Shares in oil group Desire Petroleum (LON:DES) jumped this morning on news that Rockhopper (LON:RKH), its partner in the Falkland Islands, had agreed a farm-in deal that will see it drill a new well on Desire’s acreage in the coming months. The move is a major boost for Desire, which has had no success from a series of wells in the North Falkland Basin since a drilling campaign began there in early 2010. With no cash for drilling and only the results of a new 3D seismic survey for comfort, the deal with Rockhopper offers Desire a chance to breathe new life into its credibility and market price – and perhaps share some of Rockhopper’s luck.. Shares in the company closed yesterday at 17.25p but gained around 17% to 20.3p this morning. The deal comes a year, almost to the day, that Desire’s shares peaked at 168p before a string of disappointments saw investor sentiment evaporate.

Under the terms of the farm-in, Rockhopper is buying in to a small fraction of Desire’s PL004 licence, also known as Tranche D, where it believes the existing Sea Lion field extends. By increasing its stake in Area 1 of that licence from 7.5% to 60%, Rockhopper will give Desire a free carry on a well that will be drilled after next Sea Lion appraisal well. In a move to increase its exploration exposure, Rockhopper has also built its stake in Area 2 from 7.5% to 25%. The overall position increases Rockhopper’s exposure to the Beverley and Jayne prospects.

To fund the deal, and help it pay for the current appraisal drilling around Sea Lion, Rockhopper is set to place around 25.8 million shares, which could net it around £50 million. In recent weeks Rockhopper has begun to talk about its plans for developing the Sea Lion field. At an estimated cost of $2 billion, the company is keen to bolster its oil-in-place figures. The current high case estimate stands at 1.428 billion barrels but the company believes the new acreage could increase that number by 10-15%.

Stephen Phipps, the chairman of Desire, said: “We are very pleased that this agreement to farm-out part of Tranche D to Rockhopper will enable another well to be drilled on our acreage in this current drilling campaign, at no further…

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