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

http://www.rockhopperexploration.co.uk

http://www.argosresources.com/




Rockhopper was established in 2004 with a strategy to invest in and undertake an offshore oil exploration programme in the North Falkland Basin. It was floated on AIM in August 2005. Rockhopper was the first company to make a commercial oil discovery in the Falklands. Today Rockhopper is the largest acreage holder in the North Falkland Basin, with interests in the Greater Mediterranean region.

Of course this comment today from Argos

........Argos Resources reckons that approximately 30% of the Johnson Gas discovery, drilled by Shell in 1998 but only declared as a discovery by Rockhopper Exploration in 2009, extends into Licence PL001. Argos Resources has not had the benefit of access to Rockhopper Explorations 3D seismic or any of their proprietary studies and will no doubt have to enter negotiations with Rockhopper Exploration on the subject in due course........


Now means that should Argos wish, they will pay likely 30% of any costs for this discovery in future. It has no value now for RKH in the equations, but in a few years time you never know, for now, oil is the focus.

Cynic there is a post from iii which i think sums it up in one I think i read some where Ernest had a 40% of finding oil which is a high chance in oil terms.

The answer to this question will become clearer in the coming months as the geology of the basin is further understood, but for now here is a few thoughts of what developments are likely to happen in the next two years.

Area 1: South North Falklands Basin (SNFB)

Firstly Ernest, as I wrote last week, I believe that Ernest is the key to the SNFB (South North Falklands basin) and it will give a lot of information on local source and migration pathways. Data from Ernest will be essential in helping Desire (DES) decide which of their giant plays, Jacinta (1.1 billion mmbs) or Alpha (1.6 billion mmbs) has the greater chance of success. These plays are critical to DES (and Arcadia wrt. to Alpha) and will open up the entire economics of the SNFB.

The SNFB is critical to future RKH plays Keppel, Pebble, Weddel, Saunders, Beauchenel and Ruth Kate and Barbara for DES. Based on a positive Ernest and local source suggesting likely Jacinta or Alpha, I believe that a second rig will be essential.

Given that a rig can carry out a maximum of eight drills annually a shared annual contract with option of a second year would be easily covered by RKH/DES/Arcadia.

Assuming that the exploration wells for Ernest and either Jacinta/Alpha are in the existing OG contact, the subsequent drills year 1 could be:
Ernest Flow test
Alpha flow test
Weddell exploration/flow test
Alpha appraisal 1
Ernest appraisal 1
Alpha appraisal 2
Weddell appraisal
Ruth Exploration/flow test

Area 2: North East North Falklands basin (NENFB)

To me this is the area that is now in the bag and will be where the Ocean Guardian spends the next 2 years. The regional seal and proven source provides enough prospects to keep the rig busy for the foreseeable future and maybe will be into production in time to see Jessica Ennis win Gold.

Sealion will need to be flow tested (in the current contract) and will require at least two appraisal wells to prove out the P10 area and three or four for the P1 area(4). DES have the Rachel exploration well (and flow test?) in the current OG contract, and when(!!) it is positive, they will also need two appraisal wells (6).

RKH will be anxious to drill Fox (7) to test the northern extremities of the regional seal, and Jason (8) to test the east. That is without mentioning the most likely successes in Meredith (9) and Chatham (10).

Des will want to test Anna (11) and Anna Deep (12) to test the southern extremes of the NENFB.

The curiosity will be in finding the oil/water contact and understanding the full extent of the geology. With each exploration/appraisal drill this will become more readily apparent. The existing Sealion data will be already analysed and the geological model underway.

A positive Rachel and Sealion flow test will give both RKH and DES the capital to fund the NENFB as far as the positives will allow.

Area 3: North West North Falklands Basin (NWNFB)

This is where the data from Liz is essential and potentially has less impact on RKH than the other two areas. However it is critical for DES. DES have had the Liz data for some months now, and will hopefully be better placed to understand the impact of this data than any of us.

Rachel will perhaps provide additional help in understanding the NWNFB, but on the whole Liz is the key. I see Liz, Beth, Ninky and Pam to be part of the same story, and the Liz data will help with the early chapters. Sometime in the next two years the NWNFB will be revisited hopefully using data to generate the highest possible COS.

The alternative in this area is Anne, this prospect is more likely if the Ernest data points towards Jacinta rather than Alpha as Arcadia have a share of Anne. Being on the western extremity the data here would be useful to DES as I am sure would be sharing some of the cost.

To the North of this area is the Argos prospects, DES may wait for Argos to drill and provide them additional data before revisiting the NWNFB, and also any Argos data may be useful to RKH with respect to Bleaker.

Summary:

So, three areas, one (NENFB) significantly de-risked by Sealion, and will be more so with Rachel in the current OG contract. One is currently being drilled and may be de-risked by Ernest (at least in proving source); and the third with a disappointing Liz behind it, but plenty of opportunity in the next two years

perhaps i'm wrong, but i think the implication is that ernest will not produce anything commercial, but is really just a "tester" to determine field extent and similar

I think RKH management will be pretty disappointed if Ernest is a flop after spending cash on CSEM etc...no one spends 16m drilling without high hopes of a commercial find....information gained from the drill regarding source rock/traps/seals etc will be very handy as a by-product should it fail but ...

Your correct in your thinking Cynic except Ernest has double the chance off success than in Sea Lion and yes with it in the SNFB and what information which is gained by drilling it duster or no duster will help with the remodelling of the SNFB but one thing for sure the NFB now hold substantial commercial oil as is proven.

but the immediate implication for RKH sp is not encouraging for sure

cynic at the end of the day as far as investors are concerned a duster is not going to help the sp.

I just love the "significant upside potential" words :)


http://www.proactiveinvestors.co.uk/companies/news/19346/argos-resources-to-join-aims-falkland-oil-explorers-19346.html


...........Of the four junior explorers currently active in the Falklands, Rockhopper has enjoyed the most success to date, with its Sea Lion discovery being the highlight of Falklands exploration story to date. The Sea Lion 14/10-2 struck oil early in May, and later in June further analysis showed that the well had discovered medium gravity oil.

The analysis confirmed the first contingent resource in the Falklands, and upped the recoverable resource estimates from 170mmbbls (million barrels) to 242mmbbls with significant upside potential..............

For RKH and DES, If Ernest is a duster then the sp will slide only to recover strongly upon Sea Lion testing, so if it is a duster it will be a great time on the dip to get some more or if it is a success....well : 5 possibly....for Rockhopper anyway...

Pro's woken up...off he goes again or is he chav.....i don't know
Agree with you cynic, am in with reasonable holding but won't be increasing at the mo.

actually reduced my holding a bit earlier today for no blood ... still o'weight but not so badly

Nothing is a certainty in Oil explorers so I agree that you should only hold what you are happy with through the drilling results....I have had a 'proven and probable' drill come up with the wrong result in the past, let alone the 40% ish of Ernie being a strike!

Its worth remembering that the "experts" value Sea Lion in its present form (not flow tested and not yet proved commercially viable) at 319p per share.

That valuation once a flow test is done and the producability is proven, should rise to circa 750p per share just for Sea Lion.

Whether Ernest is a success or failure does not take away from that, therefore at the present price the downside for Ernest failure is going to be minimal, as the present price only covers Sea Lion and excludes everything else (including cash).

Whilst some shorters might try it on, and some margin and spread betters might close, anyone holding fully paid for shares has no reason to sell, as ultimately they have got in for Sea Lion flow testing, and Ernest is just an event before that happens.

The upside for having the position is that should Ernest come in, it adds 200p a share on discovery news with good oil, and 450p a share once flow tested and ok.

If a flow test is needed at Ernest it would take only about 10 days, after which they would likely P&A the well to eliminate the expensive "suspended" status, which costs a lot of money to keep it in that state. Sea Lion was only suspended for flow testing, as the equipment was not available at the time.

http://ftalphaville.ft.com/blog/2010/07/09/282646/markets-live

9.7.2010

We saw RKH management yesterday, who confirmed that the Ernest exploration prospect is likely to be the next to be drilled on its northern Falklands acreage, once the Ocean Guardian rig is released by FOGL/BHP later this month. The result of the FOGL/BHP Toroa-1 prospect, a giant structure with the potential to contain 1.7bn barrels of oil, is expected imminently

RKHs Ernest well is targeting a 156m barrel prospect with a Chance of Success (COS) of 23%, although this may have been derisked somewhat by the success of the recent 242m barrel Sea Lion discovery. On similar metrics to Sea Lion, Ernest could be worth around 280p/share. Following the 30-35 days expected to drill Ernest, the rig will then demobilise and move back to Sea Lion, where the original well will then be re-enterred in anticipation of a testing programme, due to take 45 days to complete. Two separate zones will be tested, with each zone likely to be tested twice, hence this is a relatively slow job. We therefore expect definitive news on the producability of the reservoir by early to mid September. We have a total NAV of 563p/share, which includes 441p/share for Sea Lion and 122p/share for cash and risked upside continue to BUY>/i>

for people who look at charts - which rules out clubby! - current level just may see a bounce off 25 DMA

July offshore Mag


Falkland Islands

A small spot with a disproportionate amount of activity, the Falkland Islands continue to see drilling. Rockhopper Exploration has updated the analysis of its Sea Lion oil discovery in the offshore North Falkland basin. According to independent consultants RPS Energy, the field could contain 242 MMbbl of recoverable oil, with significant upside potential.

Well 14/10-2 was drilled in April and May to a depth of 2,744 m (9,002 ft), and following completion of final logging, was suspended for future testing. The well penetrated what is thought to be a regional seal between 2,250 and 2,374 m (7,382 and 7788 ft) subsea. Based on log analysis, well site evaluation of shows and samples, sidewall cores, and wireline formation testing, all sands encountered beneath the regional seal at this location appear to be charged with oil. No oil/water contacts were encountered.

The top oil sand in Sea Lion was encountered at 2,374 m (7,789 ft) subsea, and the base of the lowest oil sand at 2,591 m (8,500 ft) subsea. Rockhopper estimates the total vertical oil column at 217 m (712 ft), with total net pay of 53 m (174 ft) in seven identified pay zones, the thickest around 30 m (98 ft) gross.

Pressure data suggest there may be two separate oil columns, although this will have to be confirmed by the well test. The main Sea Lion fan has a net pay interval of 34.5 m (113 ft). Other underlying sands have total net pay of around 18 m (59 ft), some of which appears to be connected to a Sea Lion lower fan, which had been regarded as a primary prospect. The well also intersected a further 2 m (6.5 ft) of deeper pay.

Oil down to 2,591 m subsea is 116 m (380 ft) beneath the lowest mapped point of the entire Sea Lion fan, which has an aerial extent of over 45 sq km (17 sq mi). There are seismic indications of thicker reservoir compartments elsewhere in the fan.

Rockhopper believes the well has opened a new play fairway in licenses PL032 and PL033.

The play around the Falklands may be set to expand, too. Desire Petroleum has classified its first well in the North Falkland basin as a gas discovery. The Liz well 14/19-1 reached a TD of 3,667 m (12,031 ft), and is currently being plugged and abandoned.

Initial log interpretation suggests that the well encountered 17 m (56 ft) of net hydrocarbon pay at sub-surface depths between 2,961 and 3,031 m (9,714 and 9,944 ft) within a zone of over-pressured, and chiefly sandstone, reservoir. A hydrocarbon sample and formation pressures were recovered from this interval.

Early analysis indicates wet gas, with no apparent water-leg in this interval. Desire adds that further work will be needed to evaluate reservoir quality, to determine the trapping mechanism, and to assess the discoverys potential.

The well also recovered dry gas in a separate accumulation in a different pressure regime from a deeper interval below 3,400 m (11,155 ft). This suggests that gas pay is present in generally poor quality reservoir. However, there is uncertainty over the rock type and its reservoir potential.

The Liz fan was encountered between 2,540 and 2,568 m (8,333 and 8,425 ft). Desire says that good oil shows were recorded while drilling, but logging and sampling confirmed that this reservoir interval was tight. The company believes the Beth fan was also penetrated between 2,654 and 2,672 m (8,707 and 8,766 ft), again with oil shows in tight reservoir. Further weak oil shows were recorded in conglomeratic zones between 2,706 and 2,932 m (8,878 and 9,619 ft).

Liz was the first in a multi-well, multi-operator campaign offshore the Falkland Islands using the semisub Ocean Guardian. Rockhopper will now drill two wells in the North Falkland basin and BHP one in the East Falkland basin before the rig returns to Desire for further drilling later in the year.

Desire says it will use the next three months to evaluate data from the Liz well. These and the results of the Rockhopper wells should assist planning of future well locations.

so much for a bounce!
next stop = 290 = 50 dma level

Cynic any other day you would be correct but there have been some difficulties with the OG but am sure they can solve the problem as quick as possible.RKH said 30 days i think maybe still on target.


Just looked on iii and I yarned at the 800 or so posts and know why enjoy moneyam so much betterbetter class of people.well its not over till the fat lady sings!!

Your not wrong there marky. iii & ADVFN full of rampers & rubbish, but I think the younger members love the banter. MAM & Motley Fool at least have some decent info & opinions.

Totally correct Harry...ADFVN i dont have but have over 1000 post today on iii and i woundt care i have loads filted but still to much crap so its a turn off.

But when you have a 1000 in a day post you know your on to a winner.

I See the fat lady is standing up a singing again.happy days!!!