Rockhopper Exploration plc (the ‘Company’ or ‘Rockhopper’) is an AIM listed company and is required by the London Stock Exchange to apply a recognised corporate governance code. The Company is required to give details of how it complies with the chosen code and, where it departs from the code, provide an explanation of the reasons for doing so.
The Board of Directors of the Company (the ‘Board’) is fully committed to high standards of corporate governance and has chosen to apply and report against the Quoted Companies Alliance Corporate Governance Code (2018) (the ‘QCA Code’) which has been designed for small to mid-sized companies and which has been adopted by many AIM listed companies.
The Board assesses its compliance with the QCA Code on an annual basis and publishes the status of compliance in its annual report and accounts. As part of the annual review, the Board considers whether it continues to remain appropriate to apply the QCA Code.
Chairman’s Governance Statement
As Chairman of the Company, I believe that strong governance supports the execution of the Company’s strategy and delivery of shareholder value. Along with the rest of the Board, I am committed to ensuring that high standards of corporate governance are maintained and that the Company’s values are promoted and its strategy clearly communicated across the Group and to shareholders and stakeholders.
As the Company seeks to progress the Sea Lion Development, I will continue to work with the Board to ensure that this is delivered in an environment of good corporate governance and that we grow the business in accordance with our values and principles for the benefit of all shareholders and stakeholders.
Keith Lough, Chairman
APPLICATION OF THE QCA CODE
The QCA Code has ten principles of corporate governance that the Company has committed to apply across the business. These principles are:
1. Establish a strategy and business model which aims to promote long-term value for shareholders;
2. Seek to understand and meet shareholder needs and expectations;
3. Consider wider stakeholder and social responsibilities and their implications for long tern success;
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation;
5. Maintain the board as a well-functioning balanced team led by the Chair;
6. Ensure that between them the directors have the necessary up to date experience, skills and capabilities;
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement;
8. Promote a corporate culture that is based on ethical values and behaviours;
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board;
10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
The QCA Code requires us to apply the ten principles and publish certain disclosures in our Annual Report and also on our website.
Principle Two: Seek to understand and meet shareholder needs and expectations.
Disclosure: Explain the ways in which the Company seeks to engage with shareholders.
The Company seeks to provide shareholders with relevant information in a timely manner and engages with shareholders in a variety of ways:
– Regulatory news flow: the Company issues financial results on a half yearly basis, operational updates, releases relating to significant developments and events relevant to the Company’s business and releases of a regulatory nature.
– Meetings: the executive directors meet from time to time with major shareholders and the investment community which allows exposure to new investors. This process includes presentations, one-to-one meetings, analyst briefings and press interviews. The CEO regularly briefs the Board on these contacts and relays the views expressed. Copies of analyst research reports, press reports and industry articles are circulated to all directors and ensures that the Board is aware of the views of its major shareholders.
– Website: the Company’s website is updated regularly with external presentations and corporate updates which ensures that existing and potential investors have access to up to date and relevant information.
– Annual Report: the Company’s annual report gives a detailed overview of the Company’s strategy, operations, financial position, risk profile and remuneration structure and is available in hard copy and on the website. This ensures that existing and potential investors are provided with the information that they need to make an assessment of the Company’s performance and prospects.
– Annual General Meeting (AGM): the AGM is usually attended by all directors. The Chairman gives an overview of the Company’s performance in the period since the previous AGM and the CEO gives a detailed operational and financial update. The AGM is mainly attended by retail investors and gives them the opportunity to address questions to the Board. The 2020 AGM was a closed meeting due to Government restrictions in relation to the COVID-19 pandemic and shareholders were requested not to attend the 2021 AGM due to the ongoing pandemic. In order to give shareholders the chance to meet and question the Board in person, a retail investor meeting was held in September 2021.
The CEO has primary responsibility for shareholder liaison and the Chairman is available to meet with shareholders if requested. The Chairman of the Audit & Risk Committee, who is also the Senior Independent Director, is the contact for shareholders, employees, consultants, contractors or anyone with concerns which they believe have not been adequately addressed by the Chairman or CEO and contact details are provided on the Company’s website. The Company Secretary is the primary contact for routine questions regarding shareholdings and acts as a liaison with the Company’s registrars.
In all communications with shareholders and the general market the Company maintains strict compliance with the requirements of the AIM Rules and Market Abuse Regulation.
The Company’s website includes email addresses for general enquiries, press and media information and for the Chairman of the Audit & Risk Committee.
Principle Three: Consider wider stakeholder and social responsibilities and their implications for long term success.
Disclosure: Explain how the business model identifies the key resources and relationships on which the business relies.
The Board recognises its responsibility to promote the success of the Company for the benefit of its members as a whole whilst taking into account the interests of other stakeholders including employees, partners, suppliers and the environment and communities in which it operates.
The Board recognises that pro-active engagement with its stakeholders is an essential for successful delivery of the Company’s strategy. Further details of how the Company engages with its key stakeholders is given in the Strategic Report of the latest annual report and accounts.
Disclosure: Explain how the Company obtains feedback from stakeholders and the actions that have been generated as a result of this feedback.
The Company’s stakeholders include joint venture partners, contractors, consultants, staff, regulatory authorities and potential new venture partners. There is regular engagement with stakeholders through both formal and informal channels including public consultations where appropriate. The Company takes every opportunity to ensure that where possible the views of its stakeholders are considered and acted upon when these are believed likely to bring material benefit to the success and integrity of the Company’s business activities.
Principle Seven: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
Disclosure: Include a description of the Board performance evaluation process.
The Board considers that its effectiveness and the individual performance of its directors is vital to the success of the Company.
An internal performance evaluation of the Board and the Audit & Risk Committee and an appraisal of the Chairman’s performance is undertaken each year.
i. Board performance appraisal – Board members review a questionnaire which is focused on strategy, risks, performance against objectives, Board processes, relationships and communication and Board structure and development. The key conclusions are discussed at a Board meeting and follow up actions are agreed if necessary.
In addition to the internal performance evaluation, an external performance evaluation of the Board was undertaken in 2016 with specific focus on the skillset and structure of the Board which was used as the basis for discussions on succession planning. The Board has confirmed its commitment to maintaining the current Board structure whilst efforts continue on finding a way to retain the Falkland Island licences, bring in a partner and secure wider industry support for the Sea Lion Development. A further review of the experience and skills set of Board members will be undertaken in due course as the Company moves into the next stage of its development.
ii. Chairman’s performance appraisal – this is coordinated by the Senior Independent Director who consults each individual director for their view on the Chairman’s performance and reports back at a Board meeting.
iii. Audit & Risk Committee performance appraisal – the Senior Independent Director and Company Secretary review the performance of the Audit & Risk Committee using guidance issued by the Financial Reporting Council’s guidance on the composition, role and responsibilities of the audit committee. The key conclusions are discussed by the Audit & Risk Committee and follow up action is agreed if necessary.
Principle Eight: Promote a corporate culture that is based on ethical values and behaviours.
Disclosure: Explain how the Board ensures that the Company has the means to determine ethical values and behaviours.
The Company is committed to ensuring that there is a healthy corporate culture and has put in place a number of policies and procedures which are designed to ensure that ethical and transparent behaviour is recognised and followed across the Group. These include the HSE Policy, Code of Business Conduct and Social Responsibility, Anti-Bribery and Corruption Policy and Procedures and Share Dealing Code.
Principle Nine – Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
Disclosure: Describe the roles and responsibilities of the chair, chief executive and other directors with responsibilities.
There is a clear division of responsibilities between the Chairman and CEO which is set out in writing and has been approved by the Board.
Keith Lough (Chairman of the Board) is chair of the Nomination Committee and attends the other Board committees as requested. His key responsibilities are:
– ensuring that the Board delegates responsibility for executive management matters whilst retaining sufficient oversight to ensure the agreed strategy is delivered, objectives are met and board decisions are implemented
– ensuring the effective running of the Board and ensuring that the Board as a whole plays a full and constructive part in the development and determination and approval of the company’s strategy and overall objectives
– setting the agenda for Board meetings and ensuring that the Board receives timely and accurate information to enable it to focus on the key issues facing the company
– ensuring that the Board develops an understanding of the views of the major investors in the Group and are informed of shareholders views and concerns
– ensuring that the overall composition of the Board and Board committees remains appropriate
– overseeing the board performance process
– promoting the highest standards of integrity, probity and corporate governance across the Group.
The key responsibilities of Sam Moody (CEO) are:
– all executive management matters affecting the company
– implementing the decisions of the Board and its committees and delivering against the agreed strategy and objectives
– management of all staff matters below Board level
– maintaining a dialogue with the Chairman on the key issues facing the Group
– ensuring that the management team provides reports to the Board which contain accurate, timely and clear information
– leading and maintaining relationships with key external stakeholders including shareholders, regulators and Governments
– promoting and conducting the affairs of the Group with the highest standards of integrity, probity and corporate governance.
Stewart MacDonald (CFO) is accountable for the financial performance of the Group and works with the CEO on delivery of the Company’s strategy.
Alison Baker (Non-Executive Director) is the Senior Independent Director and chair of the Audit & Risk Committee. She is also a member of the Remuneration and Nomination Committees. Her main responsibilities as Senior Independent Director are:
– providing a sounding board for the Chairman and acting as an intermediary for Board members
– acting as a point of contact for shareholders who have concerns which have not been adequately addressed by the Chairman
– coordinating the Chairman’s appraisal.
John Summers (Non-Executive Director) is chairman of the Remuneration Committee and is also a member of the Audit & Risk and Nomination Committees.
Disclosure: Describe which matters are reserved for the Board.
There is a schedule of matters reserved for the Board for decision to ensure that the Board exercises control over the key matters which could impact on delivery of the Company’s strategy. This is divided into the following categories:
– Strategy and management – long term objectives and commercial strategy, budgets, operations overview, health and safety, new ventures
– Structure and capital
– Financial reporting and control
– Risk management and internal controls
– Major contracts and investments
– Communications with shareholders
– Board membership – succession planning, board committee constitution, company secretary, external auditor
– Delegation of authority – Chairman/ CEO division of responsibilities, board committees terms of reference
– Corporate governance
– Group policies
– Miscellaneous – external auditors, advisers, litigation, donations.
Disclosure: Describe the roles of any committees.
The Audit & Risk Committee meets regularly throughout the financial year and consists of two members, both Non-Executive Directors. The key responsibilities of the Audit & Risk Committee are:
– reviewing and reporting to the Board on the audit plans of the external auditors
– the Group’s overall framework for financial reporting and internal controls
– the Group’s overall framework for risk management
– the accounting policies and practices of the Group
– the annual and periodic financial reporting carried out by the Group
– the independence and performance of the external auditors.
The Remuneration Committee meets several times during the financial year and consists of two members, both Non-Executive Directors. The key responsibilities of the Remuneration Committee are:
– considering and reporting on the remuneration policy for the Group
– undertaking the annual remuneration review for the executive directors including any bonus awards
– setting the parameters for the annual staff remuneration review
– overseeing the operation of the Company’s share plans including approving awards and vesting of options to employees including the executive directors.
The Nomination Committee meets on an ad hoc basis and consists of the Chairman and the Non-Executive Directors. The key responsibilities of the Nomination Committee are to consider Board member succession, review the structure and composition of the Board and its Committees and identify and make recommendations for any changes to the Board.
Disclosure: Describe plans for evolution of the governance framework.
The Board has agreed that the QCA Code remains the appropriate governance code for it to apply. There are no current plans to adjust the governance framework within which the Company operates but this will be kept under review as the Board seeks to progress the Sea Lion Development.
Principle Ten – Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
Disclosure: Disclose outcome of votes and describe any actions to be taken where a significant proportion of votes have been cast against a resolution.
The Company announces detailed results of shareholder voting at its general meetings to the market. The Company will provide this detail in the future. Should there be a situation where there is a significant vote against a resolution at general meeting the Company will provide an explanation of what action it intends to take to understand the reasons behind the vote result and any action it has taken or will take as a result of the vote.
Disclosure: Include historical annual reports and governance-related material on the website.
Copies of the Company’s report and accounts, and all other shareholder communications are maintained on the Company’s website.
Annual Report disclosures:
|QCA Code Principle
|Explain the company’s business model and strategy, including key challenges in their execution and how those will be addressed.
||The Company operates in the upstream oil and gas sector.
The Company’s strategy is to create value for all stakeholders through building a well-funded, full- cycle, exploration-led E&P company. Further details are given in the Strategic Report on pages 1 to 19 of the 2020 Annual Report
The key challenges to delivery of the Company’s strategy are described in Principal Risks and Uncertainties in the Strategic Report on pages 14 to 17 of the 2020 Annual Report together with actions and ongoing initiatives to mitigate and manage the key risks.
|Describe how the board has embedded effective risk management in order to execute and deliver strategy. This should include a description of what the board does to identify, assess and manage risk and how it gets assurance that the risk management and related control systems in place are effective.
||The Company’s approach to the identification and management of risk is set out in the Internal Controls and Principal Risks and Uncertainties section of the Strategic Report contained in the 2020 Annual Report on pages 13 to 17.
|Identify those directors who are considered to be independent; where there are grounds to question the independence of a director, through length of service or otherwise, this must be explained.
||The Board currently has a Non-Executive Chairman, Chief Executive Officer and two non-executive Directors.
The Board considers that the Chairman and the Non-Executive Directors are all independent. Other than any shareholdings in the Company and the receipt of fees for acting as Directors, the Chairman and Non-Executive Directors have no financial interests in the Company or business relationships that would interfere with their independent judgement.
||Describe the time commitment required from directors (including non-executive directors as well as part-time executive directors).
||The Executive directors are expected to devote substantially the whole of their time to their duties with the Company. Executive directors are permitted to engage in other activities and businesses outside the Group providing that there is no risk of conflict with their executive duties and subject to full Board disclosure.
The appointment letters of the Non-Executive Directors detail the expected time commitment which is around 20 days a year. Non-Executive Directors undertake on joining the Company that they are able to allocate sufficient time to discharge effectively their responsibilities and are required to keep the Board updated of any changes in respect of their other commitments.
||Include the number of meetings of the board (and any committees) during the year, together with the attendance record of each director.
||Attendance at meetings is shown on the following pages of the 2020 Annual Report:
Board – p.26
Audit & Risk Committee – p.28
Nomination Committee – p.30
Remuneration Committee – p.37
|Identify each director.
||Information on each of the Directors is provided on pages 22 and 23 of the 2020 Annual Report.
|Describe the relevant experience, skills and personal qualities and capabilities that each director brings to the board; the statement should demonstrate how the board as a whole contains (or will contain) the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the strategy of the company for the benefit of the shareholders over the medium to long- term.
||The Directors have a wide range of experience and skills across the oil and gas industry including technical, operational, commercial and financial both in the UK and internationally. The Chairman and Non-Executive Directors have held senior management/board/advisory positions in the industry and bring relevant experience from their current and previous positions. The Nomination Committee maintains oversight of the Company’s requirements to ensure that the make-up of the Board is kept in line with the Company’s needs and provides a mix of experience, skills, personal qualities and capabilities appropriate to the task. These include full consideration to maintain a healthy diversity where this is possible, including gender diversity.
The background history of each of the Directors is on pages 22 and 23 of the 2020 Annual Report
||Explain how each director keeps his/her skillset up-to-date.
||The Board as a whole has significant experience both within the industry and in public and financial markets.
The Board receives support and advice from its Nomad on AIM requirements as and when required. The Board supports Directors who wish to receive ongoing training and education relating to their duties.
||Where the board or any committee has sought external advice on a significant matter, this must be described and explained.
||During 2020, the Remuneration Committee commissioned Aon to provide independent advice on the restructuring of the executive directors’ remuneration packages and the proposed new equity incentive arrangements. Aon advised the Committee that the proposed arrangements ensured an appropriate balance between cash and equity and were fair to all stakeholders.
||Where external advisers to the board or any of its committees have been engaged, explain their role.
||The Directors seek advice as appropriate from the Company’s Nomad, auditors and lawyers (corporate, employment and property).
||Describe any internal advisory responsibilities, such as the roles performed by the company secretary and the senior independent director, in advising and supporting the board.
||The Company Secretary’s primary role is explained on pages 27 of the 2020 Annual Report. The Company Secretary has also been the principal source of advice on employment matters, remuneration policy and practice, share scheme administration and property matters.
The role of the Senior Independent Director is explained on page 25 of the 2020 Annual Report.
|Include a high-level explanation of the board performance effectiveness process.
||See Website disclosure: Principle Seven above
||Where a board performance evaluation has taken place in the year, provide a brief overview of it, how it was conducted and its results and recommendations. Progress against previous recommendations should also be addressed.
||See Website disclosure: Principle Seven above
|Include in the Chair’s corporate governance statement how the culture is consistent with the company’s objectives, strategy and business model in the strategic report and with the description of principal risks and uncertainties. The statement should explain what the board does to monitor and promote a healthy corporate culture and how the board assesses the state of the culture at present.
||See Website disclosures: Principle Eight above.
|Describe the work of any board committees undertaken during the year.
||The work undertaken by Board committees is shown on the following pages of the 2020 Annual Report:
Audit & Risk Committee – p.28
Nomination Committee – p.30
Remuneration Committee – p.37
||Include an audit committee report (or equivalent report if such committee is not in place).
||See pages 28 and 29 of 2020 Annual Report
||Include a remuneration committee report (or equivalent report if such committee is not in place).
||See pages 31 to 41 of 2020 Annual Report
||If the company has not published one or more of the disclosures set out under Principles 1-9, the omitted disclosures must be identified and the reason for their omission explained.
||The Company has published all of the disclosures set out under Principles 1-9 and has not omitted any disclosures.