Rockhopper Exploration secures drilling slots ahead of new Falklands well in January

Rockhopper Exploration (LON:RKH) , the oil and gas exploration group active in the Falkland Islands, reported this morning that it had entered into an agreement to take up two optional drilling slots under the original rig contract between Desire Petroleum (LON:DES) and Diamond Offshore Drilling, the owners of the Ocean Guardian drilling rig. Rockhopper said it was also in discussions to take up further well slots on the Ocean Guardian and that a 3D seismic programme was underway on its acreage.

The move follows a spectacular year for Rockhopper , which became the first, and so far only company among a group of explorers operating in the Falklands to announce an oil discovery at its Sea Lion prospect in May. That well was followed by a dry hole on the Ernest prospect and a series of disappointments from its partner in the region, Desire. Nevertheless, the Sea Lion success was enough to re-rate Rockhopper’s shares from around 58p to over 300p, with today’s news pushing them 4% higher to 330p.

Separately today, Desire said that is 100% owned Dawn/Jacinta 25/5-1 well had been spudded over the weekend. The well has targets at two levels. The Jacinta prospect is a Lower Cretaceous stratigraphic sand pinch out trap with a target depth of around 1,000 metres. The deeper Dawn prospect is a 3-way dip, fault bounded closure with a target depth of around 1,350 metres. The total depth of the well is planned to be around 1,670 metres and is expected to take 30 days to complete.

Rockhopper’s decision to secure new drilling slots with the Ocean Guardian comes as the company holds discussions with the Falkland Islands Government regarding the declaration of a Discovery Area which is likely to encompass the southern lobe of the Sea Lion fan where the Sea Lion discovery well, 14/10-2 was drilled.

Rockhopper's next anticipated well, 14/10-3, is expected to spud during January 2011 and will be an exploration well on the northern lobe of the Sea Lion fan system outside of the proposed Discovery Area, approximately 8km from the Sea Lion discovery well. The well will also target deeper sands, including S2, which the company has mapped following the Sea Lion oil discovery earlier this year. S2 has a newly-identified reservoir feeder system and a total area currently mapped of 42 sq km. The well is located downdip to the main part of the S2 fan and should provide valuable reservoir information. The S2 fan is mapped on the existing Rockhopper 3D seismic and sits entirely within 100% held Rockhopper acreage.

The second well, 14/10-4, is currently planned as an appraisal well, within the proposed Sea Lion Discovery Area on the southern lobe of the Sea Lion fan system, the timing of which is subject to the order of drilling slots as yet to be determined. Rockhopper is understood to have identified a number of other potential drilling locations which are a combination of appraisal and exploration wells.

Elsewhere, the vessel MV Polarcus Nadia has commenced operations on a new 3D seismic programme to cover licence PL024 (100% Rockhopper) and adjacent areas, which were not previously defined by 3D seismic, as well as participating with Desire on areas of licences PL003 and PL004, in which Rockhopper has a 7.5% interest. Nadia is expected to complete its survey by the end of April 2011.

Sam Moody, the chief executive of Rockhopper, said: “We are delighted to have secured the use of the Ocean Guardian for a further two wells and are in discussions to secure further drilling slots. We expect to undertake a significant drilling programme during 2011, including a number of appraisal and exploration wells designed to refine our understanding of our northern licences.”