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Canaccord

Rockhopper Exploration plc (RKH : AIM): So close -- BUY, target 494p
Rockhopper Exploration plc

RKH : AIM : 278p | 717.0M | Buy, 494p

So close -- BUY, target 494p
Richard Slape, 44.20.7050.6643

Plenty of encouragement but not much oil

Rockhopper has announced the results of well 14/10-3 offshore the Falkland Islands. It encountered good quality reservoir at a depth from 2,425 metres to 2,535 metres in a sequence of four main sandstone intervals. Within these, 64 metres of gross reservoir sand was encountered with net sand of 54 metres.

Given that reservoir quality is regarded as a significant risk in the area, Rockhopper said it was pleased to have encountered a thick sequence of sand with average porosity of 18-20% and peaks of up to 25%. Unfortunately, samples from the first, second and fourth sands contained only water.

Samples recovered from the third sand contained approximately 20% live oil that appears to be of medium gravity. Furthermore, pressure readings taken from this interval indicate that it is lying on the same oil pressure gradient as the main Sea Lion fan in well 14/10-2. However, when Rockhopper performed a mini Drill Stem Test (DST) on this horizon, it produced only water into the well.

Only the upper end of the resources range should be affected

The result of 14/10-3 is disappointing but investors should not forget that it was an exploration well located 8 kilometres from the Sea Lion discovery. So, while it now seems unlikely that the upper end of the previous range of resource estimates (669 mmbbl on a P10 basis) for the field will be realised, we do not think this will have an adverse impact on earlier P50 resource estimates.

Disappointment creates a buying opportunity

Assuming it contains reserves 170 mmbbl, we estimate the Sea Lion oil field is worth equivalent of 402p per Rockhopper share when allied to an oil price of US$70/barrel flat real and a 12% discount rate. Adding an estimated 92p/share of net cash increases the total to 494p, which is our target.

We reiterate our BUY rating.

From the FT's sector watcher:

..................The failure of the most recent Sea Lion appraisal well is not quite the disaster that the RKH share price reaction implies. Friday afternoon's announcement that 14/10-3, an 8-km stepout, had only encountered oil shows in one of four zones led to a 17% fall in the share price to 278p/share, an eight-month low, and 45% below last year's high. Our core NAV for Sea Lion is 402p/share, with a further 92p/share of cash, giving a total of 494p. Moreover if we assume an oil price of $85/barrel rather than $70, we get to a total NAV of around 630p/share. With the shares trading at less than half of this, the market seems to be taking the view that even the base case of 170m barrels of oil is under threat.

This seems harsh given that a CPR conservatively estimated those reserves, with an upside of 242m barrels based on drilling to date. I suspect a bigger factor in the fall has been a recent general waning of enthusiasm for the E&P sector following a series of exploration disappointments - DES, HOIL, GPX, PMO, NPE etc. Moreover one of the other big drivers for the sector last year was a rising oil price, whilst with Brent currently trading close to $100/barrel, the upside looks limited. The next RKH well is 2.3 kilometre step-out appraisal, also containing some risk, which should complete next month. Thereafter we expect to see at least three low-risk appraisal/development wells on Sea Lion that should prove up commerciality. By the end of the year I therefore think it is reasonable to expect a share price in the 500-700p range, hence I'd consider current levels an extremely attractive entry point............

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ditto - good post proselenes

http://www.offshore-mag.com/index/article-display/2367306901/articles/offshore/drilling-completion/latin-america/20110/February/sea-lion_delivers.html


Sea Lion delivers further oil off Falklands


Published: Feb 14, 2011

Offshore staff

PORT STANLEY, Falkland Islands -- Rockhopper Exploration has proven further oil close to last years Sea Lion discovery in the offshore North Falkland basin.


The 14/10-3 well was drilled by the Ocean Guardian to a TD of 2,830 m (9,285 ft) in license PL032, 8 km (4.9 mi) northwest of the discovery well. It was designed to explore the northern lobe of the Sea Lion fan feature, and is also the first well drilled in that area.


It encountered good-quality reservoir from 2,425-2,535 m (7,956-8,317 ft) within a sequence of four main sandstone intervals, including 64 m (210 ft) of gross reservoir sand with net sand of 54 m, or 177 ft (a net to gross ratio of 84%).


Rockhopper says wireline log interpretation was performed using Resistivity of formation water (Rw) drawn from downhole Modular Formation Dynamic Tester (MDT) water samples from each sand.


Logs indicate that sands 1, 2, and 4 have high water saturations with hydrocarbon shows during drilling and in cores, while Sand 3 has net pay of 7.3 m (24 ft) using a cut off of 70% water saturation (Sw).


The reservoir lies beneath a thick regional shale seal. Sands appear to be of good quality, with average porosity of 18-20% and peaks of up to 25%. Rockhopper believes that sands 1-3 are likely related to part of the main Sea Lion feature, while Sand 4 could be related to the S2 feature.


Oil and gas shows were detected throughout the reservoir intervals. Four conventional cores were cut through the reservoir totalling 101 m (331 ft), with bleeding of live oil and oil staining observed throughout. However, MDT samples on sands 1, 2, and 4 returned water.


Rockhopper adds that samples recovered from Sand 3, using a standard MDT tool, contained 20% live oil, thought to be of medium gravity.


During a subsequent DST on Sand 3, using a dual-packer MDT tool downhole, water was produced into the well. Further studies will be needed to determine why the mini DST produced water while the standard MDT recovered 20% live oil from the same sand interval.


MDT pressure readings taken over Sand 3 suggest it is lying on the same oil pressure gradient as the main Sea Lion fan in well 14/10-2, indicating potential for good lateral communication. Further drilling should reveal whether this is the case.


Rockhopper believes that the lowest sand (Sand 4) could form the downdip, distal part of the S2 feature, and plans further analysis to determine whether oil is present updip in the S2 lobe.


It will also investigate the likelihood of oil being present elsewhere in the northern Sea Lion lobe and the likely contribution of this latest well to any commercial oil development of Sea Lion.


The regional overlying seal seems to be intact and effective at the well location. With reservoir quality good, and oil shows and moveable live oil present, the main technical risks associated with the northern Sea Lion lobe are the effectiveness of the seal at the location of the feeder channel and the possibility of effective charge from the south if there is discontinuity within the reservoir.


The Ocean Guardian will next drill appraisal well 14/10-4, 2.3 km (1.4 mi) northwest of the discovery well. A further announcement will be issued on the spudding of 14/10-4.


02/14/2011

Lots of shorters this week, this is the up to date chart as of close on 14th Feb - a big jump in shorts on RKH yesterday, to the tune of nearly 500K volume shorted yesterday.

Shorts will apply pressure this week and next and hope to close out with a profit before the appraisal spud news.

Buying opportunity thanks to shorters keeping the price down.




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I keep on repeating this : but the sp just has to rise......if anybody had told me that the sp would be at these levels when it was hovering around 500p, I would never had believed you...far too low now....

me neither rf - but it will correct soon i am sure

RKH

Goldman Sachs Update :

Conviction buy, target price cut to 640p from 729p

Roadshow in progress and should be spud of the appraisal well RNS on Monday/early next week.

http://www.ft.com/cms/s/0/42d2b592-3ab3-11e0-9c1a-00144feabdc0.html#ixzz1EG7WWziy

..........Rockhopper Exploration, 0.7 per cent better at 271p, was in focus as the company started an investor roadshow.
Thursdays meetings was hosted by Merrill Lynch and Fridays will be at the Victoria offices of Canaccord Genuity..............

For those that have not read it, the Edison update.

http://www.mediafire.com/?s6ou9fbvtsb2ara

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http://www.investegate.co.uk/Article.aspx?id=201102210700095385B

Rockhopper Exp plc
14/10-4 Appraisal Well Spud
RNS Number : 5385B
Rockhopper Exploration plc
21 February 2011


14/10-4 Appraisal Well Spud


Rockhopper Exploration plc (AIM: RKH), the North Falkland Basin oil and gas exploration company, announces that the 14/10-4 appraisal well was spudded at 0040hrs GMT on 19 February 2011. 14/10-4 is the first appraisal well to be drilled on the Sea Lion feature situated on Licence PL032, which is 100% owned and operated by Rockhopper.

The appraisal well (14/10-4) is located 2.3km away from the Sea Lion 14/10-2 discovery well, in the southern lobe of the Sea Lion fan system. 14/10-4 is designed to investigate reservoir and hydrocarbon columns downdip of the Sea Lion 14/10-2 discovery well. The planned Target Depth of circa 3,000 metres will investigate the possibility of deeper sands than those encountered in the Sea Lion discovery well.

Drilling operations are expected to take approximately 38 days and a further announcement will be made once drilling is completed.

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Nice to see they will test for deeper sands.

Now we now deeper and older fans have oil in them, thanks for cores on the last well from S2 fan system, and also they are viable, there could be some serious upside from lower down.

US crude...plus $2 this morning...almost $92 .....oilies could rocket this morning...plus gold almost back to $1400.......goody.....

2 days into drilling as well already. Not long for the shorters left to push the price down and then re-buy to close.

Basically they only have this week and next to manipulate the SP and then they need to be back to level.

Well, I am now pretty much "all in" RKH after selling other stocks and buying even more.

If the next 8 to 10 wells they have the funds to drill all fail, I shall lose a couple of hundred K.

If the next 8 to 10 wells strike lots more oil, I will walk away with a 7 figure pure profit.

These kind of fully funded chances do not come along too often, you have to grab them and either make a name for yourself or go down in flames with a smile on your face for having a go.

I am having a go and fully prepared to lose, and also full prepared to accept a win if it happens :)

What a load of sphericals.

in that case Mr P, if you are really telling the truth, you're a total arsehole .... fools and money come immediately to mind

cynic - you can call me a fool if the next 8 to 10 wells all fail.

If they come in good I will make a 7 figure profit.


A fool it may be come late 2012 when all their upcoming drills end, the not a fool will be seen much quicker if they strike loads of net oil pay in the coming 8 to 10 drills that they have the money to do.


We shall see. I am willing to take the risk, and I might be laughing all the way to the bank if the reward comes in.