.

From the Sector Watcher today (FT Alphaville) , it should be noted that they allow nothing for the S2 fan and so if that comes in as well, expect valuations to go wild....


..........."Rockhopper has spudded the next well on its PL032 licence in the North Falkland Basin, with the 14/10-3 well located 8 kilometres west of the Sea Lion discovery. The well, located outside the Sea Lion Discovery Area, will appraise the northern lobe of the Sea Lion structure, hence it should not be considered quite as high risk as a pure exploration well Id imagine the chance of success is around 1 in 2 to 1 in 3. Difficult to say what a successful well would do to reserves estimates on the overall Sea Lion structure although with a current P10 case of over 600 million barrels of oil against a P50 case of around 170 million barrels there is clearly enormous upside.

The well should take around 5 weeks to drill and will be followed by 14/10-4, designed to test the southerly extension of the field. Interestingly, if the southerly extension is successful, the structure could extend about 1 kilometre into Desire Petroleums acreage in the adjacent licence. Following the two wells, the Ocean Guardian rig will probably revert to Desire for its final well.

Thereafter RKH has signed up the rig for three firm wells and five contingent, designed to appraise Sea Lion and test further exploration prospects, so it will be a busy year for the group. Our current NAV on RKH is 494p/share, although this could be deemed conservative as it assumes only the base case reserves estimate of 170 million barrels and a long-term oil price of $70/barrel. On the basis of a successful P10 case, this valuation would likely more han treble.

RKH remains the best way to play the Falklands exploration province.........

Pretty similar picture every day now, dip down in the morning and early afternoon and recovery end of the day.

http://www.proactiveinvestors.co.uk/companies/news/24607/broker-roundup-rockhopper-exploration-universal-coal-chariot-oil-gas-kentz-24607.html

Broker Roundup: Rockhopper Exploration, Universal Coal, Chariot Oil & Gas, Kentz

Friday, January 14, 2011 by Jamie Ashcroft

Evolution Securities analyst David Farrell featured Rockhopper Exploration (LON:RKH) in the brokers First Take morning note.

Farrell said: While Rockhopper has said that the 14/10-3 well is an exploration well it is targeting the northern lobe of the Sea Lion fan and should it work we believe this will start to validate the upper resource estimates of the original Sea Lion discovery.

The RPS report published immediately after the Sea Lion discovery suggested an upper resource estimate in excess of 500mmbls.

Based upon a 200mmbls discovery we believe that the Sea Lion discovery is worth c350p/sh suggesting the market is ascribing just 31p/sh to exploration which we believe is worth c180p/sh on a risked basis.

If this first Sea Lion well works, we expect a significant leg up in the share price.

Charlie Sharp, equity analyst at City broker Charlie Sharp also commented on the news.

We expect considerable further exploration and appraisal work beyond that, dependent to some degree on the outcome of the next two wells.

We believe that Rockhopper presents the best opportunity among the FI players for further positive share-price movement in the near term, although the risks remain considerable, Sharp said.

Fox-Davies emphasised that whilst the well is being drilled near the Sea Lion discovery well, there are distinct differences between the two parts of the Sea Lion system.

The new well is located to the North of the discovery well and will test the northern lobe of the Sea Lion fan complex which looks, from seismic mapping, to be fed from a different sediments source, the broker said.

We understand the seismic attributes are similar to that at the discovery well location, hence limiting the risk, although the 8 kilometre distance is a large outstep from that data point and reservoir/seal risk is far from negligible.".................

Interesting couple of posts by kiwi over at AFN, and I do think the comment on over a billion barrels recoverable just from Sea Lion is very possible, not fantasy.

7Kiwi - 15 Jan'11 - 19:59 - 14480 of 14487

I've been doing a bit of digging to see if I can work out where 14/10-3 is and what S2 might be. Of course there's an element of guesswork, so I can't be certain but there's a certain amount of fun in guessing.

First a graphic of Sea Lion taken from the "volumetric assessment":

I've drawn an 8km line in a NW direction from the Sea Lion discovery well to work out an estimate of the location of the current 14/10-3 explo well.



Second, here's a picture taken from elsewhere in the same volumetric assessment document. This shows a very rough schematic of the main Sea Lion fan and the deeper Sea Lion fan. It also shows in blue another fan that they think may merge into the lower fan.



With a bit of squinting I think it is possible to see that the 14/10-3 well may just be clipping this blue fan, and hence the blue fan is quite possibly S2. Further, in Figure 17 of the volumetric assessment document it describes a "high amplitude seismic event" of equivalent age to the lower Sea Lion fan.

Trouble is, I'm not sure the "blue fan" is quite big enough. The P10 size of the Lower Sea Lion fan is 30km2, and by inspection, the blue fan looks a bit smaller, so I don't know where the size of 46km2 comes from. Indeed the P10 estimate of Sea Lion itself is only 55km2, and that is muich bigger than the blue fan.

I guess we have to wait a bit for proper answers.

Volumetric Assessment doc for reference:

http://www.rockhopperexploration.co.uk/pdf/Volumetric_Assessment_of_Sea_Lion_2010.pdf



7Kiwi - 15 Jan'11 - 20:06 - 14481 of 14487

Also a bit of looking at the license maps leads me to beleive that the gap between the southern boundary of the current RKH 3-D and the southern boundary of their license is some 5km. If SL is to extend into DES's acreage, then I thik it would be at least twice the size of the current P10 estimate of 55km2, which would suggest it contains over 1.2bn recoverable barrels (plus the lower fan plus whatever else they find).

Nice to think about, but probably not realistic.

.

Rumour has it the seller is now clear, whether that is correct or not who knows, we will see next week if there is a strong move upwards with less available stock on offer.

Pros - Was that dogging or digging? Squinting or Squirting the blue fan. Yours confused!

confused.com

Where the 3D is being done. Page 11 of the presentation below :

http://www.polarcus.com/assets/0000/1209/Polarcus_Company_Presentation_SEB_12_Jan.pdf


Here is the blow up of the chart on page 11 :

Interesting RKH are doing 3D on Weddell down there.

Overlaid the 3D map from Polarcus with the NFB prospect/license map and you can now see where the 3D is being done in relation to the targets.




.

It would be interesting to know who is paying for the 3D up north outside the present license area's.

Is it split 50/50 RKH or ARG or are RKH paying for that 100%, and obviously keeping the results very much to themselves for future reference/license applications ?

Updated Falklands Government wesbite for mineral resources - better layout.

http://www.falklands-oil.com/

.

Useful post from King Khan at LSE

IMO, Update from Drill is expected in 3rd week of drill commence day. I am expecting update on 31 Jan or 1st week of Feb.

Remember Sea Lion (TD: 2700m, Result in 20 days, initial expected day of result wsa 35 days),

Ernest: (TD: 2400m, Result in 25 days, Expected days: 30 days)

Rachel (TD: 2850m, Result: 18 days, expected days: 35 days)

Rachel North (TD: 3050m, result: 20 days, Expected days: 35 days)

Jacinta. (TD: 1300m result: 10days, Expected days: 20-30days)

Dawn (TD: 1670m, result: 16 days, expected: 30days), Provided that Office was closed for fews days on XMAS, BANK HOLIDAY.

On avg. Falkland drill rate is : 134m/day. On same drill rate, Current well is expected to reach TD in 22 days. (07 feb 2011)

Two and a half weeks to go then.

This ongoing exploration drill does have the potential to be a "game changer". Whilst we can all appreciate its outside the defined discovery area of Sea Lion, should it come in with success it expands Sea Lion into being a potential "Billion recoverable barrel" size.

That is a game changer and one which will have serious repercussions for the Falkland Islands as well as Rockhopper (RKH) (and to a lessor extent Argos (ARG))

Worth noting this from Spiegel in 2004, one wonder how quick they will try to move in, in this respect I am glad Rockhopper now has 250 million cash, to protect against the oil majors trying to push their way in with poor priced bids or farm in attempts. :

http://www.spiegel.de/international/spiegel/0,1518,334165,00.html

"...........The Falkland Islands deposits aren't even mentioned in the lists of known oil reserves kept by the oil giants Shell, BP and Exxon. These multinationals, known in industry parlance as the majors, already have their hands full in regions such as West Africa, the Brazilian coastal waters and the Caspian Sea. Until now, searching for black gold in the rough and deep seas (up to 10,000 feet) of the South Atlantic seemed too complex and expensive, as well as being a highly speculative proposition. It's a risk the major corporations prefer to hand over to smaller oil exploration outfits. After all, if the venture turns out to be unsuccessful, the majors won't have incurred any costs. But if the prospectors make a strike, they'll be quick to move in.

Perhaps 10 to 14 days to news now.

I expect the BS rumour mill will start cranking into gear now as the short term pump and dumpers start trying to spike the price, along with shorters who want the price to spike before putting shorts on for results.

Therefore expect lots of nonsense across the other internet BB's about 7" liner, coring, oil shows, people talking in bars, gas kicks etc...

Do not get sucked into it IMO, either buy and hold for results, or do not buy and wait and see - don't let the pump and dump rumour crews suck people in is my view. Going to be lots of false rumours spread around in the coming days/weeks.

Nothing exciting, just the price rebounding a little as it was becoming oversold imo.

At this stage they could, if there has been no hold ups, now be drilling into Sea Lion main fan, there are perhaps 4 other targets to TD (Sea Lion Lower, S2 and also identified seismic events).

So, given they could now be into Sea Lion upper main fan, one should expect the rumour mill to go into overdrive very soon.

From my post early on this morning at ADFN :




Sea Lion Main fan +
Teardrop (Sea Lion Lower ? ) +
S2 +
Perhaps 2 to 4 more fans from S2 to TD.