Rockhopper Exploration, the oil and gas exploration and production company with key interests in the North Falkland Basin, announces several measures to materially reduce its cost base following a Board review of expenditure.

The Board has initiated a considered plan in response to recent external events affecting the sector, to further reduce ongoing G&A costs and re-balance executive director remuneration from cash to equity while ensuring retention of key staff, capabilities and knowledge within the business.

Further to the Company's full-year results announcement on 8 April 2020, cost reductions have been initiated which are aimed at reducing corporate overheads by approximately 30 per cent compared with 2019 levels. These measures include, but are not limited to:

• Permanent reduction to executive director base remuneration
• Employee headcount reduced including certain roles transitioning to part-time
• Reductions to adviser and contractor costs
• Decreased head office costs through relocation outside of London

Certain of these cost reductions will result in a one-off cost to the Company during 2020.

Executive director remuneration 

As part of the review of remuneration, the Board sought independent remuneration advice and consulted with several of the Company's largest institutional shareholders. As a result of this review, the following initiatives are being implemented:

Cash compensation

Base salaries for executive directors have been permanently reduced by 20 per cent. All benefits related to base salary, in addition to the  existing cap on any annual bonus awards, will be linked to the newly reduced base salary. It is anticipated that any base salary increases over the next five years will be restricted to the rate of inflation only, other than in exceptional circumstances.

Existing long-term incentive plan ("LTIP")

The current LTIP scheme, which has been in operation for eight years, will be discontinued for the next five years. All historically issued LTIPs will remain in place subject to the same relative performance criteria as disclosed in the Company's annual reports and accounts.

Share incentive plan

The monthly Share Incentive Plan will be discontinued.

New equity incentive and retention package

As part of the review of remuneration, taking into account the material forgoing of future LTIP share awards, and the need to retain the requisite skill sets to support progression of the Company's asset base, a one-off equity option package has been implemented. Taken alongside the base salary reductions, the Option Scheme represents a rebalancing of executive director remuneration more heavily towards equity in order to achieve greater alignment with shareholders, in particular in the event of the successful progression of Sea Lion and associated future share price upside.

The Option Scheme is one off and designed to cover the next five years, during which time it is anticipated that no further equity incentivisation will be offered other than in exceptional circumstances. Further details on the Option Scheme are in the appendix below. 

In addition, each of the Company's non-executive directors have committed that 20 per cent of their fees, after tax and national insurance, will be used to purchase shares in the Company.

Keith Lough, Chairman, commented: 
"It is very important that Rockhopper maintains its balance sheet strength against the current volatile and challenging macro backdrop. The measures we have implemented aim both to lower our costs but also retain and incentivise our staff at what is a very important time for the Company as we look to finalise the farm out of Sea Lion to Navitas, further progress the financing of the project and hope to conclude the Ombrina Mare arbitration successfully. The savings arising should result in a circa 30 per cent reduction to 2019 G&A levels, which in themselves reflect a circa 50 per cent reduction compared to 2014/15 levels. These are material and permanent reductions and demonstrate our commitment to a strong balance sheet and leaner organisation."