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.

This ones got 1000p written all over.

Oriel note

Rockhopper Exploration (RKH, BUY, 420p) - Successful Sea Lion flow-test

Rockhopper announced on Friday that the Sea Lion discovery well had been successfully flow-tested at sustained rates in excess of 2,000bopd over an 18 hour period.

Equipment constraints limited the flow-rates which we understand would have been up to 3x higher if the well had flowed unrestricted. There were no flow assurance issues during the test, a concern ahead of events given the wax content of the crude

Downhole pressure gauges will be recovered which will help confirm the continuity of the reservoir sections tested and connected volumes around the well location

We view this test result a significant milestone is derisking the commerciality of the Sea Lion discovery. In our base case model for Sea Lion we assume horizontal production wells come on at peak rates of 6-8kbopd with long-term support from water injection and possibly ESP's and this result appears to more than underpin these assumptions

Our unrisked NAV for Sea Lion based on the current P50 240mmb reserve case is 786p/sh, unchanged on the back of this update.

The company has yet to confirm a date for appraisal drilling given the forward programme with the Ocean Guardian remains fluid. The next well in the programme is Rachel in which Rockhopper has a 7.5% stake worth c61p/sh unrisked if successful and which has been significantly derisked by the success of Sea Lion (analogous prospect in the same play, located in the block directly to the south on the eastern margin of the basin)

We re-iterate our BUY recommendation. Ignoring cash balances, the shares are trading at just over 50% of our unrisked NAV for Sea Lion under the P50 case which we believe is far too conservative

Mitzy.

Is that the same as when Pele was going to 200p within days then :-))

Pele big mistake down 30% but thats life.

ravey davy gravy its just diffrent views on the stock. lots of news to come before AGM and i think all good news.

You are the big mistake mitzy not Pele :-))

Equipment constraints limited the flow-rates which we understand would have been up to 3x higher if the well had flowed unrestricted

You would think i wrote oriels note...heeee

Starting to settle down now and then a steady rise in the coming days untill we get this upgrade!!!!!!

No need to rub it it ainsoph.

mitzy - sleep with dogs (PELE) and catch fleas

You mean you get it wrong sometimes mitz..........now you tell me!!!

In case any missed the earlier post, the highlighted bits tell you that, flow rate was restricted by equipment, not Sea Lion AND look to possible size upgrades in the next update once the pressure data is built into the model.

:



Oriel note

Rockhopper Exploration (RKH, BUY, 420p) - Successful Sea Lion flow-test

Rockhopper announced on Friday that the Sea Lion discovery well had been successfully flow-tested at sustained rates in excess of 2,000bopd over an 18 hour period.

Equipment constraints limited the flow-rates which we understand would have been up to 3x higher if the well had flowed unrestricted. There were no flow assurance issues during the test, a concern ahead of events given the wax content of the crude

Downhole pressure gauges will be recovered which will help confirm the continuity of the reservoir sections tested and connected volumes around the well location

We view this test result a significant milestone is derisking the commerciality of the Sea Lion discovery. In our base case model for Sea Lion we assume horizontal production wells come on at peak rates of 6-8kbopd with long-term support from water injection and possibly ESP's and this result appears to more than underpin these assumptions

Our unrisked NAV for Sea Lion based on the current P50 240mmb reserve case is 786p/sh, unchanged on the back of this update.

The company has yet to confirm a date for appraisal drilling given the forward programme with the Ocean Guardian remains fluid. The next well in the programme is Rachel in which Rockhopper has a 7.5% stake worth c61p/sh unrisked if successful and which has been significantly derisked by the success of Sea Lion (analogous prospect in the same play, located in the block directly to the south on the eastern margin of the basin)

We re-iterate our BUY recommendation. Ignoring cash balances, the shares are trading at just over 50% of our unrisked NAV for Sea Lion under the P50 case which we believe is far too conservative

I've lost my touch Balerboy and will be retiring Xmas.

No PP we did not miss the earlier post, we are not blind but do post it
ten times just to make sure :-))

Pro you missed this bit

the shares are trading at just over 50% of our unrisked NAV for Sea Lion under the P50 case which we believe is far too conservative

A few thoughts on the initial results of the Sea Lion DST.

The RNS contained some surprises. However the Declaration of Commerciality to the markets was not one of them.

The test rate was relatively modest but my previous post

http://www.iii.co.uk/investment/detail/?display=discussion&code=cotn%3ARKH.L&fromdate=02%2F07%2F2010&threshold=0&todate=02%2F07%2F2010&pageno=5&it=le

pointed out that test rate would be dependent on the pressure draw down achievable without any form of artificial lift and that the Gas Oil Ratio of Sea Lion might limit the draw down and therefore rate.

Hence it may be that 1000 psi drawdown is not achievable in a DST and hence the rates may be lower. This should not be of concern. With their track record RKH will be quick to point out potential for improvements in rate in a development scenario.

It was pleasing to see just such a comment in the RNS.... Rockhopper anticipates that the additional equipment that would be incorporated into any future test, when combined with a more optimal well location, would result in a significantly higher flow rate.

Unfortunately it is difficult to provide insights on the rate because essentially no supporting information was provided in the RNS. This was surprise number 1 because at the very least they could have supplied a choke size and wellhead pressure and of course the interval tested. We do not know if they tested only the Main Fan or only the Lower Fan (unlikely) or both together. Quite extraordinary that they did not indicate the interval(s) perforated!

I am hoping that RKH will run true to form however and release more information beginning next week as it becomes available. From the wording of the RNS..

Downhole pressures were recorded and their analysis will inform the Companys development scoping plans. It appears as though they want a little more time to analyse the pressure gauge information. Given that RKH just managed to announce the results prior to COB on Friday I would not be surprised to learn that they had only just completed the test and not had the opportunity to study the pressure information. A Technical Update along the lines of the 4th June RNS would be much appreciated.

Surprise number 2 was that there appears to have been only one DST. RKH had previously announced ...
Pressure data suggest the possibility of two separate oil columns, although this will have to be confirmed by a full well test. The main Sea Lion fan has a net pay interval of 34.5 metres. Additional underlying sands have net pay totalling approximately 18 metres. Approximately 16m of this lower pay appears to relate to a Sea Lion lower fan, which had been previously recognised, but not included as a primary prospect. A further 2 metres of deeper pay has also been encountered.

Running a separate DST on the lower fan would have provided the opportunity to characterise the lower fan independently of the main Fan and potentially obtain indications of up dip pinch out or thickening down dip. However I suspect there were a couple of concerns about conducting two tests:

1. Concerns that the flow rate from the Lower Fan would lead to wax issues at low rates
2. The reference to additional equipment that would be incorporated into any future test could refer to a number of things* but makes it clear that RKH was not entirely satisfied with the test set up. Hence it may have been decided to test the lower fan in a more optimal location down dip in a future test with an enhanced test set up.
* Limited wax suppression capability or perhaps decision not to flare on environmental grounds and inadequate storage capacity to handle produced crude or the need for an ESP to boost rates.

3. The additional cost of a second test even though RKH raised funds on the basis of up to 45 days required to re-enter test and P&A and that suggested two tests would be conducted.

Surprise number 3 whilst not entirely unexpected was a pleasant one. No H2S and negligible CO2. This will avoid the burden of additional costs associated with significant CO2 and H2S content and the previously announced low sulphur content will help with marketing the crude.

Surprise number 4 was the comment from Pierre Jungels on the size of Sea Lion We believe that Sea Lion is the largest fan sandstone body in the North Falkland Basin and, given this successful flow test, that the Sea Lion discovery will be commercially viable.

On the face of it it seemed early to be making that assertion. However as a reminder the initial preliminary volumetric assessment of Oil Initially In Place and estimates of recoverable resources from RPS was completed on 2nd June. It said Further detailed work has been commissioned by Rockhopper to calibrate the seismic with well data and characterise the hydrocarbon sands. As a result these preliminary volume estimates may be subject to change following the more detailed technical review. Sounds to me like that work has progressed and the results are going to be highly favourable when published.


SEA LIONS DISTANT COUSINS IN THE WEST OF SHETLANDS
It is always useful to look for analogues to a new discovery both in terms of geological setting, rock and fluid properties and development type to obtain an understanding how things could turn out, especially in this case since we have such little information on the test. Whilst the analogy is not perfect (perhaps someone can provide details of a better one) I think it is useful to look at the Foinaven and Schiehallion Fields, West of Shetlands UK.

Firstly Foinaven .. a basin opening discovery, in a remote province in 440m water depth, early post-rift, Cretaceous age stacked slope and basin floor submarine fan sands with initially estimated reserves of about 250 mm bbl.... sound very familiar?

Take a look below at how closely some of the other key parameters compare.
Water Depth: F 440m, SL 451m
Reservoir Depths: F 2100m SS, SL 2440m SS
Reservoir Pressure: F 3242 psi, SL Main Fain ~ 3500 psi
API Gravity: F 24 27API, SL 26 29API
GOR: F 350 scf/bbl, SL 265 scf/bbl (MDT samples)
Viscosity: F 3.5 4cp, SL 6.5 8.5 cp
Permeability Average (Range): F 800md (500 2000md), SL N/A (preliminary 200 900md from CMR log interpretation ref Volumetric assessment by RPS 2/6/10)

We can conclude there are a lot of similarities between the fields. Foinaven has a significant advantage in terms of lower viscosity which would lead to higher rates from Foinaven wells for a given reservoir thickness.

So what did Foinaven well rates look like? The field was discovered with a well that encountered a limited reservoir section of 11m; RKH did rather better...lol!

The second well was drilled to find the OWC and tested 3800 bbl/d through a 1 choke from about 35m of pay out of a total of 48m net pay. Sea Lion tested up to 2300 bbl/d. The interval tested has not yet been announced but the Main Fan has 34m net pay and well total pay is 53m.

The higher in situ viscosity of Sea Lion crude, about double that of Foinaven, would appear to be the major contributor to the difference in rate.

So how did the Foinaven development turn out? It was a resounding success. There were some initial teething problems with a new subsea connection system and some cost over runs but in truth the targets were unrealistic and driven by a crude price around $15 20/bbl.

The reservoir performance has been very good. Many of the development wells were horizontals as the net:gross was high in the main sand channels. Wells typically produced at 20,000 bbl/d initially before declining. The field started up in late 1997 and within 2 years was producing at 90,000 bbl/d. 13 years later is still going strong with satellite discoveries being made and ultimate reserves likely to be higher than initial forecasts.

There is every reason to be confident that Sea Lion will be an equally successful development. Whilst development well rates of 20,000 bbl/d may not be possible due to the viscosity, from what we know to date there is good reason to believe 10,000 bbl/d will be achievable from horizontal or high angle wells located in the reservoir sweet spots. That will ensure commerciality.

And Schiehallion? It is Foinavens big brother with 450mm bbl reserves and the potential for an increase to 600+mm bbl. The really exciting thing... Sea Lion has the potential to exceed this!
Regards and GLA

From Gramacho on iii

Fox Davies flash note

Oil & Gas Corporate News

Rockhopper Exploration (LON:RKH) (BUY, 5.00) (RKH, 468.5p, ▲ (11.55%)) reported the successful test of well 14/10-2 "Sea Lion 1. Sea Lion 1 was drilled in a water depth of 451m during April and May 2010 and suspended for future testing, having encountered a gross oil column of 217m with net pay of 53m. Initial MDT samples were confirmed as medium grade crude oil of 26.4-29.2o API gravity. Sea Lion 1 was re-entered during September 2010 and was flowed for 18h. The well tested at sustained rates in excess of 2,000 barrels per day with a maximum rate of 2,304 barrels per day. The flow test results are in line with Rockhopper's pre-test expectations and were significantly limited by downhole and surface equipment. The well produced no water, no H2S and negligible CO2. Downhole pressures were recorded and their analysis will inform the Company's development scoping plans. A number of downhole and surface samples were collected and will be further analysed in the UK. The test was carried out with limited equipment owing to the length of the logistics chain and timelines involved in securing such equipment. Rockhopper anticipates that the additional equipment that would be incorporated into any future test, when combined with a more optimal well location, would result in a significantly higher flow rate. Rockhopper now intends to plug and abandon the well as planned.

Comment: Those are decent flow rates even though such a sand body should be able to flow at much higher rates given the reservoir characteristics and the quality of the oil. Given the limitations imposed by the equipment, we agree with the Company that much higher rates should be achievable. We are encouraged by those results and are raising our probability of success for Sea Lion from 50% to 67%, resulting in an increase in our price target from 350p to 500p.

Rockhopper Exploration shares much higher on Broker coverage

Shares in Rockhopper Exploration plc (LON:RKH) continued to trade much higher today on the back of broker upgrades following the flow test results from their Sea Lion 14/10-2 discovery well. At 10.30am the shares were trading up 50.25p (+12%) at 470.25p having been up as high as 483p earlier in the morning.

Bank of America Merrill Lynch in their broker note set a price target of 700p, Fox Davies set a target price of 500p and Evolution Securities price target is 450p.

Desire Petroleum plc (LON:DES) down 2.5p at 150.75 was initially trading as high as 180p boosted by the positive Falklands oil sentiment and by a positive note from Evolution Securities with a target price of 166p.

Another upwards move,,,,