Rockhopper Exploration sets sights on Sea Lion development approval and further Falklands drilling in 2014/15
Dec 19, 2013 at 11:30 am in AIM by contrarianuk
Couple of interesting announcements from Falklands oil explorer Rockhopper Exploration over the last 2 days. Unfortunately it’s going to be pretty long wait for major news from the Falklands given the sticky rig situation and the need to transport a suitable rig down to the area.
The interim results today for the period ending 30th September 2013 gave some insights on the development of the Sea Lion discovery with Premier Oil in the North Falklands basin as well as their planned exploration activity using 4 wells in Q4 2014/Q1 2015 depending on rig availability.
One of the big pieces of news next year will be Premier’s assessment of the Tension Leg Platform (TLP) development plan for Sea Lion, following the confirmation that an FPSO solution is viable and meets all of its internal metrics.This news will be awaited with baited breath given Schroder’s and others pressure on Premier to ditch the development. Once the FDP is approved by the RKH and PMO boards its all systems go and with over 300 million barrels to be recovered it would seem an awful waste to just let it sit there.
The latest modelling of Sea Lion led the joint venture to increase the estimate of the field’s 2C resources from 321 million barrels to 337, with a further 57 mm barrels contributed by the satellites. This figure assumes a gas cap is present on the western flank of the field. If that is not the case, a 50% chance, the 2C estimate for Sea Lion could rise by a further 65 mm to 402 mm barrels. The Chatham / Sea Lion gas cap well to be drilled will answer the question of the gas cap.
The company has also confirmed until it has greater clarity regarding the likely cost of the Sea Lion project and the expenditure requirements of further exploration it won’t be returning any of its $259 million cash pile back to investors…
Yestersday, the company issued an RNS that it had agreed with the Falklands Islands Government (FIG) that it had agreed in principle that the total CGT payable is $146 million with payment split into two tranches. The first payment, due immediately, equates to $42 million, of which Rockhopper paid $39 million in June 2013. The second payment equates to $104 million and will now be paid at the same time as the first royalty payment to FIG from oil production at Sea Lion.
In early October 2013, Rockhopper and Premier announced the signing of a Heads of Agreement with Desire to farm in to licences PL004a and PL004c. Under the terms of the deal, increased its interest to 24% from 3% and 10% respectively. In return, Desire’s share of costs for an exploration well on each block will be carried by Rockhopper and Premier. The farm in has now completed subject to sign off by the Governor of the Falkland Islands.
Subject to rig availability, four wells will be drilled in late 2014 or early 2015. In addition to the Isobel/Elaine and Jayne East prospects that will be drilled as part of the farm in deal, RKH will drill at the Zebedee and Chatham locations on PL004b (Rockhopper 24%) and PL032 (Rockhopper 40%) respectively. They estimate these could hold 800 mmbbl (net Pmean STOIIP) of oil. The Isobel/Elaine wells have a 13-18% chance of success, Casper 52%, Jayne East 13% to 36%.
Contrarian Investor UK
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