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LONDON (Dow Jones)--Oil and gas explorer Rockhopper Exploration PLC (RKH.LN) Wednesday said it intends to carry out more work at its Sea Lion discovery before publishing new resource estimates, after a preliminary analysis suggested the field may contain about 30% less oil than thought.
Rockhopper struck oil at the Sea Lion prospect in the waters off the coast of the Falkland Islands in May last year and in June estimated about 242 million barrels of oil could be recovered from the field.
It said Wednesday a technical report scheduled to be published by the end of the year won't now be published until the second half of 2011 because its consultants told it that if the report was produced today the resource estimate would be about 30% lower than 242 million barrels.
"This would not reflect the board's view of the prospectivity of Sea Lion, not least in the light of the preliminary nature of the analysis undertaken to date," Rockhopper said. It added it is confident oil can be recovered commercially from Sea Lion.
At 0842 GMT, shares in the company were down 77 pence,or 17% at 383 pence, underperforming a 0.1% lower Alternative Investment Market and valuing the explorer at roughly GBP670 million. The company's shares have risen more than fivefold since the Sea Lion discovery.
Analyst Richard Rose at Oriel Securities said if these revised estimates prove accurate that would reduce resources at Sea Lion to about 170 million barrels.
He said his view is the discovery is commercial and investors should view any share price weakness as a buying opportunity.
Rockhopper said it intends to carry out more drilling and surveying at Sea Lion to get a better picture of how much oil the field contains.
The company said it is considering selling shares as a way to raise money for the next stage of exploration at the North Falklands basin.
It said it reached preliminary agreement with a contractor to carry out seismic surveys in the basin, beginning in January. The surveys will allow Rockhopper to scrutinize geological formations called sandstone fans at Sea Lion and examine other promising targets, the company said.
It added it also received a new proposal from a drilling contractor that would enable it to drill up to eight wells in the next stage of its campaign.
A formal contract hasn't been agreed but a deal would require Rockhopper to place money sufficient to cover the cost of drilling in an escrow account, it said.
A large fundraising is therefore likely in the near term, Rose said. Rockhopper didn't say how much it will need but Rose said $150 million to $200 million would be consistent with its requirements.