 31 December. This change was to bring its financial year end in line with the majority of its peers. These financial statements for the nine months to 31 December 2014 are the first to be published to this new accounting reference date.

Statement of Directors’ responsibilities in respect of the Report for the Period Ended 31 December 2014 and the financial statements The directors are responsible for preparing the report for the period ended 31 December 2014, and the group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange for companies they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

• for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement as to disclosure of information to the auditor Each director in office at the date of this report has confirmed, as far as he is aware, that there is no relevant audit information of which the auditor is unaware. Each such director has confirmed that he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditor During the period, KPMG LLP was appointed as independent auditor of the group. A resolution to re-appoint the auditor, KPMG LLP, will be put forward to the forthcoming Annual General Meeting of the company.

Jan DaviesCompany Secretary

8 April 2015


Independent audit report to the members of Rockhopper Exploration plc

We have audited the financial statements of Rockhopper Exploration Plc for the nine month period ended 31 December 2014 set out on pages 47 to 79. The financial reporting framework that has been applied in their preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s 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 and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 45, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s web-site at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2014 and of the group’s loss for the period then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Lynton Richmond (Senior Statutory Auditor)for and on behalf of KPMG LLP, Statutory AuditorChartered Accountants15 Canada SquareLondonE14 5GL

8 April 2015

Group income statementfor the nine months ended 31 December 2014


Accounts

Nine months ended Year ended 31 December 31 March 2014 2014 Notes $’000 $’000

Revenue 1,910 —

Other cost of sales (554) —

Depreciation and impairment of oil and gas assets (3,416) —

Total cost of sales 4 (3,970) —

Gross profit (2,060) —

Exploration and evaluation expenses 5 (1,782) (1,461)

Administrative expenses 6 (10,033) (12,341)

Charge for share based payments 9 (672) (797)

Foreign exchange movement 10 6,516 (2,631)

Results from operating activities (8,031) (17,230)

Finance income 11 657 1,499

Finance expense 11 (209) —

Loss before tax (7,583) (15,731)

Tax 12 (5) (62,542)

Loss for the year attributable to the equity shareholders of the parent company (7,588) (78,273)

Loss per share: cents (basic & diluted) 13 (2.63) (27.54)

All operating income and operating gains and losses relate to continuing activities.

Group statement of comprehensive incomefor the nine months ended 31 December 2014

Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Loss for the period (7,588) (78,273)

Items that may be reclassified to profit and loss

Exchange differences on translation of foreign operations (4,217) —

Total comprehensive loss for the period (11,805) (78,273)

Group balance sheet as at 31 December 2014

Accounts


31 December 31 March 2014 2014 Notes $’000 $’000

Non-current assets

Exploration and evaluation assets 14 204,164 153,656

Property, plant and equipment 15 12,146 353

Goodwill 16 10,940 —

Other receivables 17 566 —

Current assets

Inventories 2,188 —

Other receivables 17 4,681 1,932

Restricted cash 18 1,384 309

Term deposits 19 100,000 185,000

Cash and cash equivalents 99,726 62,482

Total assets 435,795 403,732

Current liabilities

Other payables 20 19,358 3,084

Tax payable 21 100,439 107,056

Non-current liabilities

Provisions 22 21,816 —

Deferred tax liability 23 39,144 39,137

Total liabilities 180,757 149,277

Equity

Share capital 24 4,854 4,711

Share premium 25 662 170

Share based remuneration 25 4,960 4,597

Own shares held in trust 25 (628) (354)

Merger reserve 25 11,112 (243)

Foreign currency translation reserve 25 (4,217) 4,123

Special reserve 25 536,976 541,964

Retained losses 25 (298,681) (300,513)

Attributable to the equity shareholders of the company 255,038 254,455

Total liabilities and equity 435,795 403,732

These financial statements were approved by the directors and authorised for issue on 8 April 2015 and are signed on their behalf by:



Accounts

Group statement of changes in equityfor the nine months ended 31 December 2014

Foreign currency Share Share Share based Shares held Merger translation Special Retained Total capital premium remuneration in trust reserve reserve reserve losses equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 31 March 2013 4,710 578,754 3,999 (212) (243) 4,123 — (259,234) 331,897

Total comprehensive loss for the year — — — — — — — (78,273) (78,273)

Share based payments — — 797 — — — — — 797

Share issues in relation to SIP 1 175 — (142) — — — — 34

Cancellation of share premium account — (578,759) — — — — 541,964 36,795 —

Exercise of SARs — — (199) — — — — 199 —

Balance at 31 March 2014 4,711 170 4,597 (354) (243) 4,123 541,964 (300,513) 254,455

Total comprehensive loss for the period — — — — — (4,217) — (7,588) (11,805)

Acquisition of subsidiary 127 — — — 11,355 — — — 11,482

Share based payments — — 672 — — — — — 672

Share issues in relation to SIP 1 77 — (49) — — — — 29

Exercise of share options 15 415 (309) — — — — 309 430

Purchase of own shares — — — (225) — — — — (225)

Other transfers — — — — — (4,123) (4,988) 9,111 —

Balance at 31 December 2014 4,854 662 4,960 (628) 11,112 (4,217) 536,976 (298,681) 255,038

Group cash flow statementfor the nine months ended 31 December 2014

Accounts


Nine months ended Year ended 31 December 31 March 2014 2014 Notes $’000 $’000

Cash flows from operating activities

Net loss before tax (7,583) (15,731)

Adjustments to reconcile net profits/losses to cash utilised:

Depreciation 15 2,186 282

Impairment on property, plant and equipment 15 1,465 —

Share based payment charge 9 672 797

Exploration impairment expenses 14 258 2

Loss on disposal of tangible fixed assets 3 13

Finance expense 208 —

Interest (470) (1,003)

Foreign exchange 10 (6,349) 2,672

Operating cash flows before movements in working capital (9,610) (12,968)

Changes in:

Inventories 495 —

Other receivables 1,682 (325)

Payables (3,812) 459

Movement on other provisions 8 —

Cash utilised by operating activities (11,237) (12,834)

Cash flows from investing activities

Capitalised expenditure on exploration and evaluation assets (10,150) (2,485)

Purchase of equipment (1,111) (65)

Acquisition of subsidiary, net of cash acquired 29 (24,037) —

Proceeds on disposal of exploration and evaluation assets — 665

Interest 673 955

Taxation — (40,382)

Investing cash flows before movements in capital balances (34,625) (41,312)

Changes in:

Restricted cash (953) —

Term deposits 85,000 (104,623)

Cash flow by investing activities 49,422 (145,935)

Cash flows from financing activities

Share options exercised 430 —

Share incentive plan 29 34

Purchase of own shares (225) —

Finance expense (20) —

Cash flow from financing activities 214 34

Currency translation differences relating to cash and cash equivalents (1,155) 3,853

Net cash flow 38,399 (158,735)

Cash and cash equivalents brought forward 62,482 217,364

Cash and cash equivalents carried forward 99,726 62,482

Notes to the group financial statementsfor the nine months ended 31 December 2014


Accounts

1 Accounting policies1.1 Group and its operations

Rockhopper Exploration plc (the “company”), a public limited company quoted on AIM, incorporated and domiciled in the United Kingdom (“UK”), together with its subsidiaries (collectively, the “group”) holds certain exploration licences granted in 2004 and 2005 for the exploration and exploitation of oil and gas in the Falkland Islands. During the period it diversified its portfolio through the acquisition of an exploration and production company with operations principally based in Italy. The registered office of the company is Hilltop Park, Devizes Road, Salisbury SP3 4UF.

1.2 Statement of complianceThe consolidated financial statements are prepared in compliance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with UK company law. The consolidated financial statements were approved for issue by the board of directors on 8 April 2015 and are subject to approval at the Annual General Meeting of shareholders on 19 May 2015.

1.3 Basis of preparationThe results upon which these financial statements have been based were prepared using the accounting policies set out below. These policies have been consistently applied unless otherwise stated.

These consolidated financial statements have been prepared under the historical cost convention except, as set out in the accounting policies below, where certain items are included at fair value.

Items included in the results of each of the group’s entities are measured in the currency of the primary economic environment in which that entity operates (the “functional currency”). The functional currency of the group acquired during the period is euros. All other members of the group have a functional currency of US$.

All values are rounded to the nearest thousand dollars ($’000) or thousand pounds (£’000), except when otherwise indicated.

1.4 Change in accounting policyChanges in accounting standardsIn the current period the following significant and new and revised standards, amendments and interpretations were effective but did not affect amounts reported in these financial statements but may affect future periods:

– Amendments to IFRS10, IFRS12 and IAS27 Investment Entities;

– Amendments to IAS32 Offsetting Financial Assets and Financial Liabilities;

– Amendments to IAS36 Recoverable Amount Disclosure for Non-Financial Assets;

– Amendments to IAS39 Novation of Derivatives and Continuation of Hedge Accounting; and

– IFRIC 21 Levies.

At the date of authorisation of this report the following standards and interpretations, which have not been applied in this report, were in issue but not yet effective:

– IFRS9 Financial Instruments;

– FRS15 Revenue from Contracts with customers;

– Amendments to IFRS11 Accounting for Acquisitions of Interests in Joint Operations;

– Amendments to IAS16 and IAS38 Clarification of Acceptable Methods of Depreciation and Amortisation;

– Amendments to IAS19 Defined Benefits Plans: Employee Contributions;

– Annual Improvements to IFRSs 2010-12 Cycle; and

– Annual Improvements to IFRSs 2011-13 Cycle.

Management does not believe that the application of these standards, where applicable, will have a material impact on the financial statements, except for the requirement of additional disclosures.

1.5 Going concernAt 31 December 2014 the group had available resources of $200 million. In addition the group’s main development, Sea Lion, is fully funded through a combination of Development Carries and a loan facility from the operator.


Notes to the group financial statements continuedfor the nine months ended 31 December 2014

Accounts

1 Accounting policies continued1.6 Significant accounting policies(A) Basis of accounting

The group has identified the accounting policies that are most significant to its business operations and the understanding of its results. These accounting policies are those which involve the most complex or subjective decisions or assessments, and relate to the capitalisation of exploration expenditure. The determination of this is fundamental to the financial results and position and requires management to make a complex judgment based on information and data that may change in future periods.

Since these policies involve the use of assumptions and subjective judgments as to future events and are subject to change, the use of different assumptions or data could produce materially different results. The measurement basis that has been applied in preparing the results is historical cost with the exception of financial assets, which are held at fair value.

The significant accounting policies adopted in the preparation of the results are set out below.

(B) Basis of consolidationThe consolidated financial statements include the results of Rockhopper Exploration plc and its subsidiary undertakings to the Balance Sheet date. Where subsidiaries follow differing accounting policies from those of the Group, those accounting policies have been adjusted to align with those of the Group. Inter-company balances and transactions between group companies are eliminated on consolidation, though foreign exchange differences arising on inter-company balances between subsidiaries with differing functional currencies are not offset. The results of subsidiaries acquired in any period are included in the Income Statement and Statement of Cash Flows from the effective date of acquisition.

(C) Segmental reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker as required by IFRS8 Operating Segments. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors.

The Group’s operations are made up of three segments, the oil and gas exploration activities in the geographical regions of the North Falkland Basin and the greater Mediterranean region as well as its corporate activities centred in the UK.

(D) Oil and Gas AssetsThe group applies the successful efforts method of accounting for exploration and evaluation (“E&E”) costs, having regard to the requirements of IFRS 6 – ‘Exploration for and evaluation of mineral resources’.

Exploration and evaluation (“E&E”) expenditureExpensed exploration & evaluation costsExpenditure on costs incurred prior to obtaining the legal rights to explore an area, geological and geophysical costs are expensed immediately to the income statement.

Capitalised intangible exploration and evaluation assetsAll directly attributable E&E costs are initially capitalised in well, field, prospect, or other specific, cost pools as appropriate, pending determination.

Tangible assets used in E&E activities are classified as property, plant and equipment. However, to the extent that such a tangible asset is consumed in developing an intangible asset, the amount reflecting the consumption is recorded as part of the cost of the intangible asset.

Treatment of intangible E&E assets at conclusion of appraisal activitiesIntangible E&E assets related to each cost pool are carried forward until the existence, or otherwise, of commercial reserves have been determined, subject to certain limitations including review for indications of impairment. If commercial reserves have been discovered, the carrying value, after any impairment loss, of the relevant E&E assets, are then reclassified as development and production assets within property plant and equipment. However, if commercial reserves have not been found, the capitalised costs are charged to expense.



Accounts

The Group’s definition of commercial reserves for such purpose is proved and probable reserves on an entitlement basis. Proved and probable reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty (see below) to be recoverable in future years from known reservoirs and which are considered commercially producible. There should be a 50% statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as proved and probable. The equivalent statistical probabilities for the proven component of proved and probable reserves are 90%.

Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention is based upon:

– a reasonable assessment of the future economics of such production;

– a reasonable expectation that there is a market for all or substantially all the expected hydrocarbon production;

– evidence that the necessary production, transmission and transportation facilities are available or can be made available; and

– the making of a final investment decision.

Furthermore:

(i) Reserves may only be considered proved and probable if producibility is supported by either actual production or a conclusive formation test. The area of reservoir considered proved includes: (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, or both; and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geophysical, geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.

(ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are only included in the proved and probable classification when successful testing by a pilot project, the operation of an installed programme in the reservoir, or other reasonable evidence (such as, experience of the same techniques on similar reservoirs or reservoir simulation studies) provides support for the engineering analysis on which the project or programme was based.

Development and production assetsDevelopment and production assets, classified within property, plant and equipment, are accumulated generally on a field-by-field basis and represent the costs of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets.

Depreciation of producing assetsThe net book values of producing assets are depreciated generally on a field-by-field basis using the unit-of-production method by reference to the ratio of production in the year and the related commercial reserves of the field, taking into account the future development expenditure necessary to bring those reserves into production.

DisposalsNet cash proceeds from any disposal of an intangible E&E asset are initially credited against the previously capitalised costs. Any surplus proceeds are credited to the income statement.

DecommissioningProvision for decommissioning is recognised in full when the related facilities are installed. The amount recognised is the present value of the estimated future expenditure. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related oil and gas property. This is subsequently depreciated as part of the capital costs of the production facilities. Any change in the present value of the estimated expenditure is dealt with prospectively as an adjustment to the provision and the oil and gas property. The unwinding of the discount is included in finance cost.

(E) Capital commitmentsCapital commitments include all projects for which specific board approval has been obtained up to the reporting date. Projects still under investigation for which specific board approvals have not yet been obtained are excluded.


Accounts


1 Accounting policies continued(F) Foreign currency translation

Functional and presentation currencyItems included in the results of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates, the functional currency. The consolidated financial statements are presented in US$ as this best reflects the economic environment of the oil exploration sector in which the Group operates. The Group maintains the accounts of the parent and subsidiary undertakings in their functional currency. Where applicable, the Group translates subsidiary accounts into the presentation currency, US$, using the closing rate method for assets and liabilities which are translated at the rate of exchange prevailing at the Balance Sheet date and rates at the date of transactions for Income Statement accounts. Differences are taken directly to reserves.

Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

The period end rates of exchange actually used were:

31 December 2014 31 March 2014

£ : US$ 1.56 1.66

a : US$ 1.22 1.38

(G) Investment incomeInvestment income consists of interest receivable for the period. Interest income is recognised as it accrues, taking into account the effective yield on the investment.

(H) Non-derivative financial instrumentsFinancial assets and financial liabilities are recognised on the group’s balance sheet when the group has become a party to the contractual provisions of the instrument.

(i) Other receivablesOther receivables are classified as loans and receivables and are initially recognised at fair value. They are subsequently measured at their amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made where there is objective evidence that amounts will not be recovered in accordance with original terms of the agreement. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.

(ii) Term depositsTerm deposits are disclosed separately on the face of the balance sheet when their term is greater than three months and they are unbreakable.

(iii) Restricted cashRestricted cash is disclosed separately on the face of the balance sheet and denoted as restricted when it is not under the exclusive control of the group.

(iv) Cash and cash equivalentsCash and cash equivalents comprise cash in hand and at bank and other short-term deposits held by the group including breakable and unbreakable deposits with terms of less than three months and breakable term deposits of greater terms than three months where amounts can be accessed within three months without material loss. They are stated at carrying value which is deemed to be fair value.

(v) Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

(vi) Trade payablesTrade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

(vii) Equity instrumentsEquity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.


Accounts

(I) Income taxes and deferred taxationThe current tax expense is based on the taxable profits for the period, after any adjustments in respect of prior years. Tax, including tax relief for losses if applicable, is allocated over profits before tax and amounts charged or credited to reserves as appropriate.

Deferred taxation is recognised in respect of all taxable temporary differences that have originated but not reversed at the balance sheet date where a transaction or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the exception that deferred tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

(J) Share based remunerationThe group issues equity settled share based payments to certain employees. Equity settled share based payments are measured at fair value (excluding the effect of non market based vesting conditions) at the date of grant The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for non market based vesting conditions.

Fair value is measured by use of either Binomial or Monte-Carlo simulation. The main assumptions are disclosed in note 9.

Cash settled share based payment transactions result in a liability. Services received and liability incurred are measured initially at fair value of the liability at grant date, and the liability is remeasured each reporting period until settlement. The liability is recognised on a straight line basis over the period that services are rendered.

2 Use of estimates, assumptions and judgementsThe group makes estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. Estimates, assumptions and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Carrying value of intangible exploration and evaluation assets (note 14) and property, plant and equipment (note 15)The amounts for intangible exploration and evaluation assets represent active exploration and evaluation projects. These amounts will be written off to the income statement as exploration costs unless commercial reserves are established or the determination process is not completed and there are indications of impairment in accordance with the Group’s accounting policy.

In addition for assets under evaluation where discoveries have been made, such as Sea Lion, and property plant and equipment assets their carrying value is checked by reference to impairment models which requires key assumptions and estimates in relation to: commodity prices that are based on forward curves for a number of years and the long-term corporate economic assumptions thereafter, discount rates, the quantum of commercial reserves and the associated production and cost profiles. Future development costs are estimated taking into account the level of development required to produce the reserves by reference to operators, where applicable, and internal engineers.

Carrying value of goodwill (note 16)Following the acquisition of Mediterranean Oil & Gas plc during the period, Rockhopper recognised goodwill in line with the requirements of IFRS 3- Business Combinations. Management performs annual impairment tests on the carrying value of goodwill. The calculation of the recoverable amount is based on the likely future economic benefits of the the acquired portfolio and is based on estimated value of the potential and actual discoveries as noted above.

Decommissioning costs (note 22)Decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to the relevant legal requirements, the emergence of new technology or experience at other assets. The expected timing, work scope and amount of expenditure may also change. Therefore significant estimates and assumptions are made in determining the provision for decommissioning. The estimated decommissioning costs are reviewed annually by an external expert and the results of the most recent available review used as a basis for the amounts in the Financial Statements. Provision for environmental clean-up and remediation costs is based on current legal and contractual requirements, technology and price levels.


Accounts


3 Revenue and segmental information Falkland Greater Islands Mediterranean Corporate Total $’000 $’000 $’000 $’000

Nine months ended 31 December 2014

Revenue — 1,910 — 1,910

Other cost of sales — (554) — (554)

Depreciation and impairment of oil and gas assets — (3,416) — (3,416)

Total cost of sales — (3,970) — (3,970)

Gross profit — (2,060) — (2,060)

Exploration and evaluation expenses (295) (885) (602) (1,782)

Costs in relation to acquisition — — (1,899) (1,899)

Other administrative costs (128) (1,511) (6,495) (8,134)

Total administrative expenses (128) (1,511) (8,394) (10,033)

Charge for share based payments — — (672) (672)

Foreign exchange movement 6,617 153 (254) 6,516

Results from operating activities 6,194 (4,303) (9,922) (8,031)

Finance income — 1 656 657

Finance expense — (209) — (209)

Profit/(loss) before tax 6,194 (4,511) (9,266) (7,583)

Tax — (5) — (5)

Profit/(loss) for period 6,194 (4,516) (9,266) (7,588)

Reporting segments assets 175,504 62,589 197,702 435,795

Reporting segments liabilities 139,576 24,836 16,345 180,757

Falkland Greater Islands Mediterranean Corporate Total $’000 $’000 $’000 $’000

Year ended 31 March 2014

Revenue — — — —

Cost of sales — — — —

Gross profit — — — —

Exploration and evaluation expenses (1,246) — (215) (1,461)

Administrative expenses — — (12,341) (12,341)

Charge for share based payments — — (797) (797)

Foreign exchange movement (6,552) — 3,921 (2,631)

Results from operating activities (7,798) — (9,432) (17,230)

Finance income — — 1,499 1,499

(Loss)/profit before tax (7,798) — (7,933) (15,731)

Tax (62,542) — — (62,542)

(Loss)/profit for period (70,340) — (7,933) (78,273)

Reporting segments assets 153,656 — 250,076 403,732

Reporting segments liabilities 146,193 — 3,084 149,277


Accounts

4 Cost of sales Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Cost of sales 554 —

Depreciation of oil and gas assets 1,951 —

Impairment of oil and gas assets 1,465 —

3,970 —

5 Exploration and evaluation expenses Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Allocated from administrative expenses (see note 6) 1,060 1,108

Capitalised exploration costs impaired (see note 14) 258 2

Other exploration and evaluation expenses 967 1,707

Amounts recharged to partners (503) (1,356)

1,782 1,461

6 Administrative expenses Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Directors’ salaries and fees, including bonuses (see note 7) 2,473 2,676

Other employees’ salaries 3,078 2,501

National insurance costs 925 1,109

Pension costs 283 311

Employee benefit costs 219 98

Exercise of cash settled SARs (see notes 7) — 3,351

Total staff costs 6,978 10,046

Amounts reallocated (2,057) (2,013)

Total staff costs charged to administrative expenses 4,921 8,033

Auditor’s remuneration (see note 8) 256 226

Costs in relation to acquisition 1,899 —

Other professional fees 1,369 2,565

Other 1,975 1,849

Depreciation 235 282

Amounts reallocated (622) (614)

10,033 12,341

The average number of staff employed during the period was 29 (year ended 31 March 2014: 18).

Amounts reallocated relate to the costs of staff and associated overhead in relation to non administative tasks. These costs are allocated to exploration and evaluation expenses or capitalised as part of the intangible exploration and evaluation assets as appropriate.


Accounts


7 Directors’ remuneration Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Executive salaries 1,158 1,250

Executive bonuses 912 428

Compensation on loss of office — 458

Company pension contributions to money purchase schemes 116 181

Benefits 22 28

Non-executive fees 403 540

Gain on exercise of share options (31 March 2014: cash settled SARs) 336 3,351

2,947 6,236

Gain on exercise of share options during the period relates to the exercise by a Director of the Company of 425,000 shares in the Company at an exercise price of 10 pence per share. The option was due to expire in April 2015.

Gain on exercise of cash settled SARs in the prior year relates to the exercise by certain Directors of a total of 1,907,239 SARs that had been granted to them on 25 November 2008 and 3 July 2009 at a base price of 19.25 pence and 30.87 pence respectively being the market price at the time of grant. The SARs were granted under the terms of the Rockhopper Exploration PLC Employee Share Option Scheme. The Remuneration Committee of the Company exercised its discretion to settle the exercise of the SARs in cash.

The relevant Directors elected to purchase 747,165 shares at a price of £1.353 from the net proceeds of £1,109,766, after meeting the cost of exercising the SARs and payment of the tax obligations arising therefrom.

The total remuneration of the highest paid director was:


Annual salary 266,250 341,000

Bonuses 221,875 102,300

Money purchase pension schemes 26,625 34,100

Benefits 2,172 2,526

Gain on exercise of share options (31 March 2014: cash settled SARs) 213,563 1,120,461

730,485 1,600,387

Directors’ interests in outstanding share options and interests in outstanding SARs, by director, are separately disclosed in the directors’ remuneration report.


Accounts

8 Auditor’s remuneration Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

KPMG LLP

Fees payable to the company’s auditor for the audit of the company’s annual financial statements 153 104

Fees payable to the company’s auditor and its associates for other services:

Audit of the accounts of subsidiaries 62 —

Other services pursuant to legislation 35 72

Tax compliance services 6 4

Services relating to corporate finance — 46

256 226

9. Share based paymentsThe charge for share based payments relate to options and share appreciation rights (“SARs”) granted to employees of the company under the employee share option scheme (“ESOS”).


Charge for the share appreciation rights granted on 30 January 2013 — 420

Charge for the long term incentive plan options granted on 8 October 2013 366 294

Charge for the long term incentive plan options granted on 10 March 2014 46 4

Charge for the long term incentive plan options granted on 13 October 2014 164 —

Charge for shares issued under the SIP throughout the period 96 79

672 797

The models and key assumptions used to value each of the grants and hence calculate the above charges are set out below:

Long term incentive plan During 2013 a long term incentive plan (“LTIP”) was introduced to be operated and administered by the Remuneration Committee. During the period a number of LTIP awards, structured as nil cost options, were granted to executive directors and senior staff.

Awards will generally only vest or become exercisable subject to the satisfaction of a performance condition measured over a three year period (“Performance Period”) determined by the Remuneration Committee at the time of grant. The performance conditions must contain objective conditions, which must be related to the underlying financial performance of the Company.

The current performance condition used is based on Total Shareholder Return (“TSR”) measured over a three-year period against the TSR of a peer group of at least 11 other oil and gas companies comprising both FTSE 250, larger AIM oil and gas companies and Falkland Islands focused companies (“Peer Group”). The Peer Group for the Awards may be amended by the Remuneration Committee at their sole discretion as appropriate.


Accounts


9 Share based payments continuedPerformance measurement for the Awards are based on the average price over the relevant 90 day dealing period measured against the 90 dealing day period three years later. Awards will typically vest on a sliding scale from 35% to 100% for performance in the top two quartiles of the peer group. Certain awards have an escalator applied which means that they vest in excess of 100% if the Company is first or second in the peer group. For performance in the third quartile usually no Awards will vest but the Remuneration Committee will retain discretion to allow a percentage of awards to vest if it believes, having considered overall Company performance, that this is justified. For performance in the bottom quartile no awards will vest.

The Awards granted in the prior year also have an additional performance condition so that no awards will vest if the Company’s share price does not exceed £1.80 based on the average price over the 90 day dealing period up to 31 March 2016. No such condition exists for those Awards granted in the current period.

The LTIP has been valued using a Monte Carlo model the key inputs of which are summarised below:

Grant date: 13 Oct 14 13 Oct 14 10 Mar 14 8 Oct 13

Closing share price 76p 76p 115p 131p

Minimum exercise/base price N/A N/A 180p 180p

Escalation applied for being best of peer group N/A 33% N/A N/A

Escalation applied for being second of peer group N/A 29% N/A N/A

Number granted 1,063,750 2,382,581 201,117 1,757,786

Weighted average volatility 36.5% 36.5% 60.1% 60.1%

Weighted average volatility of index 42.2% 42.2% 62.0% 62.0%

Weighted average risk free rate 1.27% 1.27% 0.30% 0.30%

Correlation in share price movement with comparator group 32.0% 32.0% 49.0% 49.0%

Exercise price 0p 0p 0p 0p

Dividend yield 0% 0% 0% 0%

The following movements occurred during the period:

At 1 April At 31 December Issue date Expiry date 2014 Issued Exercised 2014

8 October 2013 8 October 2023 1,757,786 — — 1,757,786

10 March 2014 10 March 2024 201,117 — — 201,117

13 October 2014 13 October 2024 — 3,446,331 — 3,446,331

1,958,903 3,446,331 — 5,405,234

Share incentive planThe group has in place an HMRC approved Share Incentive Plan (“SIP”). The SIP allows the group to award Free Shares to UK employees (including directors) and to award shares to match the Partnership Shares purchased by employees, subject to HMRC limits.

Throughout this and the prior period the group issued two Matching Shares for every Partnership Share purchased.

Due to the change in period end the group did not make a free award in the period and an award was made in February 2015. In the prior year, on 27 February 2014, the group made a free award of £3,000 worth of Free Shares to eligible employees.


Accounts

This resulted in nil (year ended 31 March 2014: 41,280) Free Shares and 35,861 (year ended 31 March 2014: 34,974) Matching Shares being issued under the SIP in the period.

31 December 31 March 2014 2014

The average fair value of the shares awarded 1.18 1.18

Vesting 100% 100%

Dividend yield Nil Nil

Lapse due to withdrawals Nil Nil

The fair value of the shares awarded will be spread over the expected vesting period.

Share appreciation rightsA SAR is effectively a share option that is structured from the outset to deliver, on exercise, only the net gain in the form of new ordinary shares that would have been made on the exercise of a market value share option.

No consideration is payable on the grant of a SAR. On exercise, an option price of 1 pence per ordinary share, being the nominal value of the company’s ordinary shares, is paid and the relevant awardee will be issued with ordinary shares with a market value at the date of exercise equivalent to the notional gain that the awardee would have made, being the amount by which the aggregate market value of the number of ordinary shares in respect of which the SAR is exercised, exceeds a notional exercise price, equal to the market value of the shares at the time of grant (the “base price”). The remuneration committee has discretion to settle the exercise of SARs in cash.

The share based payment charges for SARs are calculated using a binomial model. Weighted average volatility was calculated based on the historical share price movement of the group. The inputs into the model that were used to value the SARs granted on the 30 January 2013 were:

Granted date: 30-Jan-13

Exercise/base price 159.00p

Number granted 711,127

Weighted average volatility 70%

Weighted average risk free rate 1.23%

Dividend yield Nil

Number of employees that will leave prior to exercise Nil

Illiquidity discount 0.00%

Expiry date 30-Jan-23

The following movements occurred during the period on SARs:

Exercise price At 1 April At 31 December Issue date Expiry date (pence) 2014 Lapsed Exercised 2014

22 November 2008 22 November 2018 19.25 355,844 — — 355,844

3 July 2009 3 July 2019 30.87 103,368 — — 103,368

11 January 2011 11 January 2021 372.75 212,641 — — 212,641

14 July 2011 14 July 2021 239.75 43,587 — — 43,587

16 August 2011 16 August 2021 237.00 17,035 — — 17,035

13 December 2011 13 December 2021 240.75 29,594 — — 29,594

17 January 2012 17 January 2022 303.75 291,531 — — 291,531

30 January 2013 30 January 2023 159.00 400,834 (33,903) — 366,931

1,454,434 (33,903) — 1,420,531


Accounts


9 Share based payments continuedOptionsThe following movements occurred during the period on options:

Exercise price At 1 April At 31 December Issue date Expiry date (pence) 2014 Exercised 2014

11 April 2005 10 April 2015 10.00 425,000 (425,000) —

10 May 2005 9 May 2015 10.00 15,840 — 15,840

8 August 2005 7 August 2015 42.00 4,050,000 (525,000) 3,525,000

4,490,840 (950,000) 3,540,840

The weighted average price of the options exercised was 27.7 pence.

10 Foreign exchange Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Foreign exchange gain/(loss) on Falkland Islands tax liability 6,617 (6,552)

Foreign exchange (loss)/gain on term deposits, cash and restricted cash (268) 3,880

6,349 (2,672)

Foreign exchange on operating activities 167 41

Total foreign exchange gain/(loss) 6,516 (2,631)

11 Finance income and expense Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Bank and other interest receivable 657 1,499

Total finance income 657 1,499

Unwinding of discount on provisions 188 —

Other 21 —

Total finance expense 209 —


Accounts

12 Taxation Nine months ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Current tax:

Overseas tax 17 —

Adjustment in respect of prior years (19) 62,542

Total current tax (2) 62,542

Deferred tax:

Overseas tax 7 —

Total deferred tax – note 23 7 —

Tax on profit on ordinary activities 5 62,542

Loss on ordinary activities before tax (7,583) (15,731)

Loss on ordinary activities multiplied at 26.0% weighted average rate (31 March 2014: 24.5%) (1,972) (3,852)

Effects of:

Amounts not subject to taxation (928) 1,798

Depreciation in excess of capital allowances (217) 53

Deferred tax 7 —

IFRS2 Share based remuneration cost 70 113

Losses carried forward 3,278 1,617

Amounts relating to prior years (19) 62,542

Other (214) (34)

Tax charge for the year 5 62,542

At the 31 March 2013 Rockhopper provided £52 million in relation to capital gains tax (“CGT”) due on its farm out of 60% of its licences to Premier. This was in line with the computations submitted to the Falkland Island Government (“FlG”). This was subsequently challenged by FIG. Rockhopper and FIG reached an agreement in principle regarding the timing and quantum of the CGT liability due as a result of this transaction leading to the $62.5 million adjustment in respect of prior years in the year ended 31 March 2014.

Under the Extra Statutory Concession 16 (“ESC 16”), Rockhopper has the right, subject to agreement with the Falkland Islands Government, to defer the payment of tax to the same date as the first royalty payment. At the period end date, the agreement in principle was not formally documented and as such the liability has been classified as current.

After the period end date a formal agreement has been reached, hence the tax liability will be reclassified as non-current and discounted in future reporting periods. Further details can be found in note 30 Post Balance Sheet Events.

The total carried forward losses and carried forward pre trading expenditures available for relief on commencement of trade are as follows:


UK 45,929 27,577

Falkland Islands 53,415 31,272

Italy 7,313 —

No deferred tax asset has been recognised in respect of temporary differences arising on losses carried forward, outstanding share options or depreciation in excess of capital allowances due to the uncertainty in the timing of profits and hence future utilisation.


Accounts


13 Basic and diluted loss per share 31 December 31 March 2014 2014 Number Number

Shares in issue brought forward 284,316,698 284,224,774

Shares issued during the period

– Issued on exercise of options on 1 April 2014 400,000 —

– Issued in relation to acquisition on 12 August 2014 7,481,816 —

– Issued on exercise of options on 19 November 2014 125,000 —

– Issued on exercise of options on 16 December 2014 425,000 —

– Issued under the SIP 56,939 91,924

Shares in issue carried forward 292,805,453 284,316,698

Weighted average shares in issue 288,646,881 284,251,566


Net (loss) after tax (7,588) (78,273)

Basic and diluted net (loss) per share – cents (2.63) (27.54)

The calculation of the basic loss per share is based upon the loss for the period and the weighted average shares in issue. As the group is reporting a loss for both periods then in accordance with IAS33 the share options are not considered dilutive because the exercise of the share options would have the effect of reducing the loss per share.

14 Intangible exploration and evaluation assets Falkland Greater Islands Mediterranean Total $’000 $’000 $’000

As at 1 April 2013 151,957 — 151,957

Additions 2,366 — 2,366

Written off to exploration costs (2) — (2)

Disposals (665) — (655)

As at 31 March 2014 153,656 — 153,656

Acquisitions — 30,288 30,288

Additions 21,848 1,542 23,390

Written off to exploration costs — (258) (258)

Foreign exchange movement — (2,912) (2,912)

As at 31 December 2014 175,504 28,660 204,164

Falkland Islands licences The additions during the period relate to $10.5 million of advance costs for the four well exploration campaign for which drilling commenced in March 2015. $11.3 million relates to the Sea Lion development.

Greater Mediterranean licences The additions during the period predominantly relate to work on the Italian and Maltese license interests.


Accounts

15 Property, plant and equipment Oil and gas Other 31 December 31 March assets assets 2014 2014 $’000 $’000 $’000 $’000

Cost brought forward — 1,139 1,139 1,096

Acquisitions 15,324 339 15,663 —

Additions 558 554 1,112 65

Foreign exchange (1,469) (32) (1,501) —

Disposals — (10) (10) (22)

Cost carried forward 14,413 1,990 16,403 1,139

Accumulated depreciation brought forward — (786) (786) (513)

Current year depreciation charge (1,951) (235) (2,186) (282)

Impairment (1,465) — (1,465) —

Foreign exchange 171 1 172 —

Disposals — 8 8 9

Depreciation carried forward (3,245) (1,012) (4,257) (786)

Net book value brought forward — 353 353 583

Net book value carried forward 11,168 978 12,146 353

All oil and gas property, plant and equipment assets relate to the Greater Mediterranean region.

The impairment charge in the current year relates to the production assets in the Greater Mediterranean. The impairment charge of US$1.5 million was calculated by comparing the future discounted cash flows expected to be derived from production of commercial reserves (the value-in-use being the recoverable amount) against the carrying value of the asset. The future cash flows were estimated using a realised gas price assumption equal to the existing contracts in place and the relevant forward curve in 2015 and 2016, and a0.25/sm3 in “real” terms thereafter and were discounted using a rate equivalent to a pre-tax rate of 21%. Assumptions involved in the impairment measurement include estimates of commercial reserves and production volumes, future oil and gas prices and the level and timing of expenditures, all of which are inherently uncertain. The cause of the impairment charge being recognised in the period is a combination of a reduction in the short term realised gas price assumption as well as a small increase in expected capital costs and revised production outlook for the Guendalina asset.

16 Goodwill Greater Mediterranean Total $’000 $’000

As at 31 March 2014 — —

Additions 12,074 12,074

Foreign exchange movement (1,134) (1,134)

As at 31 December 2014 10,940 10,940

Goodwill additions in the period relate to the corporate acquisitions during the period. Details of the corporate acquisitions can be found in note 29. This goodwill is fully allocated to the Greater Mediterranean operating segment and more specifically the portfolio of intangible exploration and appraisal assets.

The group tests goodwill annually for impairment, or more frequently if there are indicators goodwill might be impaired. The recoverable amounts are determined from a value in use calculation. The future cash flows were estimated using a realised gas price assumption equal to the existing contracts in place and the relevant forward curve in 2015 and 2016, and a0.25/sm3 in “real” terms thereafter and were discounted using a rate equivalent to a pre-tax rate of 21%. Assumptions involved in the impairment measurement include estimates of commercial reserves and production volumes, future oil and gas prices and the level and timing of expenditures, all of which are inherently uncertain.


Accounts


17 Other receivables 31 December 31 March 2014 2014 $’000 $’000

Non-current

Other 566 —

566 —

Current

Receivables 2,194 819

Prepayments 291 416

Accrued interest 166 369

Income tax 256 —

Other 1,774 328

4,681 1,932

The carrying value of receivables approximates to fair value. Receivables relate to amounts charged for the provision of technical services to third parties.

The accrued interest relates to unexpired fixed term deposits held at the period end.

18 Restricted cash 31 December 31 March 2014 2014 $’000 $’000

Charged accounts 898 309

Restricted cash in relation to exploration license applications 486 —

1,384 309

The charged accounts relate to a collateral account at Royal Bank of Scotland plc, to support the credit risk to the bank stemming from any forward currency purchases by the group, and the rent deposit for the offices leased by the group. Both amounts are GB£ denominated.

19 Term deposits 31 December 31 March 2014 2014 $’000 $’000

Maturing after the period end:

Within three months 25,000 85,000

Three to six months 20,000 40,000

Six to nine month 25,000 60,000

Nine months to one year 30,000 —

100,000 185,000

Term deposits are disclosed separately on the face of the balance sheet when their term is greater than three months and they are unbreakable.


Accounts

20 Other payables and accruals 31 December 31 March 2014 2014 $’000 $’000

Accounts payable 2,318 1,363

Accruals 15,869 1,721

Other creditors 1,171 —

19,358 3,084

All amounts are expected to be settled within twelve months of the balance sheet date and so the book values and fair values are considered to be the same.

21 Tax payable 31 December 31 March 2014 2014 $’000 $’000

Current tax payable 100,439 107,056

Tax payable relates to corporation tax due as a result of the farm out transaction during 2012. The amount payable remains at £64 million although in dollar terms this equates to $100 million at the period end exchange rate. Management are considering strategies to mitigate currency risk in relation to this balance. Further details on this balance are disclosed in note 12 Taxation and note 30 Post Balance Sheet Events.

22 Provisions Abandonment Other 31 December 31 March provision provisions 2014 2014 $’000 $’000 $’000 $’000

Brought forward — — — —

Acquisitions 23,556 316 23,872 —

Amounts utilized — (38) (38) —

Amounts arising in the period — 46 46 —

Unwinding of discount 179 — 179 —

Foreign exchange (2,215) (28) (2,243) —

Carried forward at period end 21,520 296 21,816 —

The abandonment provision relates to the group’s licences acquired during the period in the Greater Mediterranean region. The provision covers both the plug and abandonment of wells drilled as well as any requisite site restoration. Assumptions, based on the current economic environment, have been made which management believe are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required which will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain. Currently it is expected that the majority of this expenditure will be incurred over the next five to twenty year period.

Other provisions include amounts due to employees for accrued holiday and for staff in Italy, leaving indemnity, that will become payable when they cease employment.


Accounts


23 Deferred tax liability 31 December 31 March 2014 2014 $’000 $’000

At beginning of period 39,137 39,137

Movement in period 7 —

39,144 39,137

The deferred tax liability arises due to temporary differences associated with the intangible exploration and evaluation expenditure. The majority of the balance relates to historic expenditure on licences in the Falklands being utilised to minimise the corporation tax due on the consideration received as part of the farm out disposal during 2012.

Total carried forward losses and carried forward pre trading expenditures available for relief on commencement of trade at 31 December 2014 are disclosed in note 12 Taxation. No deferred tax asset has been recognised in relation to these losses due to uncertainty that future suitable taxable profits will be available against which these losses can be utilised. The potential deferred tax asset at the 31 December 2014 would be $25 million (31 March 2014: $14 million).

24 Share capital 31 December 2014 31 March 2014

$’000 Number $’000 Number

Called up, issued and fully paid: Ordinary shares of £0.01 each 4,854 292,805,453 4,711 284,316,698

For details of all movements during the year, see note 13.

25 ReservesSet out below is a description of each of the reserves of the group:

Share premium Amount subscribed for share capital in excess of its nominal value.

Share based remuneration The share incentive plan reserve captures the equity related element of the expenses recognised for the issue of options, comprising the cumulative charge to the income statement for IFRS2 charges for share based payments less amounts released to retained earnings upon the exercise of options.

Own shares held in trust Shares held in trust represent the issue value of shares held on behalf of participants in the SIP by Capita IRG Trustees Limited, the trustee of the SIP as well as shares held by the Employee Benefit Trust which have been purchased to settle future exercises of options.

Merger reserve The difference between the nominal value of shares issued with the nominal value of the shares received on the reversal of Rockhopper Resources Limited into Rockhopper Exploration Plc on 23 February 2005, during the year ended 31 March 2005.

Foreign currency translation Exchange differences arising on consolidating the assets and liabilities of the group’s subsidiaries are reserve classified as equity and transferred to the group’s translation reserve.

Special reserve The reserve is non distributable and was created following cancellation of the share premium account on 4 July 2013. It can be used to reduce the amount of losses incurred by the parent company or distributed or used to acquire the share capital of the company subject to settling all contingent and actual liabilities as at 4 July 2013. Should not all of the contingent and actual liabilities be settled, prior to distribution the parent company must either gain permission from the actual or contingent creditors for distribution or set aside in escrow an amount equal to the unsettled actual or contingent liability.

Retained losses Cumulative net gains and losses recognised in the financial statements.


Accounts

26 Lease commitmentsThe future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings were as follows:

31 December 31 March 2014 2014 $’000 $’000

Total committed within 1 year 979 224

Total committed between 1 and 5 years 2,461 58

3,440 282

27 Capital commitmentsCapital commitments represent Rockhopper’s share of expected costs in relation to its interests in joint ventures net of any carry arrangements that are in force.

During the period the group committed to a multi-year work plan and budget in relation to the four well Falkland Island exploration campaign. Expected costs of the campaign net of carries are forecast to be $25 million.

Rockhopper also committed to fund its share of pre sanction costs on Sea Lion. Rockhopper’s share of the gross approved development budget for the calendar year ending 31 December 2015 is $28 million.

In addition, Rockhopper has approved work plan and budget commitments of a8 million in relation to its portfolio of assets in the Greater Mediterranean region.

28 Related party transactionsThe remuneration of directors, who are the key management personnel of the group, is set out below in aggregate. Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report on pages 32 to 43.


Short term employee benefits 2,495 2,786

Pension contributions 116 181

Other long term employee benefits 336 3,351

Termination benefits — 458

Share based payments 346 381

3,293 7,157

Other long term employee benefits relate to the gain on exercise of share options during the current period and SARs during the prior year. Additional details are disclosed in note 7 Directors’ Remuneration.

On the 16 December 2014 the company was notified that Sam Moody, a director of the company, exercised an option over 425,000 shares in the Company at an exercise price of 10 pence per share. The option was due to expire in April 2015. Mr Moody elected to sell 237,136 shares to discharge the cost of exercise and his tax and national insurance obligations. On 19 December 2014, these shares were purchased by the Rockhopper Employee Benefit Trust (the “EBT”) which was established in 2013 for the purpose of holding shares to satisfy future exercises of options and vesting of awards under the company’s Long Term Incentive Plan. The 237,136 shares were acquired by the EBT by way of an off market purchase at a price of 60.25 pence being the closing share price on the date of exercise. The remaining 187,864 shares were retained by Mr Moody.


Accounts


29 Acquisition of subsidiariesIn August 2014 Rockhopper completed the acquisition of the entire issued share capital of Mediterranean Oil & Gas Plc (“MOG”).

MOG was an AIM quoted exploration and production company with operations in Italy, Malta and France. The acquisition of MOG provides Rockhopper with a low cost entry into the Greater Mediterranean region as well as providing established production and revenue. MOG produces natural gas onshore and offshore in Italy and has a balanced portfolio of exploration, appraisal and development opportunities with reserves and contingent resources of 32 mmboe.

Under the terms of the agreement announced on 23 May 2014, shareholders of MOG received 4.875 pence in cash and 0.0172 shares of the company per MOG share.

The transaction has been accounted for by the purchase method of accounting with an effective date of 11 August 2014 being the date on which the group gained control of MOG. Information in respect of the assets and liabilities acquired and the fair value allocation to the MOG assets in accordance with the provisions of “IFRS3 – Business Combinations” has been determined and is as follows:

Recognised values on acquisition $’000

Intangible exploration and appraisal assets 30,288

Property, plant and equipment 15,663

Long term other receivables 625

Inventories 2,683

Trade and other receivables 4,634

Restricted cash 268

Trade and other payables (6,845)

Long-term provisions (23,872)

Net identifiable assets and liabilities 23,444

Goodwill 12,074

Satisfied by:

Cash ($35,700,000 less $11,663,000 of cash acquired) 24,037

Equity instruments 7,481,816 ordinary shares 11,481

Total consideration 35,518

The fair value of equity instruments has been determined by reference to the closing share price on the trading day immediately prior to the completion of the acquisition.

In addition there was a contingent consideration of up to a maximum amount of 3.550 pence in cash for each MOG Share. The availability of the contingent consideration, and the amount of cash which would ultimately be payable was to be determined by the success of an exploration well targeting the Hagar Qim prospect in Offshore Malta Area 4, Block 7. As the Hagar Qim well was proved a dry hole during the measurement period the fair value of this contingent consideration was nil.

Acquired receivables have been accounted for at their gross contractual value as this is materially the same as their fair value.

Goodwill arises due to the difference between the fair value of the net assets and the consideration transferred and relates to the portfolio of intangible exploration and appraisal assets, which together have the optionality and potential to provide value far in excess of this fair value as well as the strategic premium associated with a significant presence in a new region. The functional currency of MOG is euros. As such the goodwill is also expressed in the same functional currency and subject to retranslation at each reporting period end. The reduction in the period from acquisition to the period end of $1,134,000 is entirely due to this foreign currency difference. None of the goodwill recognised is expected to be deductible for tax purposes.


Accounts

Acquisition costs of $1,899,000 arose as a result of the transaction. These have been recognised as part of administrative expenses in the statement of comprehensive income.

Since the acquisition date, MOG has contributed $1,910,000 to group revenues and added $4,363,000 to the group loss. If the acquisition had occurred on 31 March 2014, group revenue would have been $3,473,000 and group loss for the period would have been $11,309,000.

30 Post balance sheet events2015 Exploration drilling campaignOn the 2 April 2015 the group announced an update of the 14/15b-5 well. The Well is located on licence PL004b in which Rockhopper has a 24% working interest. The group confirmed that all seven of the reservoir targets predicted across the Cretaceous F1-F3 intervals were encountered. An additional sand was also encountered in the F2 sequence. Three of the sands were hydrocarbon bearing at this location, including the primary Zebedee F2 fan and additional oil shows were recorded in the deeper F3 targets.

Wireline logging and formation test data indicate that a total of 18.5m of net gas pay, and 27.9m of net oil pay were encountered in the Well. The Well was then plugged and abandoned as a successful exploration well.

On the 8 April 2015 the next well of the campaign, on the Isobel Deep target, was spudded by Premier Oil as operator.

Confirmation of Falkland Island capital gains tax liability deferment On the 8 April 2015 the group agreed binding documentation with the Falkland Island Government (“FIG”) in relation to the tax arising from the group’s 2012 farm-out to Premier Oil plc (“Premier”).

The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and reflects the principles agreed between Rockhopper and FIG in December 2013 and is made under Falkland Islands Extra Statutory Concession 16.

The key points of the Tax Settlement Deed are:

• Outstanding tax liability confirmed at £64.4 million (equivalent to $100.4 million at the 31 December 2014) and payable on the first royalty payment date on Sea Lion (or earlier subject to certain events – see CFO Review for details)

• First royalty payment date anticipated to occur within six months of first oil production which itself is estimated to occur in late 2019 (assuming Sea Lion project sanction in mid 2016)

• Outstanding tax liability amount may be revised downwards if the Falkland Islands’ Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier is used to fund exploration activities; or (ii) any element of the Development Carry from Premier becomes “irrecoverable”

• Rockhopper provides certain “creditor protection” undertakings to FIG while the tax liability remains outstanding including (i) restriction on dividends or distributions; (ii) granting of first ranking security over Rockhopper assets; and (iii) while such security is in place, restrictions, subject to conventional carve outs, on granting further security

• Intention that at the point Rockhopper is able to secure senior debt for the Sea Lion project, the security provided to FIG will be released and FIG will be provided with a standby letter of credit to preserve its creditor position

Accounts



31 Risk management policiesRisk reviewThe risks and uncertainties facing the group are set out in the risk management report. Risks which require further quantification are set out below.

Foreign exchange risks: The group’s functional currency is US$ and as such the group is exposed to foreign exchange movements on monetary assets and liabilities denominated in other currencies, in particular the CGT liability with the Falkland Island Government which is a GB£ denominated balance. Management are considering strategies to mitigate currency risk in relation to this balance. In addition a number of the group’s subsidiaries have a functional currency other than US$, where this is the case the group has an exposure to foreign exchange differences with differences being taken to reserves. The following table summarises the impact on the group’s pre-tax profit and equity of a reasonably possible change in the US$ to GB£ exchange rate and the US$ to euro exchange:

Pre tax profit Total equity

+10% US$ rate –10% US$ rate +10% US$ rate –10% US$ rate increase decrease increase decrease $’000 $’000 $’000 $’000

US$ against GB£

31 December 2014 (9,504) 9,504 (9,504) 9,504

31 March 2014 (8,250) 8,250 (8,250) 8,250

US$ against euro

31 December 2014 (32) 32 3,828 (3,828)

31 March 2014 83 (83) 83 (83)

Capital risk management: the group manages capital to ensure that it is able to continue as a going concern whilst maximising the return to shareholders. The capital structure consists of cash and cash equivalents and equity. The board regularly monitors the future capital requirements of the group, particularly in respect of its ongoing development programme.

Credit risk: the group recharges partners for the provision of technical services. Should the company holding these accounts become insolvent then these funds may be lost or delayed in their release. Amounts at the 31 December 2014 were $1,130,000 (31 March 2014: $819,000). These amounts were fully settled after the period end.

Interest rate risks: the group has no debt and so its exposure to interest rates is limited to finance income it receives on cash and term deposits. The group is not dependent on its finance income and given the current interest rates the risk is not considered to be material.

Liquidity risks: the group makes limited use of term deposits where the amounts placed on deposit cannot be accessed prior to their maturity date. The amounts applicable at the 31 December 2014 were $100.0 million (31 March 2014: $185.0million) and are disclosed in the counter-party risk table below.


Accounts

31 Risk management policies continuedCounter-party risk: rather than keep all its funds with one bank, the group splits its funds across a number of banks, two of which are part owned by the British government.

31 December 31 March 2014 2014 $’000 $’000

Barclays — 60,000

Lloyds 20,000 125,000

Standard Chartered 30,000 —

Investec 50,000 —

Total term deposits 100,000 185,000

RBS 89,235 36,688

Barclays 15 5,211

Lloyds 5,088 20,568

Deutsche Bank 2,805 —

Intesa San Paolo 1,233 —

Others 1,350 15

Total cash and cash equivalents 99,726 62,482

Total term deposits and cash and cash equivalents 199,726 247,482

Accounts


Parent company financial statements

Company balance sheet as at 31 December 2014

31 December 31 March 2014 2014 Notes $’000 $’000

Tangible fixed assets 2 674 353

Investments 3 35,825 —

Fixed assets 36,499 353

Debtors due beyond one year 330,489 308,219

Debtors due within one year 1,724 1,932

Debtors 4 332,213 310,151

Restricted cash 898 309

Cash at bank and in hand 194,406 247,482

Current assets 527,517 557,942

Creditors due within one year 5 (17,192) (3,084)

Net current assets 510,325 554,858

Total net assets 546,824 555,211

Share capital 6 4,854 4,711

Share premium 8 662 170

Share based remuneration 8 4,960 4,597

Share held by trust 8 (628) (354)

Foreign currency translation reserve 8 — 4,123

Special reserve 8 536,976 541,964

Retained losses 8 — —

Equity shareholders’ funds 546,824 555,211

These financial statements were approved by the directors and authorised for issue on 8 April 2015 and are signed on their behalf by:


Registered Company number: 05250250


Accounts

Notes to the company financial statementsfor the nine months ended 31 December 2014

1 Accounting policiesBasis of accountingThe financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. These policies have been consistently applied except where otherwise stated. The accounts relate to the company only and do not include the results of its subsidiaries.

All values are rounded to the nearest thousand dollars ($’000), except where otherwise indicated.

Going concernAt 31 December 2014 the group had available resources of $200 million. In addition the group’s main development, Sea Lion, is fully funded through a combination of Development Carries and a loan facility from the operator.


Profit and loss accountAs a group income statement is published, a separate profit and loss account for the parent company is omitted from the group financial statements by virtue of section 408 of the Companies Act 2006. The result for the period was a loss of $9.4 million (year to 31 March 2014: loss of $7.6 million).

Share based paymentThe company has two option schemes that have each granted options over the ordinary shares of the company, being an employee share option scheme (“ESOS”) and a non-employee share option scheme (“NESOS”).

Both schemes were created after 7 November 2002 and the company accounts for their cost until such time as they are fully vested in line with Financial Reporting Standard 20 (“FRS20”): Share based payments. Under the method set out in this standard, the cost of providing such schemes is based on the fair value of the options at the date of grant. The cost is charged to profit and loss over the expected vesting period of the options and credited to a share based payment reserve.

During 2008, the company also created a scheme for share appreciation rights (”SARs”). These are accounted and valued on a similar basis to the options. During 2012, the group started an HMRC approved Share Incentive Plan (“SIP”) which is available to all employees. Under the terms of the SIP, subscribing employees can be granted a free award of Ordinary Shares in the Company (“Shares”) (the “Free Shares”).

In addition, subject to employees purchasing Shares (“Partnership Shares”), an additional conditional award of Shares may be granted (“Matching Shares”).

Shares to meet the future Free Share and Matching Share obligations of participants are issued to Capita IRG Trustees Limited the trustee of the SIP. The Free Shares and Matching Shares are held on trust for the participants and are not released except in specific circumstances for three years after the date of allotment.

The issue of Partnership Shares are made at fair value and do not have any vesting conditions. As such they are accounted for as an equity transaction rather than as a share based payment.

The Free Shares and Matching Shares are conditional on the continued employment of the individual for three years after grant, except under certain specific circumstances. As such they are a Share Based Payment and accounted for on the same basis as the options.

The trust that holds the Shares to meet participants’ future entitlement to Free Shares and Matching Shares is aggregated into the Company’s financial statements.

When new shares are issued, the proceeds, net of any transaction costs, are credited to share capital at nominal value and the balance to share premium. The related amount in the share based payment reserve is then credited to retained earnings. Further details are disclosed within note 9 of the group financial statements.

Cash flow statementThe company has taken advantage of the exemption under FRS1 from preparing a cash flow statement as it is part of a group that produces consolidated accounts into which the results of the company are incorporated.

Accounts


Notes to the company financial statements continuedfor the nine months ended 31 December 2014

InvestmentsThe investments in the subsidiary undertakings are included in the company financial statements valued at the lower of cost and the directors’ estimate of net realisable value.

In the company’s balance sheet the investment in Rockhopper Resources Limited is stated at the nominal value of shares issued. As permitted by company law, no premium was recorded on the ordinary shares in connection with this acquisition.

Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred. Timing differences are differences between the company’s taxable profits and its results as stated in the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the years in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

Foreign currenciesThe functional currency of the company is US$.

Transactions denominated in foreign currencies are translated at the exchange rate ruling at the transaction date or, if appropriate, at the rate in related forward-currency contracts. The historic differences relating to the translation of share capital and premium have been taken straight to reserves. Monetary assets and liabilities denominated in foreign currencies are translated into dollars at the exchange rates ruling at the balance sheet date and any differences thereon are included in the profit and loss account.

The period end rates of exchange actually used were:


£ : US$ 1.56 1.66

a : US$ 1.22 1.38

Financial instrumentsThe company has taken advantage of the exemption in FRS29 (Financial Instruments: Disclosures) not to present company only information as the disclosures provided in the notes to the group consolidated financial statements comply with the requirements of the standard.

Tangible fixed assets and depreciationTangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset evenly over its expected useful life as follows:

Office equipment Over 3 yearsLeasehold improvements Over 5 years

Costs associated with the development and maintenance of the company’s website have been written off to the profit and loss account in accordance with Urgent Issues Task Force (UITF)29.

LeasingRentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.


Accounts

2 Tangible fixed assets 31 December 31 March 2014 2014 $’000 $’000

Cost brought forward 1,139 1,096

Additions 539 65

Disposals (5) (22)

Cost carried forward 1,673 1,139

Accumulated depreciation brought forward (786) (513)

Depreciation charge (218) (282)

Disposals 5 9

Accumulated depreciation carried forward (999) (786)

Net book value brought forward 353 583

Net book value carried forward 674 353

3 Investments Subsidiary undertakings Total Net book value $’000 $’000

At 1 April 2013 and 1 April 2014 — —

Additions 35,825 35,825

As at 31 December 2014 35,825 35,825

Additions during the period relate to the acquisition of 100% of the ordinary issued share capital of Mediterranean Oil & Gas Plc. The acquisition was for a combination of cash and newly issued shares in the Company, as such merger relief has been applied and the shares issued have been accounted for at nominal value.

Details of the investments at the period end were as follows:

Percentage Class of held Company Incorporated share %

Rockhopper Resources Limited England & Wales Ordinary 100

Rockhopper Exploration (Oil) Limited England & Wales Ordinary 100

Rockhopper Exploration (Hydrocarbons) Limited England & Wales Ordinary 100

Rockhopper Exploration (Petrochemicals) Limited England & Wales Ordinary 100

Rockhopper Exploration (Oil) Limited Falkland Islands Ordinary 100

Mediterranean Oil & Gas Plc England & Wales Ordinary 100

Rockhopper Civita Limited England & Wales Ordinary 100

Rockhopper Italia SPA Italy Ordinary 100

Melita Exploration Company Limited Malta Ordinary 100

Malta Oil Pty. Limited Australia Ordinary 100

Notes to the company financial statements continuedfor the nine months ended 31 December 2014

Accounts


4 Debtors 31 December 31 March 2014 2014 $’000 $’000

Due beyond one year 330,489 308,219

Other debtors 1,360 1,147

Accrued interest 166 369

Prepayments 198 416

Due within one year 1,724 1,932

332,213 310,151

All amounts due beyond one year are from subsidiary undertakings. These are the subject of a loan agreement signed on 26 September 2006. Under the original terms of the loan agreement interest was payable on the balance outstanding at the accrual dates, being 30 September and 31 March, at a rate of 2.5% per annum over the base rate of the Bank of England. The terms of the loan agreement were amended such that, with effect from 1 April 2011, they became interest free. The repayment date is to be the earlier of (i) the tenth anniversary of the date that the first advance was made or (ii) the date of winding up or an administration order is made in respect of the company.

5 Creditors due within one year 31 December 31 March 2014 2014 $’000 $’000

Trade creditors 1,462 1,363

Inter company balances 847 —

Other creditors 264 —

Accruals 14,619 1,721

17,192 3,084

6 Share capital 31 December 31 March 2014 2014 Number Number

Shares in issue brought forward 284,316,698 284,224,774

Shares issued during the period

– Issued on 1 April 2014 400,000 —

– Issued in relation to acquisition on 12 August 2014 7,481,816 —

– Issued on 19 November 2014 125,000 —

– Issued on 16 December 2014 425,000 —

– Issued under the SIP 56,939 91,924

Shares in issue carried forward 292,805,453 284,316,698


$’000 Number $’000 Number

Called up, issued and fully paid: Ordinary shares of £0.01 each 4,854 292,805,453 4,711 284,316,698


Accounts

7 Other statutory disclosures Period ended Year ended 31 December 31 March 2014 2014 $’000 $’000

Salaries and fees 4,360 4,216

National insurance costs 663 1,109

Pension costs 222 311

Employee benefit costs 92 98

Exercise of cash settled SARs — 3,779

Average number of employees 17 18

Statutory information on directors’ remuneration and for services provided by the company’s auditor and its associates is given on a consolidated basis in the directors’ report and notes 7 and 8 of the group accounts.

8 Reconciliation of shareholders’ funds and movement on reserves Currency Share Share Share based Shares held translation Special Retained capital premium remuneration in trust reserve reserve losses Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 31 March 2014 4,711 170 4,597 (354) 4,123 541,964 — 555,211

Total comprehensive loss for the year — — — — — — (9,420) (9,420)

Acquisition of subsidiary 126 — — — — — — 126

Share based payments — — 672 — — — — 672

Share issues in relation to SIP 2 77 — (49) — — — 30

Exercise of share options 15 415 (309) — — — 309 430

Other movements — — — (225) (4,123) (4,988) 9,111 (225)

At 31 December 2014 4,854 662 4,960 (628) — 536,976 — 546,824

For share based payments, see note 9 within the group accounts.

9 Financial commitmentsAt the year end the company had annual commitments under non-cancellable operating leases in respect of land and buildings expiring as follows:

31 December 31 March 2014 2014 $’000 $’000

In less than one year 112 142

In the second to fifth year inclusive 576 83

10 Post balance sheet eventsSee note 30 within the group accounts.

11 Related partiesThe company has taken advantage of the exemption available under FRS 8 from disclosing transactions with members of the group.


Shareholder information

Key contacts

Registered address and head office:Hilltop ParkDevizes RoadSalisburyWiltshireSP3 4UF

Mediterranean office: Via Cornelia, 49800166 RomaItalia

Nomad and joint brokerCanaccord Genuity Limited88 Wood Street London EC2V 7QR

Joint brokerLiberum Capital LimitedRopemaker Place, Level 1225 Ropemaker StreetLondon EC2Y 9LY

Joint brokerMerrill Lynch International2 King Edward StreetLondonEC1A 1HQ

SolicitorsAshurst LLPBroadwalk House5 Appold StreetLondonEC2A 2DA

Principal BankersRoyal Bank of Scotland plc36 St Andrew SquareEdinburghEH2 2YB

AuditorKPMG LLP15 Canada SquareLondonE14 5GL

Financial adviserNM Rothschild & Sons LimitedNew CourtSt Swithin’s LaneLondonEC4N 8AL

RegistrarComputershare Investor Services plcVintners Place68 Upper Thames StreetLondonEC4V 3BJ

Concerns and procedures

General [email protected]

Audit committee [email protected]

Websitewww.rockhopperexploration.co.uk

Shareholder concerns:Should shareholders have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

Whistle-blowing procedures:Should employees, consultants, contractors or other interested parties have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

designed and produced by JacksonBone Limited.Printed in England by synergy Group.

REPORT And AccOunTs for the period ended 31 december 2014

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BuILdInG A WELL-FundEd,FuLL-cYcLE, EXPLORATIOnLEd E&P cOMPAnY

[email protected]

@RockhopperExplo

Company Reg. No. 05250250

Rockhopper Exploration plcHilltop ParkDevizes RoadSalisbury SP3 4UF Telephone +44 (0)1722 414 419

Mediterranean office: Via Cornelia, 49800166 RomaItaliaTelephone +39 06 62290270

rockhopper exploration plc report and a ccounts · 06 our business model ... area 3 fornovo di taro...

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