Rockhopper - A big 2011 coming (RKH)

Monday, Jan 03 2011 by
6

As RKH is my choice for the 2011 competition over at TMF I have done a very long write up, the link to it is here.

http://boards.fool.co.uk/nfsc-2011-rockhopper-write-up-rkh-12137962.aspx

In the meantime a shortened version will be put here for a new dedicated RKH thread to post on.

Rockhopper Exploration
Web Site:  http://www.rockhopperexploration.co.uk/
Epic: RKH
ISIN: GB00B0FVQX23
Shares in Issue: 258,039,606
Market Cap: £948.2m
Closing price on 31st Dec 2010 : 367.5 pence (£3.675)
Cash in the bank: circa £250,000,000 (thats a quarter of a billion pounds)
Cash value per share: 97p per share is cash.
RNS announcements:  http://www.investegate.co.uk/Index.aspx?searchtype=3&words=rkh

Company Description :

Rockhopper was established in February 2004 with a strategy to invest in and carry out an offshore oil exploration programme to the north of the Falkland Islands. The Company floated on AIM in August 2005 and holds a 100 per cent. interest in four offshore production licences: PL023, PL024, PL032 and PL033 which cover approximately 3,800 sq. km. Rockhopper has also farmed in (7.5% working interest) to licences PL003 and PL004, which are operated by Desire Petroleum. These licences have been granted by the Falkland Islands government.


An extensive work programme has been carried out over a number of years on the licences operated by Rockhopper. This has included 2D and 3D Seismic and Controlled Source Electromagnetic Mapping (CSEM). In February 2010, the Ocean Guardian drilling rig arrived in Falkland waters to carry out a multi-well drilling campaign. Rockhopper drilled an exploration well on its Sea Lion prospect during April and May 2010, the result of which was the first oil discovery and Contingent Oil Resource in the North Falkland Basin. The Sea Lion discovery was successfully tested during September 2010 and was the first oil to flow to surface in Falkland Islands waters. Rockhopper has contracted seismic vessels MV Polarcus Asima and Nadia to carry out a 3D seismic survey, beginning December 2010, over areas of licences PL024, PL032 and PL033 which were not previously defined by 3D, as well as adjacent areas.
PL 023 and PL 024 are in the Southern North Falklands Basin (South NFB) – 100% owned
PL 032 and PL 033 are in the North of the North Falklands Basin (North NFB) – 100% owned.

And so ...... ?
Rockhopper raised £206m in the last placing, to add to the £44m it…

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Rockhopper Exploration plc is an oil and gas exploration and production company. The Company is engaged in the exploration and exploitation of its oil and gas acreage. The Company operates through three segments, which include the oil and gas exploration activities in the geographical regions of the Falkland Islands, and the Greater Mediterranean region, as well as its corporate activities centered in the United Kingdom. The Company holds interests in North Falkland Basin and the Greater Mediterranean region. The Company's areas of operations include Falkland Islands, which is located in the South Atlantic Ocean, over 8,000 miles from the United Kingdom and approximately 300 miles from South America. Its licenses in Falkland Islands include Sea Lion phase 1 (PL032), Sea Lion phase 2 (PL032/PL004) and Phase 3-Isobel-Elaine (PL004). The Company's interests in Mediterranean region include Guendalina, Ombrina Mare and Monte Grosso in Italy; Area 3 in Malta, and Block 9 in Croatia. more »

LSE Price
20.7p
Change
-1.0%
Mkt Cap (£m)
95.7
P/E (fwd)
n/a
Yield (fwd)
n/a


Argos Resources Ltd is a United Kingdom-based oil and gas exploration company. The Company is engaged in oil and gas exploration around the Falkland Islands. The Company's principal asset was its 100% interest in License PL001, which covered approximately 1,126 square kilometers in the North Falkland Basin. The Company has a farm-out agreement with Noble Energy Falklands Limited and Edison International S.p.A in respect of its interest in License PL001. The Company holds a royalty interest of 5% of gross revenues from all hydrocarbon discoveries developed within the License PL001. more »

LSE Price
2.95p
Change
 
Mkt Cap (£m)
6.5
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:RKH fundamentally strong or weak? Find out More »


55 Posts on this Thread show/hide all

Proselenes 31st Mar '11 36 of 55
1

MasterShanus's interpretation of the 14-10/4 results, will be interesting how accurate it is when more data is released.

http://mastershanusinterps.zxq.net/14104_4interp.htm

.

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Proselenes 4th Apr '11 37 of 55

Update today on the last well and also Sea Lion. Very good, new P90 is considerably higher.

The next well will have a major impact as 14-10/4 did not target Sea Lion lower, but the next well will and will also flow test Sea Lion Upper and Lower and move more of the mid case into the low case.

Given that much of South (unmapped as yet but ongoing fast track in place) is going to be above the OWC and full to spill I can see the P90 being around 450MMBO by Q3 for Sea Lion, IMO.

http://www.rockhopperexploration.co.uk/pdf/14-10_4_further-tech-FINAL.pdf

Rockhopper Exploration plc
(the “Company”)

14/10-4 Appraisal well – further technical update

Rockhopper Exploration plc (AIM: RKH), the North Falkland Basin oil and gas exploration company, is pleased to provide the following technical update on its Sea Lion Discovery after further interpretation of the results of well 14/10-4:

• Porosity in 14/10-4 in the range 15%-27%, average 20%

• Net to gross within the pay zone of 88%

• Dual packer modular formation dynamic tester (MDT) results indicated well had the potential to flow at 2,700 bbls per day, compared to c.2,000 bbls per day seen in 14/10-2

• Management interprets new low case area of 22km2 with stock tank oil initially in place (STOIIP) of 516 mmbbls giving 155 mmbbls recoverable at 30% recovery factor

• New seismic depth conversion confirms upper fan full to spill, oil water contact within the upper fan package at 2,477m true vertical depth subsea (TVDSS)

• Analysis of MDT results and logging indicates 14/10-2 and 14/10-4 are in communication.

New presentation too, link below :

http://www.rockhopperexploration.co.uk/pdf/apr_2011_update.pdf

.

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Proselenes 4th Apr '11 38 of 55
1

The next well, 14-10/5 should be westerly and intersect Sea Lion Main and Sea Lion lower.

All going well there, with good flow tests of Main and Lower fans and the "low case" size should pass the magical 200MMBO at which point only a fool would try to say that this is not commercial.

Late April (pending Ninky success) and late May/June will be exciting times.

All we need early June is the "14-10/5 is in communication with 14-10/4 and 14-10/2" and off we go laughing.

Once the low case is past 200MMBO then you should see more and more funds flood into RKH as the risk is basically eliminated.

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Biggles 13th Apr '11 39 of 55
1

I'm surprised there hasn't been lots of excited chatter about Rockhopper but maybe everybody has realised that they don't yet have a decent flow rate - "had the potential to flow at 2,700 bbls per day" isn't the same as having a commercial flow rate - needs to be nearer 10,000 bopd IMHO.

Until then, all the numbers are really just playing with Oil-in-Place.

 

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Biggles 18th Apr '11 40 of 55
1

With the failure of Desire's latest well, there's a real possibility that Sea Lion will be the only discovery in the North Falkland Basin. As a waxy crude, it is technically challenged but even if it were proven 'commercial' - which IMHO is not impossible but unlikely - it is would be extraordinarily unusual if a new province in a remote area were to be be opened up by a single, modest discovery.

Add to that that Goldman Sachs (aka "the vampire squid on the face of humanity" according to one journalist) likes it (see 22nd March on this thread) and we have all the makings of something that could be stranded for a while!

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Proselenes 6th May '11 41 of 55
2

GS gone bullish on oil again, probably why lots of buying now of RKH, as its a conviction buy for GS and so with oil back in favour clients will be made aware of the RKH potential.

http://www.reuters.com/article/2011/05/06/goldman-oil-idUSLDE74513V20110506

Goldman sees new oil rally after predicting drop

Fri May 6, 2011 8:21am EDT

* Says crash sparked by poor macroeconomic, inventories data

* Goldman says oil may surpass recent highs by 2012

* Barcap, Hermes say correction offers good chance to buy

By Dmitry Zhdannikov

LONDON, May 6 (Reuters) - Goldman Sachs, which in April predicted this week's major correction in oil prices, said on Friday that oil could surpass its recent highs by................

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Proselenes 7th May '11 42 of 55

Bit on the Falklands in DO's latest newsletter :

http://www.diamondoffshore.com/downloads/rigamarole_Spring_2011.pdf

.

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Proselenes 31st May '11 43 of 55
1

So Sea Lion goes into DES acreage down south, must mean a massive increase in the size of Sea Lion. I would go for over 600 million recoverable barrels now, perhaps more.



DES RNS :

RNS Number : 5061H

Desire Petroleum PLC

31 May 2011

For immediate release 31 May 2011

Desire Petroleum

('Desire' or 'The Company')

Exploration Update

Desire Petroleum plc (AIM:DES) the company wholly focussed on the North Falkland Basin wishes to provide the following update on its exploration activities.

The Company's 3D seismic acquisition programme is now complete and the full-fold area of coverage is approximately 1416 square kilometres in Tranches C, D, F and adjacent open areas. Combined with Desire's existing 3D data, these new data provide almost full coverage of the East Flank Play Fairway on Desire's acreage and extended coverage of the Liz area, Ann, Pam and Helen prospects. A planned extension of the survey to the south was curtailed due to poor weather conditions.

The fully processed data for the northern part of Tranche D and the Ann prospect area are being fast-tracked and are expected to be available in July. A fully merged data set covering all prospective areas is expected to be available towards the end of 2011.

However the preliminary raw stack data have been received for the area at the northern end of Tranches C and D and the initial indications for new prospects are encouraging. In particular, two new leads, Beverley and Shona, have been identified so far. The Shona lead is at the same stratigraphic level as the Rockhopper Sea Lion discovery and extends northwards to the block boundary of Tranche D, while the Beverley lead is at a shallower stratigraphic level and is mapped wholly within Tranche D...................
.......................

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Proselenes 31st May '11 44 of 55

GOLDMAN SACHS have today reiterated that RKH is a ¨conviction buy¨ and upped their price target from 684p to 732p.

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Proselenes 3rd Jun '11 45 of 55
2

Lets look at what is not being said, which may explain share price strength (they have had 3 successful drills so far and the share price has risen strongly after two of them, the other one the share price fell but this is simply due to an overhang that was ongoing at the time).


First up, Main Fan Net Pay.

In the last CPR it was based on Maximum thickness would be 65M of net pay in the Main Fan. Well, here we are with 79M of net pay. Well in excess of the Max figure used in the CPR. P50 average figure for the main fan was 34.5M in the CPR. P10 average thickness of the main fan was 51.3M of net pay. This suggests the Main Fan is going to be rather bigger than was previously thought. This pushes up estimates IMO to the realms of 250MMBO recoverable from the Main Fan)


Second up, Lower Fan Net Pay.

It was expected that no lower fan net pay would be present at this location, but we have over 14M of lower fan net pay here. This suggests the lower fan may be in the realms of its P10 size (or circa 150MMBO recoverable on its own from the Lower Fan).


Now its Main Fan Flow Test - expectation is circa 4000bopd or more - figures well in excess of that will certainly light things up and we could see the use of "commercial" by even the most bearish of anti-Falklands brokers as they gulp down their humble pie.


IMV, all being well, at the end of the flow test Sea Lion can be firmed up with 250MMBO recoverable and then the next well appraises both Main and Lower, Lower being the optimal target. All being well there this will allow, after a lower flow test at the next well, for the addition of perhaps another 100MMBO recoverable of the lower fans possible 150 on to the 250MMBO recoverable of the Main Fan, leading to a large jump in recoverable barrels figures.


So three key events ahead.


Flow test results of Main Fan in 3 to 4 weeks.

Release of fast tracked 3D seismic results and updates on Sea Lion and new leads in 6 to 8 weeks.

Next drill results in 8 to 10 weeks along with, all being well, Lower Fan flow test.


If, and its always a big if, those three go well there is certainly no reason to not expect the share price back to the circa 450p or more levels, even in the summer lulls of the market.


I remain solidly invested in RKH as I have been since 38p and look forward to more success, if nothing else there is going to be lots of news with ARG/RKH (and DES but the less said the better with them) all due to release 3D seismic results in later July and RKH with another 3 wells to drill back to back.

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flyinghorse 3rd Jun '11 46 of 55
1

In reply to post #57049

Proselenes,
Any further thoughts on Argos. The symbyotic (by geographic association)relationship between Argos & RKH appears to not exist now& has potentially made Argos shares cheap. They used to move with Rockhopper but have lost this relationship likely due to market sentiment & needing real news(ie drill bit).

I hold Argos and it looks like it wil be a long term waiting game till they can get a drill string moving.

FH

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AbAngus 3rd Jun '11 47 of 55
1

In reply to post #57060


Perhaps what is holding back Argos shares is a need to raise capital for drilling? IIRC, I think they originally wanted to come to AIM with a float at 60p but had to make do with issuing fewer shares at 30p - hoping to make up ground as RKH and DES drilled. Presumably there will be some equity dilution quite soon, but once that is out of the way things may look better. (Just my guess.)

AA

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Proselenes 4th Jun '11 48 of 55

Yes, it seems that the worry in the markets is highlighting the need for cash at ARG and making people sell it. Positive markets makes people forget, poor market sentiment highlights all the negative factors.

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Proselenes 4th Jun '11 49 of 55
1

Goldman Sachs recent Oil Sector Note which highlights just how much upside on RKH with regards to target price, one of the very best !!

http://www.mediafire.com/?2kdabr40ck5qkl6

.

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Proselenes 7th Jun '11 50 of 55
1

http://www.ft.com/cms/s/0/5ed0da58-911b-11e0-9668-00144feab49a.html#ixzz1OcKQhC1J


.............................. for rival Falklands explorer Rockhopper Exploration, which rose 2.9 per cent to 276¾p following a positive meeting at Canaccord Genuity on Tuesday afternoon.

“The Falkland stocks have taken a beating in recent months, partially because of the endless stream of dry holes that Desire Petroleum drilled, and partially because of the largely negative sentiment against the E&P sector. The way I see it, Rockhopper now has a very clear road map to commercialising the Sea Lion discovery, and I can easily see scope for a doubling in the share price before year-end,” said Canaccord................

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Proselenes 8th Jun '11 51 of 55
1

From FT Alphaville, a snippet :

http://ftalphaville.ft.com/blog/2011/06/08/588292/markets-live/


NH talking of the Falklands
NH the sector watcher saw yesterday
NH and boy was he impressed

BE Go on.

NH .....................We had a very upbeat sales-desk lunch yesterday with Sam Moody (CEO) and Peter Dixon-Clarke (FD) of RKH, convincing me even more that this is a core holding in any E&P portfolio. Recent appraisal well results on the Sea Lion oilfield in the North Falklands basin have been extremely encouraging, with the group now assuming a P90 reserves case of 155m barrels recoverable. As recently as last week the group announced that the 14/10-5 well, admittedly a very low-risk 600 metre stepout, had encountered 79m of net pay in the main upper fan and 14m of pay in the lower.

The upper result was around 10% better than the group had prognosed, i.e. a very encouraging result. This well is now being prepared for a testing programme, with results expected by the end of the month. The group is using Electrical Submersible Pumps (ESP) to aid the flow rate, and I’d bet that Sam’s target of 4,000 b/d will easily be met as a result. Anything less than this would be disappointing. Following the 14/10-5 well, around mid-July the group will drill a 4 km stepout to the west called 14/10-6 which will address the “mid-case” reserves, although the company would not be drawn on what this means – my guess would be back up towards the 242m barrels they originally carried for the field. Thereafter the group plans to drill two wells to the south, both targeting the “low-case” reserves – the location of these should be helped by the fast-tracking of a 3D seismic survey just completed

Following these wells, which should take until Q4, it is likely the group will undertake a second CPR for release in Q1 next year. The group is well-financed for at least the next 12 months with $300m of cash. Our current NAV of 593p/share is based on P50 reserves of 170m barrels. Clearly this could end up on the light side if any of the 14/10-6 or the two wells to the south are successful. At 242m barrels our NAV is c800p/share vs a current price of 277p/share. The Falkland stocks have taken a beating in recent months, partially because of the endless stream of dry holes that Desire Petroleum drilled, and partially because of the largely negative sentiment against the E&P sector. The way I see it, RKH now has a very clear roadmap to commercialisng the Sea Lion discovery, and I can easily see scope for a doubling in the share price before year-end......................

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Proselenes 8th Jun '11 52 of 55

The fact there is no present commitment past the 2 southern appraisal wells
(but they have lots of cash) suggests to me that RKH are saving the cash and will attempt to farm into DES new leads Shona and Beverly should the new 3D, once fast tracked by DES and RKH, appear to suggest they are good prospects.

A farm in where RKH takes a big slice of ownership of say the Shona prospect in return for paying a big slice of costs of the drill/s is a real win win win win win win for RKH and DES.

For DES they have to raise perhaps no money in the short term and can pay a small amount of the drill costs whilst relinquishing a big slice of ownership of Shona to RKH.

Any strike would mean DES would then be raising on the back of an oil find and at much higher prices.

RKH meanwhile get to explore without paying full costs, and any strike will not only bring a second FI discovery, but will also bring a second company into payment of development - hence cutting the funds required for RKH to get hold of in the development plan.

So a RKH farm in to the Shona lead might be a win-win for DES and RKH.


It is also possible that if ARG struggle to raise a big lump of cash for their drilling that they too could farm out their Lead 1 and Lead to RKH, again allowing ARG to raise less money with less dilution - whilst allowing RKH to get some low cost exploration done and bring more players to the party.


Late July and August will be very interesting, with ARG and DES and RKH all getting their fast tracked 3D back then - lots of decisions to be made.

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Biggles 5th Jul '11 53 of 55
2

I see there is a penguin lost, washed up 3000 miles from home, eating sand instead of snow, completely dis-orientated:
http://www.bbc.co.uk/news/world-asia-pacific-13904447
That'd be a Rockhopper then?

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the penguin 12th Jul '11 54 of 55
2

yes,lost confused limited in knowledge. 'A penguin who does,nt know his cod liver oil from his north sea but a penguin who likes to read some of the great posts on this board!

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Biggles 30th Jul '11 55 of 55

Don't worry, they'll give you a "Penguin of the Year" award!

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