Oil & Gas Corporate News

Rockhopper Exploration (LON:RKH) (HOLD, £1.10) (RKH, 93.5p, ? (152.7%)) announced that well 14/10-2 on the Sea Lion prospect has reached a depth of 2,744 metres. Initial data collected indicate that this well is an oil discovery, which would be the first in the North Falkland Basin. The Company has run a suite of wireline logs and logging data collected thus far indicate that the well has encountered a 150m gross interval of sand and shales. The data show that the well has 53m of net pay distributed in multiple pay zones, the thickest of which has a net pay of 25m. These pay zones have an average porosity of 19%. Rockhopper now intends to collect additional logging information prior to making a decision whether to plug and abandon the well, or to suspend the well for future testing. The Company is also considering whether to drill an appraisal well on Sea Lion later during the current drilling campaign. Further information will be distributed in due course. It remains the intention of the Company to drill the Ernest prospect in the fourth slot of the overall Falklands Drilling programme.

Comment: There is oil in the North Falkland basin and Rockhopper found it. The preliminary results are highly encouraging with a net pay greater than that used for P50 pre-drill estimates and porosity of 19%, slightly lower than that used pre-drill. This is an excellent result for the Company with a commensurate reaction of the share price, now back to where we initiated and closer to our target price of 110p. Hence we reiterate our Hold rating, pending further developments.

Gulf Keystone Petroleum (LON:GKP) (BUY, £2.00) (GKP, 82.5p, ? (13.01%)) Middle East Online reported the Iraqi oil minister Hussein al-Shahristani saying that the Baghdad-Kurdistan oil row had ended with the Iraqi government agreeing to be responsible for paying extraction expenses in Kurdistan. All revenues would be handed over to SOMO, the Iraq's State Oil Marketing Organisation which deals with sales of crude and other petroleum-based products, and the Iraqi government will be responsible for paying the extraction expenses in Kurdistan.

Iraqi Kurdistan halted oil exports in October last year due to a payment dispute with Baghdad. The two sides previously clashed over how oil revenues should be distributed and Kurdish authorities had said they would not resume crude…

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