Nighthawk Energy Regulatory News (HAWK)

11 Mar 2008 07:01

Nighthawk Energy plc11 March 2008 NIGHTHAWK ENERGY PLC HALF YEARLY REPORT The Directors of Nighthawk Energy plc ("Nighthawk" or "the Company") (AIM:HAWK), the US focused hydrocarbon production and development company, arepleased to announce the Company's half yearly report for the six months ended 31December 2007. HIGHLIGHTS • Excellent progress on the drilling and development programme at Cisco Springs, including implementation of Broadhead tap and new natural gas production facilities and significant increase in project acreage • Acquisition of further 12.5 per cent. in Cisco Springs, raising Nighthawk's interest to 50 per cent. and proven P90 reserves to approximately 100 BCF • Jolly Ranch project area increased to 140,000 acres following positive interpretation of 3-D seismic with expanded drilling programme scheduled to commence in March • Waterflood and test production to commence shortly at Devon Oilfield • Acquisition of Buchanan and Worden projects in Missouri, targeting the same Bartlesville sandstone channels as at the Devon Oilfield • Oversubscribed secondary fundraising in January 2008 of £14.0 million • Current cash and liquid investments in excess of £17 million David Bramhill, Managing Director of Nighthawk, commented: "Excellent progresswas made during the half year. We believe that the Company is well positionedto deliver increasing production and strong news flow throughout 2008 andbeyond." Enquiries: Nighthawk Energy plc 01271 882160 David Bramhill, Managing Director office@nighthawkenergy.netwww.nighthawkenergy.com Hanson Westhouse Limited 0113 246 2610Tim Feather tim.feather@hansonwesthouse.comMatthew Johnson matthew.johnson@hansonwesthouse.com Bishopsgate Communications Limited 020 7562 3350Dominic Barretto Managing Director's Statement I am pleased to report to the shareholders of Nighthawk Energy plc ("Nighthawk"or the "Company") continuing progress, growth and development during the sixmonths ended 31 December 2007. This is the Company's first half yearly reportprepared under International Financial Reporting Standards ("IFRS") and a fullexplanation of the transition to IFRS is provided in the notes to the financialinformation. Nighthawk is focused on growth and cash flow from the development of, andproduction from hydrocarbon projects in the United States. The Company holdssubstantial equity in seven projects across the US mid-continent, all of whichare operated by Running Foxes Petroleum Inc. ("Running Foxes"), Nighthawk'spartner and holder of the remaining interest in each project. Nighthawk holds 50 per cent. interests in the following projects, Cisco Springsin Utah, Jolly Ranch in Colorado, Centurion in Kansas and Buchanan and Worden inMissouri. 80 per cent. interests are held in the Devon Oilfield in Kansas andthe Cliffs Shale project in Illinois. Our objective is to become self-funding through the successful development ofthe Company's projects and I am pleased to report that events during the halfyear significantly advanced this strategy. Cisco Springs, Grand County, Utah A drilling and development programme of over 60 wells is ongoing at CiscoSprings. To date, the results of 28 new wells have been reported, of which 26were commercial discoveries. In December 2007, Nighthawk acquired additional equity in the Cisco Springsproject, raising its interest from 37.5 to 50 per cent. This acquisitionincreased Nighthawk's proven P90 reserves to approximately 100 billion cubicfeet ("BCF") of natural gas and P50 reserves to 125 BCF. The commissioning of the Broadhead tap and new production facilities, alsoannounced in December, provide a reliable means of natural gas transportationwith sufficient capacity for the planned increase in production. In addition,the ability to sell gas at spot price or on long term contract provides a strongcompetitive advantage in the Cisco Springs region. Following the period end, Nighthawk and Running Foxes successfully bid for anadditional 5,977 acres in the Cisco Springs area, increasing the project acreageto approximately 24,000 acres. Nighthawk has commissioned Oilfield Production Consultants Limited ("OPC") toconduct a further evaluation of the expanded Cisco Springs project as the firststage in their review of all of Nighthawk's projects. The Directors anticipatethat OPC's report on Cisco Springs will reflect a value materially higher thanreported in the Competent Person's Report at the time of the Company's flotationin March 2007. The Board is particularly pleased with the progress at Cisco Springs. 18 monthsago the project was at an early stage of development with little drillingactivity having taken place for decades. The ongoing drilling and developmentprogramme has advanced the project significantly and progress has been extremelyencouraging. Jolly Ranch, Lincoln County, Colorado Nighthawk acquired a 50 per cent. interest in the Jolly Ranch project in June2007. At that time the project area was approximately 40,000 acres. Anaggressive acquisition programme has now increased the project area toapproximately 140,000 acres. A successful 3-D seismic programme covering 21 square miles was shot over keysections of the Jolly Ranch project area including the Bolero and Craig Ranchoilfields which were abandoned in the 1990s due to low oil prices. In addition,a detailed soil gas and iodine geochemical survey was completed and numerousanomalies correlating with targets identified by the 3-D surveys wereidentified. This work led to a re-evaluation of the project and an expanded drillingprogramme has been planned for 2008. Drilling permits have been submitted for18 wells to date, of which six have been granted already. Drilling of the firstfour wells, termed the Four Kings, namely Elizabeth, Henri, Phillip and Sixtus,which will test multiple stacked targets in the Marmaton, Morrow, Atoka,Cherokee and Mississippian horizons, is scheduled to commence before the end ofMarch 2008. Devon Oilfield, Bourbon County, Kansas Since acquisition, the Devon Oilfield waterflood project area has been expandedfrom 160 acres to 1,764 acres. A successful appraisal well programme, targetingBartlesville channel sandstones between depths of 350 and 500 feet, has beenundertaken with the wells logged and cased as future producers. Permits have been received from the State of Kansas for the injection of a totalof 1,200 barrels of fluids per day in the initial four injector wells for thepurpose of enhancing the recovery of oil. Water injection and test productionare expected to commence shortly. Buchanan and Worden, Vernon County, Missouri In October 2007, Nighthawk acquired a 50 per cent. interest in the Buchanan andWorden projects which together cover 774 acres and are targeting the sameBartlesville sandstone reservoirs as the Devon Oilfield project. A test drilling programme on the Buchanan and Worden projects is underway andthe initial results are encouraging. Centurion, Sumner County, Kansas The Centurion project covers an area of 12,000 acres in the Sedgwick Basintargeting eight conventional oil zones at depths of less than 4,500 feet.Additional potential exists for the production of shale gas from the Chattanoogaand Simpson horizons. A two well and 3-D seismic programme is planned to be undertaken in 2008. Cliffs Shale, Clark, Cumberland, Jasper and Crawford Counties, Illinois Nighthawk acquired an 80 per cent. interest in the Cliffs Shale gas project inJune 2007. The project covers an area of 15,591 acres within the IllinoisBasin, a prolific region which has produced over four billion barrels of oilfrom numerous reservoirs below 2,900 feet. Shale gas is seen as a long termenergy resource that will help to replace conventional US hydrocarbon reservesas they are depleted. A test well is planned for later in 2008. Corporate and Financial In January 2008, Nighthawk undertook an oversubscribed placing withinstitutional investors in London and Europe, raising £14 million beforeexpenses. The proceeds will be used to fund the extended drilling programme atJolly Ranch and expanded programmes at the Buchanan and Worden projects. The financial results for the half year reflect the operations of an activehydrocarbon development company. Cash and liquid investments as at 31 December2007 were approximately £6.8 million. However, through the recent placing, thishas increased to a current position of in excess of £17 million. Summary There is work to be done before we achieve our planned objectives. However,excellent progress was made during the half year. We expect to see anincreasing production profile during 2008. I would like to take this opportunity to thank our shareholders, my fellowDirectors and management, advisers in the UK and the US and especially ourpartner Running Foxes for their efforts. I look forward to the results of our continuing development programmes andbelieve that Nighthawk is well positioned to deliver increasing production andstrong news flow throughout 2008 and beyond. David BramhillManaging Director11 March 2008 UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTfor the six months ended 31 December 2007 Notes Six months ended Six months Year 31 December ended 31 ended 30 December June 2007 2006 2007 £ £ £ Continuing operations: Revenue 4 23,563 15,824 65,620 Administrative expenses (732,190) (420,053) (780,811)Exceptional item - AIM admission costs - - (205,223) Operating loss (708,627) (404,229) (920,414) Finance income 226,941 32,554 165,742Profit on disposal of financial assets 7,785 14,016 14,016 Loss before taxation (473,901) (357,659) (740,656) Taxation - - - Loss for the period 7 (473,901) (357,659) (740,656) Attributable to:Equity shareholders of the Company (473,901) (357,659) (740,656) Loss per share from continuing operationsattributable to the equity shareholders of theCompany Basic and diluted loss per share 5 0.28p 0.41p 0.66p UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOMEAND EXPENSE for the six months ended 31 December 2007 Notes Six months Six months Year ended 31 ended 31 ended December December 30 June 2007 2006 2007 £ £ £ Foreign exchange translation difference 7 117,000 (6,645) (327,000) Income and expense recognised directly in equity 117,000 (6,645) (327,000) Loss for the period 7 (473,901) (357,659) (740,656) Total income and expense recognised in the period (356,901) (364,304) (1,067,656) Attributable to:Equity shareholders of the Company (356,901) (364,304) (1,067,656) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET as at 31 December 2007 Notes 31 December 31 December 30 June 2007 2006 2007 £ £ £ ASSETSNon-current assetsProperty, plant and equipment 850,165 5,198 339,594Intangibles 6 14,168,939 4,261,848 7,344,657Investment in associates - - 252,545Financial assets 857,218 558,104 767,368 15,876,322 4,825,150 8,704,164 Current assetsTrade and other receivables 23,919 43,454 198,460Cash and cash equivalents 5,960,892 2,279,144 11,285,559 5,984,811 2,322,598 11,484,019 TOTAL ASSETS 21,861,133 7,147,748 20,188,183 EQUITY AND LIABILITIESCapital and reserves attributable to the Company'sequity shareholdersShare capital 7 431,611 279,558 419,870Share premium account 7 20,688,291 5,875,183 20,277,354Foreign exchange translation reserve 7 (210,000) (6,645) (327,000)Retained earnings 7 (1,261,104) (404,206) (787,203)Share-based payment reserve 7 350,807 16,908 43,929Merger reserve 7 99,588 99,588 99,588 Total equity 20,099,193 5,860,386 19,726,538 Non-current liabilitiesTrade and other payables - 255,297 - Current liabilitiesTrade and other payables 1,761,940 1,032,065 461,645 Total liabilities 1,761,940 1,287,362 461,645 TOTAL EQUITY AND LIABILITIES 21,861,133 7,147,748 20,188,183 UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 31 December 2007 Notes Six months Six months Year ended ended 31 ended 31 30 June December December 2007 2006 2007 £ £ £ Cash (outflow)/inflow from operating activities 8 (538,929) 600,521 (1,160,095) Cash flow from investing activitiesPurchase of investment on associated undertaking - - (252,545)Purchase of investment in jointly controlled entity - - (112,298)Purchase of intangible non current assets (4,625,582) (4,115,333) (7,501,038)Proceeds on disposal of intangible non current assets - - 56,400Purchase of property, plant and equipment. (755,825) (4,373) (6,048)Proceeds on disposal of property, plant and equipment 3,751 - 700Purchase of financial assets (140,390) (659,428) (868,692)Proceeds on disposal of financial assets 58,325 115,340 115,340Dividend received 200,129 14,027 140,476Interest received 26,812 18,527 25,266 Net cash outflow from investing activities (5,232,780) (4,631,240) (8,402,439) Cash flow from financing activitiesProceeds on issue of new shares 422,679 4,772,356 20,348,605Share issue costs - (212,028) (1,245,794) Net cash inflow from financing activities 422,679 4,560,328 19,102,811 Net (decrease)/increase in cash and cash equivalents (5,349,030) 529,609 9,540,277 Cash and cash equivalents at beginning of period 11,285,559 1,752,048 1,752,048 Effects of foreign exchange movements 24,363 (2,513) (6,766) Cash and cash equivalents at end of period 5,960,892 2,279,144 11,285,559 NOTES TO THE UNAUDITED FINANCIAL INFORMATIONfor the six months ended 31 December 2007 1 Accounting policies Basis of preparation The next annual financial statements of Nighthawk Energy plc ("the Group") willbe prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with theprovisions of the Companies Act 1985. Accordingly, the interim financial information in this report has been preparedusing accounting policies consistent with IFRS. IFRS is subject to amendmentand interpretation by the International Accounting Standards Board ("IASB") andthe International Financial Reporting Interpretations Committee ("IFRIC") andthere is an ongoing process of review and endorsement by the EuropeanCommission. The financial information has been prepared on the basis of therecognition and measurement principles of IFRS that the Directors expect to beapplicable as at 30 June 2008. The financial information has been prepared under the historical cost conventionas modified by the revaluation of available-for-sale investments which arecarried at fair value. The principal accounting policies set out below havebeen consistently applied to all periods presented. IFRS transition IFRS 1 "First-time Adoption of International Financial Reporting Standards" ("IFRS 1") permits companies adopting IFRS for the first time to take certainexemptions from the full retrospective application of IFRS. The interimfinancial information has been prepared on the basis of the following exemption: Business combinations prior to 1 July 2006 have not been restated to comply withIFRS 3 "Business Combinations" The effect of translation differences arising on fair value adjustments andgoodwill in business combinations is not applied retrospectively before 1 July2006 thereby treating the fair value adjustments as assets of the Company asopposed to the entities acquired by the Company. The disclosures required by IFRS 1 concerning the transition from UK GenerallyAccepted Accounting Practice ("UK GAAP") to IFRS are given in note 10. Non-statutory accounts The financial information for the year ended 30 June 2007 set out in thisinterim report does not comprise the Group's statutory accounts as defined insection 240 of the Companies Act 1985. The statutory accounts for the year ended 30 June 2007, which were preparedunder UK GAAP, have been delivered to the Registrar of Companies. The auditorsreported on those accounts; their report was unqualified and did not contain astatement under either Section 237 (2) or Section 237 (3) of the Companies Act1985. The financial information for the 6 months ended 31 December 2007 and 31December 2006 is unaudited. Basis of consolidation The financial information incorporates the results of the Company and entitiescontrolled by the Company (its subsidiaries). Control is achieved where theCompany has the power to govern the financial and operating policies of aninvestee entity so as to obtain benefits from its activities. The accounts consolidate the results and balance sheet of the Company and itswholly owned subsidiaries using the acquisition method of accounting. TheCompany's associate is accounted for using the equity method of accounting basedon the Company's power to exert significant influence over this entity. TheCompany's jointly controlled entities are accounted for using proportionateconsolidation based on joint control. Intra-group transactions with subsidiaries are eliminated on consolidation.Transactions, balances, income and expenses with jointly controlled entities andassociates are eliminated to the extent of the Group's interest in theseentities. Revenue recognition The Group's revenue to date represents that earned from its royalty interestsand is recognised on an accrual basis, in accordance with the substance of therelevant agreement. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call withbanks, other short-term highly liquid investments with original maturities ofthree months or less and bank overdrafts. Financial instruments Financial assets and financial liabilities are recognised on the balance sheetwhen the Group becomes a party to the contractual provisions of the instrument. Trade and other receivables are measured at initial recognition at fair value,and are subsequently measured at amortised cost using the effective interestmethod. A provision is established when there is objective evidence that theGroup will not be able to collect all amounts due. The amount of any provisionis recognised in the income statement. Trade and other payables are initially measured at fair value, and aresubsequently measured at amortised cost using the effective interest ratemethod. An equity instrument is any contract that evidences a residual interest in theassets of the Group after deducting all of its liabilities. Equity instrumentsissued by the Company are recorded at the proceeds received, net of direct issuecosts. Investments are classified as 'available-for-sale' and are initially recognisedat fair value and are measured at subsequent reporting dates at fair value, thegains and losses arising from changes in fair value are included directly inequity. Foreign currency The functional currency is United States dollars being the currency, in whichthe majority of the operations are conducted. The presentational currency forthe Group's consolidated financial information is Great British pounds and it isthis currency in which the Group reports. Foreign currency transactions byGroup companies are recorded in their functional currencies at the exchange rateat the date of the transaction. Monetary assets and liabilities have beentransferred at rates in effect at the balance sheet date, with any exchangeadjustments being charged or credited to the income statement. On consolidationthe accounts of overseas subsidiary undertakings are translated into the Group'spresentational currency at the exchange rate at the balance sheet date, theincome and expenditure account items are translated at the average rate for theperiod. The exchange difference arising on translation from functional currencyto presentational currency is classified within equity as a translation reserve. Share based payments Where share options have been granted to Directors and Employees, IFRS 2 hasbeen applied, whereby the fair value of the options is measured at the grantdate and spread over the period during which the employees become entitled tothe options. An options valuation model is used to assess the fair value,taking into account the terms and conditions attached to the options. The fairvalue of goods and services received are measured by reference to the fair valueof options. The share based payments are recognised as an expense in the incomestatement with a corresponding credit to equity. Exploration costs Exploration and evaluation expenditure relates to costs incurred on theexploration and evaluation of potential mineral reserves and includes costs suchas exploratory drilling and sample testing and the costs of feasibility studies. All exploration and evaluation expenditures including related overheads on theacquisition, exploration and evaluation of interests in licences not yettransferred to a cost pool are capitalised under intangible assets. When it is determined that such costs will be recouped through successfuldevelopment and exploration or alternatively by sale of the interest,expenditure will be transferred to property plant and equipment or intangibleassets depending upon their nature and depreciated over the expected productivelife of the asset. All capitalised exploration and evaluation expenditure is monitored forindications of impairment. An impairment review is performed when there areindicators that the carrying amount of the assets may exceed their recoverableamounts or when such assets are to be reclassified as property, plant andequipment or intangibles. To the extent that this occurs, the excess is fullyprovided against, in the financial period in which this is determined. Whenevera project is considered no longer viable the associated capitalised expenditureis written off to the income statement. Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciationless any recognised impairment losses. Cost includes expenditure that isdirectly attributable to the acquisition or construction of these items.Subsequent costs are included in the asset's carrying amount only when it isprobable that future economic benefits associated with the item will flow to theGroup and the costs can be measured reliably. All other costs, includingrepairs and maintenance costs, are charged to the income statement in the periodin which they are incurred. Depreciation is provided on all property, plant and equipment other thanfreehold land and is calculated on a straight-line basis as follows: Office equipment 25% Motor vehicles 25% Plant and equipment 5% Depreciation is provided on cost less residual value. The residual value,depreciation methods and useful lives are annually reassessed. At each balance sheet date, the Directors review the carrying amount ofproperty, plant and equipment, to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss, if any. The recoverable amount is measured atthe higher of fair value less costs to sell and value in use. The recoverable amount of an asset is measured as the higher of fair value lesscosts to sell and value in use. Fair value is determined as the amount thatwould be obtained from the sale of the asset in an arm's length transactionbetween knowledgeable and willing parties. Value in use is generally determinedas the present value of the estimated future cash flows. Present values aredetermined using a risk-adjusted pre-tax discount rate appropriate to the risksinherent in the asset. Future cash flow estimates are based on expectedproduction and sales volumes, commodity prices, reserves, operating costs,restoration and rehabilitation costs and future capital expenditure. Exceptional items The Group presents as exceptional items on the face of the income statementthose significant items of income and expense which, because of their size,nature and infrequency of the events giving rise to them, merit separatepresentation to allow shareholders to understand better the elements offinancial performance in the year, so as to facilitate comparison with priorperiods to assess trends in financial performance more readily. Current taxation Current tax for each taxable entity in the Group is based on the local taxableincome at the local statutory tax rate enacted or substantively enacted at thebalance sheet date and includes adjustments to tax payable or recoverable inrespect of previous periods. Deferred taxation Deferred taxation is calculated using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. However, if thedeferred tax arises from the initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss, it is notaccounted for. Deferred tax is determined using tax rates and laws that havebeen enacted (or substantially enacted) by the balance sheet date and areexpected to apply when the related deferred tax asset is realised or thedeferred tax liability is settled. Deferred tax liabilities are provided in full. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profits will be available against which the temporary differences can beutilised. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity in which case the related deferred tax isalso charged or credited directly to equity. International Financial Reporting Standards in issue but not yet effective At the date of authorisation of this condensed consolidated financialinformation, the IASB and IFRIC have issued the following standards andinterpretations which are effective for annual accounting periods beginning onor after the stated effective date. These standards and interpretations are noteffective for and have not been applied in the preparation of the condensedconsolidated financial information: • IAS 27: Consolidated and Separate Financial Statements (Amended) (effective as of 1 July 2009) • IFRS 3: Business Combinations (Revised) (effective as of 1 July 2009) • IFRS 8: Operating Segments (effective as of 1 January 2009 - not yet endorsed by the EU) • IAS 23: Borrowing Costs (amended) (effective as of 1 January 2009 - not yet endorsed by the EU) • IFRIC Interpretation 12: Service Concession Arrangements (effective as of 1 January 2008 - not yet endorsed by the EU) • IFRIC Interpretation 13: Customer Loyalty Programmes (effective as of 1 July 2008 - not yet endorsed by the EU) • IFRIC Interpretation 14: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective as of 1 January 2008) The Directors do not anticipate that the adoption of these standards andinterpretations will have a material impact on the Group's financial statementsin the period of initial adoption. 2 Critical accounting judgments and key sources of estimation uncertainty The preparation of financial information in conformity with generally acceptedaccounting practice requires management to make estimates and judgments thataffect the reported amounts of assets and liabilities as well as the disclosureof contingent assets and liabilities at the balance sheet date and the reportedamounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. Reserve estimates Reserves are estimates of the amount of product that can be economically andlegally extracted from the Group's properties. In order to calculate thereserves, estimates and assumptions are required about a range of geological,technical and economic factors, including quantities, production techniques,recovery rates, production costs, transport costs, commodity demand, commodityprices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape anddepth of fields to be determined by analysing geological data such as drillingsamples. This process may require complex and difficult geological judgementsand calculations to interpret the data. Given the economic assumptions used to estimate reserves change from period toperiod, and because additional geological data is generated during the course ofoperations, estimates of reserves may change from period to period. Changes inreported reserves may affect the Group's financial results and financialposition in a number of ways, including the following: • Asset carrying values may be affected by possible impairment due to adverse changes in estimated future cash flows. • Depreciation, depletion and amortisation charged in the income statement may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change. Exploration and evaluation costs The Group's accounting policy leads to the development of tangible andintangible fixed asset, where it is considered likely that the amount will berecoverable by future exploitation or sale or alternatively where the activitieshave not reached a stage which permits a reasonable assessment of the existenceof reserves. This requires management to make estimates and assumptions as tothe future events and circumstances, especially in relation to whether aneconomically viable extraction operation can be established. Such estimates aresubject to change and following initial capitalisation, should it becomeapparent that recovery of the expenditure is unlikely, the relevant capitalisedamount will be written off to the income statement. Impairment of property, plant and equipment Management review property, plant and equipment at each balance sheet date todetermine whether there are any indications of impairment. If any suchindication exists, an estimate of the recoverable amount is performed, and animpairment loss is recognised to the extent that carrying amount exceedsrecoverable amount. 3 Financial risk management The Group's current activities result in the following financial risks andmanagement's responses to those risks in order to minimise any resulting adverseeffects on the Group's financial performance. Foreign exchange risk The Group is exposed to foreign currency risks on purchases and cash holdingsthat are denominated in a currency other than Sterling. The currencies givingrise to this risk are primarily US dollar. The Group's policy is to reduce therisk associated with fluctuations in the US dollar/Sterling exchange rate bymaintaining a US dollar account for future purchases and working capitalrequirements. Interest rate risk The Group does not have any borrowing and as such does not have significantexposure to interest rate risk. The Group has a significant level of cash andcash equivalents, and uses high interest deposit accounts to ensure a marketrate of return is achieved. Credit risk The Directors have a credit policy in place and the exposure to credit risk ismonitored on an ongoing basis. Credit evaluations are performed on all customersrequiring credit over a certain amount. The Group does not require collateralin respect of financial assets. At each balance sheet date, there were no significant concentrations of creditrisk. The maximum exposure to credit risk is represented by the carrying amountof each financial asset in the balance sheet. Liquidity risk The availability of adequate cash resources is such that there are no liquidityrisks identified. 4 Segmental reporting Primary reporting format - business segments The Group operates in one business segment, the production of, exploration forand investment in hydrocarbons. The relevant disclosure has been given in thisunaudited financial information. Secondary reporting format - geographical segments For management purposes, the Group is organised and reports its performance inone geographical segment, North America. The relevant disclosure has been givenin this unaudited financial information. 5 Earnings per share from continuing operations Six months ended Six months Year attributable to the equity shareholders of the 31 December ended 31 ended 30 Company December June 2007 2006 2007 £ £ £ Earnings Earnings for the purposes of basic and diluted (473,901) (357,658) (740,656) earnings per share being net loss attributable to equity shareholders Number of shares Weighted average number of ordinary shares for 172,180,462 87,458,586 112,893,363 the purposes of basic earnings per share Loss per share Basic and diluted loss per share 0.28p 0.41p 0.66p As at 31 December 2007, 30 June 2007 and 31 December 2006 the options in issue are not dilutive under IAS 33, Earnings per Share, because they would have the effect of decreasing the loss per share. As such there is no difference between the basic and dilutive loss per share. Number of shares Weighted average number of ordinary shares for 180,559,151 96,571,552 129,179,077 the purposes of the diluted loss per share 6 Exploration costs Royalty Total interests £ £ £ Cost At 1 July 2006 101,244 50,500 151,744 Additions 4,111,202 - 4,111,202 At 31 December 2006 4,212,446 50,500 4,262,946 Additions 3,147,404 250,312 3,397,716 Disposals (56,400) - (56,400) Transfer to property, plant and equipment (220,004) - (220,004) At 30 June 2007 7,083,446 300,812 7,384,258 Additions 7,354,414 - 7,354,414 Transfer to property, plant and equipment (507,362) - (507,362) At 31 December 2007 13,930,498 300,812 14,231,310 Amortisation At 1 July 2006 - - - Charge - 1,098 1,098 At 31 December 2006 - 1,098 1,098 Charge 37,038 1,465 38,503 At 30 June 2007 37,038 2,563 39,601 Charge 21,552 1,218 22,770 At 31 December 2007 58,590 3,781 62,371 Net book value At 31 December 2006 4,212,446 49,402 4,261,848 At 30 June 2007 7,046,408 298,249 7,344,657 At 31 December 2007 13,871,908 297,031 14,168,939 7 Statement of changes in equity Share Share premium Foreign Retained Share-based Merger Total capital account exchange earnings payment reserve Translation reserve reserve £ £ £ £ £ £ £As at 1 July 2006 157,663 1,436,750 - (46,547) - 99,588 1,647,454Issue of share 121,895 4,438,433 - - - - 4,560,328capital, net ofexpensesShare- based expense - - - - 16,908 - 16,908Exchange rate - - (6,645) - - - (6,645)difference onexchange of foreignsubsidiariesLoss for the period - - - (382,997) - - (382,997) As at 31 December 279,558 5,875,183 (6,645) (404,206) 16,908 99,588 5,860,3862006Issue of share 140,312 14,402,171 - - - - 14,542,483capital, net ofexpensesShare- based expense - - - - 27,021 - 27,021Exchange rate - - (320,355) - - - (320,355)difference onexchange of foreignsubsidiariesLoss for the period - - - (336,450) - - (336,450) As at 30 June 2007 419,870 20,277,354 (327,000) (787,203) 43,929 99,588 19,726,538 Share Share premium Foreign Retained Share-based Merger Total capital account exchange earnings payment reserve translation reserve reserve £ £ £ £ £ £ £ As at 1 July 2007 419,870 20,277,354 (327,000) (787,203) 43,929 99,588 19,726,538Issue of share 11,741 410,937 - - - - 422,678capital, net ofexpensesShare-based expense - - - - 306,878 - 306,878Exchange rate - - 117,000 - - - 117,000difference onexchange of foreignsubsidiariesLoss for the period - - - (473,901) - - (473,901) As at 31 December 431,611 20,688,291 (210,000) (1,261,104) 350,807 99,588 20,099,1932007 During the period to 31 December 2007, 4,696,428 shares were issued on exercise of existing sharewarrants. The shares issued are summarised as follows: Date Shares issued Share price Share premium Share capital Number £ £ £ 6 July 2007 3,625,000 0.09 317,187 9,06223 July 2007 571,428 0.09 50,000 1,4299 October 2007 500,000 0.09 43,750 1,250 4,696,428 410,937 11,741 8 Cash flow from operating activities Six months Six months ended 31 Year ended 31 December ended 30 December 2006 June 2007 2007 £ £ £ Loss for the period (473,901) (357,659) (740,656)Investment income (226,941) (32,554) (165,742)Profit on disposal of financial assets (7,785) (14,016) (14,016)Amortisation 22,770 1,098 39,601Depreciation 1,138 743 1,485Gain on disposal of fixed assets (653) - -Share based payments 306,879 16,908 43,929 Operating cash outflow before changes in working (378,493) (385,480) (835,399)capital Changes in working capitalDecrease/(increase) in trade and other 174,541 7,548 (147,457)receivables(Decrease)/increase in trade and other payables (334,977) 978,453 (177,239) (160,436) 986,001 (324,696) Net cash (outflow)/inflow from operating (538,929) 600,521 (1,160,095)activities 9 Post balance sheet events On 18 January 2008 30,434,783 new ordinary shares were issued at a price of 46p raising £14,000,000. 10 Transition to IFRS Nighthawk Energy plc reported under UK GAAP in its previously published financial statements for the year ended 30June 2007. The analysis shown in note 10 provides a reconciliation of net assets and loss as reported under UK GAAPas at 30 June 2007 to the revised net assets and loss under IFRS as reported in this unaudited financialinformation. In addition, there is a reconciliation of net assets under UK GAAP to IFRS at the transition date forthis Company, being 1 July 2006. There is also a reconciliation of net assets and loss under UK GAAP to IFRS at thecomparative interim date, being 31 December 2006. Significant changes to the cash flow statement None of the adjustments arising from the IFRS transition relate to cash and therefore there is no impact on reportedcash flow. Reconciliation of equity and loss under UK GAAP to IFRS (a) Reconciliation of equity at 1 July 2006 UK GAAP Adjustment IFRS 1 July 2006 1 July 2006 £ £ £ASSETSNon-current assetsProperty, plant and equipment 1,568 - 1,568Intangible assets 151,744 - 151,744 153,312 - 153,312Current assetsTrade and other receivables 51,003 - 51,003Cash and cash equivalents 1,752,048 - 1,752,048 1,803,051 - 1,803,051 TOTAL ASSETS 1,956,363 - 1,956,363 EQUITY AND LIABILITIESEquity attributable to equity holders of theCompanyShare capital 157,663 - 157,663Share premium account 1,436,750 - 1,436,750Retained earnings (46,547) - (46,547)Merger reserve 99,588 - 99,588 Total equity 1,647,454 - 1,647,454 Current liabilitiesTrade and other payables 308,909 - 308,909 TOTAL EQUITY AND LIABILITIES 1,956,363 - 1,956,363 There are no adjustments on transition to IFRS from UK GAAP (b) Reconciliation of equity at 31 December 2006 UK GAAP Adjustment IFRS 31 December 2006 1 31 December 2006ASSETS £ £ £Non-current assetsProperty, plant and equipment 5,198 - 5,198Intangible assets 4,261,848 - 4,261,848Financial assets 558,104 - 558,104 4,825,150 - 4,825,150Current assetsTrade and other receivables 43,454 - 43,454Cash and cash equivalents 2,279,144 - 2,279,144 2,322,598 - 2,322,598 TOTAL ASSETS 7,147,748 - 7,147,748EQUITY AND LIABILITIESEquity attributable to equity holders of theCompanyShare capital 279,558 - 279,558Share premium account 5,875,183 - 5,875,183Foreign exchange translation reserve - (6,645) (6,645)Retained earnings (410,851) 6,645 (404,206)Share-based payment reserve 16,908 - 16,908Merger reserve 99,588 - 99,588 Total equity 5,860,386 - 5,860,386 Non current liabilitiesTrade and other payables 255,297 - 255,297 Current liabilitiesTrade and other payables 1,032,065 - 1,032,065 Total liabilities 1,287,362 - 1,287,362 TOTAL EQUITY AND LIABILITIES 7,147,748 - 7,147,748 Recognition of exchange differences on translation of foreign subsidiaries inequity, as required by IAS 21, The Effects of Changes in Foreign Exchange Rates. (c) Reconciliation of loss for the period ended 31 December 2006 UK GAAP Adjustment IFRS Period ended 31 1 Period ended 31 December 2006 December 2006 £ £ £Revenue 15,824 - 15,824 Administrative expenses (426,697) 6,645 (420,052) Operating profit (410,873) 6,645 (404,228)Finance income 32,554 - 32,554Profit on disposal of fixed asset investment 14,016 - 14,016 Loss before taxation (364,303) 6,645 (357,658)Taxation - - -Loss for the period (364,303) 6,645 (357,658) Attributable to:Equity holders of Nighthawk Energy plc (364,303) 6,645 (357,658) (d) Reconciliation of equity at 30 June 2007 UK GAAP Adjustment IFRS 30 June 2007 1 2 3 4 30 June 2007ASSETS £ £ £ £ £ £Non-current assetsProperty, plant and equipment 5,431 114,159 231,583 (11,579) - 339,594Intangibles 7,564,661 - (231,583) 11,579 - 7,344,657Investments in joint ventures--share of gross assets 114,159 (114,159) - - - --share of gross liabilities (1,862) 1,862 - - - - Investment in associated 252,545 - - - - 252,545undertakingsFinancial assets 767,368 - - - - 767,368 8,702,303 1,862 - - - 8,704,164Current assetsTrade and other receivables 198,460 - - - - 198,460Cash and cash equivalents 11,285,559 - - - - 11,285,559 11,484,019 - - - - 11,484,019 TOTAL ASSETS 20,186,322 1,862 - - - 20,188,183 UK GAAP Adjustment IFRS 30 June 2007 1 2 3 4 30 June 2007EQUITY AND LIABILITIES £ £ £ £ £ £Equity attributable to equity holdersof the CompanyShare capital 419,870 - - - - 419,870Share premium account 20,277,354 - - - - 20,277,354Foreign exchange translation reserve - - - - (327,000) (327,000)Retained earnings (1,114,203) - - - 327,000 (787,203)Share-based payment reserve 43,929 - - - - 43,929Merger reserve 99,588 - - - - 99,588 Total equity 19,726,538 - - - - 19,726,538 Current liabilitiesTrade and other payables 459,784 1,862 - - - 461,645 TOTAL EQUITY AND LIABILITIES 20,186,322 1,862 - - - 20,188,183 1. Recognition of the joint venture as a jointly controlled entity applyingproportionate consolidation, as required by IAS 31, Joint Ventures. 2. Reclassification of exploration and evaluation assets based on theirnature in accordance with IFRS 6, Exploration for and Evaluation of MineralResources. 3. Recognition of the depreciation on the property, plant and equipment thathave been reclassified from intangible assets in accordance with IFRS 6,Exploration for and Evaluation of Mineral Resources. 4. Recognition of exchange differences on translation of foreignsubsidiaries in equity, as required by IAS 21, the Effects of Changes in ForeignExchange Rates. (e) Reconciliation of loss for the year ended 30 June 2007 UK GAAP Adjustment IFRS Year ended 30 Year ended 30 June June 2007 2007 £ £ £Revenue 65,620 - 65,620 Administrative expenses (1,107,811) 327,000 (780,811)Exceptional item: AIM admission costs (205,223) - (205,223) Operating loss (1,247,414) 327,000 920,414Finance income 165,742 - 165,742Profit on disposal of financial assets 14,016 - 14,016 Loss before taxation (1,067,656) 327,000 740,656Taxation - - - Loss for the period (1,067,656) 327,000 740,656 Attributable to:Equity holders of Nighthawk Energy plc (1,067,656) 327,000 740,656 1. Recognition of exchange differences on translation of foreignsubsidiaries in equity, as required by IAS 21, the Effects of Changes in ForeignExchange Rates. This information is provided by RNS The company news service from the London Stock Exchange