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
18.07p
Change
2.0%
Mkt Cap (£m)
81.1
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
2.51p
Change
-8.9%
Mkt Cap (£m)
6.1
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 3rd Feb '11 16 of 55
1

Presentation on the new S2 fan, to be drilled in a downdip location during this ongoing exploration well.

http://www.rockhopperexploration.co.uk/pdf/s2_presentation.pdf

.

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Proselenes 8th Feb '11 17 of 55

Interesting.

The Sun - Market Talk

http://www.thesun.co.uk/sol/homepage/news/money/3397803/Homes-firm-Bellway-says-market-is-on-rise.html


........FALKLANDS oil explorer ROCKHOPPER was on the move yesterday amid talk of a second discovery in the South Atlantic. Shares climbed 12.87p to 386.87...............

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Proselenes 11th Feb '11 18 of 55
1

Complex, but encouraging - there is a surprise. S2 updip interesting.

Off to appraise the Sea Lion discovery now then, jolly good.

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Proselenes 11th Feb '11 19 of 55
2

The big news is of course it appears we have found the same pressure gradient of the main sea lion, same here as the discovery area.

So the oil/water contact is in the P10 to P20 area.

I would settle with Sea Lion being the P30, or around 500MMBO of oil recoverable :) !!

I am buying more RKH now ! :)

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djpreston 11th Feb '11 20 of 55

First analyst comment Ive seen from Mirabaud.

Cutting to Neutral from Accumulate with a cut in target to 300p.

Fund Management: European Wealth
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Biggles 11th Feb '11 21 of 55
1

The "Explorer of the Year" seems to have stubbed their toe!
The pressure gradient interpetation is debate-able, to say the least; and they won't have any reserves until they have conducted an EPS which involves the shareholders reaching into their pockets, I guess?

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Proselenes 11th Feb '11 22 of 55
1

Biggles, they have £200m cash in the bank. This well is nothing to do with the Sea Lion discovery of 100% owned 170MMBO recoverable already announced last year.

:)

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Proselenes 11th Feb '11 23 of 55
1

Main points.


http://www.investegate.co.uk/Article.aspx?id=201102111431141130B




.........The Company believes that Sands 1, 2 and 3 are likely to be related to part of the main Sea Lion feature, while Sand 4 could be related to the S2 feature.


Oil and gas shows were detected throughout the reservoir intervals. [b]Four conventional cores were cut through the reservoir totalling 101 metres and both the bleeding of live oil and oil staining were observed throughout. [/b]However, MDT samples on Sands 1, 2 and 4 returned water.


A number of live oil samples were recovered from Sand 3 using a standard MDT tool, samples were approximately 20% live oil and are indicated to be medium gravity.


The Company then performed a mini Drill Stem Test ("DST") on Sand 3 by using a dual packer MDT tool downhole. During the test, water was produced into the well. Further technical work is required to understand why the mini DST produced water while the standard MDT recovered 20% live oil from the same sand interval.


[b]MDT pressure readings taken over Sand 3 indicate that it appears to be lying on the same oil pressure gradient as the main Sea Lion fan in well 14/10-2, indicating the potential for good lateral communication.[/b] Further wells and technical work will be required to determine if this is the case.


Log interpretation has proven to be complex and the Company believes that further work is required to fully understand what has been encountered in the well and its implications.


[b]The Company believes that the lowest sand (Sand 4) could form the downdip, distal part of the S2 feature[/b] and will now undertake further analysis to determine the likelihood of oil being present updip in the S2 lobe. [b]Despite the high levels of water saturation in Sand 4, oil staining was observed in the core.[/b]


Further technical work will also now be undertaken to determine the likelihood of oil being present elsewhere in the northern Sea Lion lobe and the likely contribution, if any, of this well to any commercial oil development on the Sea Lion feature.


[b]As the regional overlying seal appears to be intact and effective at the well location, reservoir quality is good, oil shows and moveable live oil are present[/b], the main technical risk associated with the northern Sea Lion lobe remains the effectiveness of the seal at the location of the feeder channel and the risk of effective charge from the south if there is discontinuity within the reservoir.


Following completion of all logging operations the Company currently intends to plug and abandon the well in line with the originally intended drilling programme.


The Ocean Guardian drilling unit will then drill appraisal well 14/10-4, which is located 2.3 km north west of the 14-10-2 Sea Lion discovery well. A further announcement will be issued on the spudding of 14/10-4.


Sam Moody, Chief Executive of Rockhopper, commented:


"This well, which was the first to be drilled in this area, 8 km to the north west of the Sea Lion discovery, was encouraging. The results of the well are complex and will take some time for us to interpret fully. The quality sands encountered confirm our understanding of the depositional system within the basin. We are particularly pleased to have encountered a thick sequence of reservoir as we prognosed and obtained a number of samples of live oil. [b]The results are indicative of significant upside potential elsewhere across the Sea Lion and S2 features.[/b]


This well is the first of a number we plan to drill during 2011, [b]focusing largely on delineating the extent and size of the Sea Lion discovery, as well as testing additional exploration upside."[/b]

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Biggles 11th Feb '11 24 of 55
5

So Proselenes, are you a petroleum engineer, a petrophysicist or a geoscientist?

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Biggles 11th Feb '11 25 of 55
1

................because all you seem to do is cut and paste what the company says?

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Proselenes 12th Feb '11 26 of 55
3

Unchanged buy rating and unchanged 500p target price from FD - quite a decent summary of what on many points was good news for such a bold exploration well.

http://www.fox-davies.com/media/325569/fdcrockhopperfeb112011.pdf

.

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Proselenes 12th Feb '11 27 of 55
3

Good couple of posts on III - now if they do more work and find the most likely reason for the water influx on the second test is indeed water coming from S2 sand due to the packer and not water from the S3 - this could be the opposite of DES, in that water saturation figure will be reduced for S3 and S3 will be declared a 7.3M net pay oil discovery and confirm it is an extension of Sea Lion Main S1 fan from the discovery well.

:) Interesting times ahead while these cores are studied and the results studied more.



So close!! marlonmonkey 13 

Credit to M74 for spotting the obvious it's just taken me 9 hours to see it. Who knows the cut off points that allow it to be called an Oil discovery?

Vshale 40%
Porosity 10%

And Sw 60%

OUCH OUCH!! Figure 8 in the CPR for those who don't believe me.

Sw in sand has an Sw of 63%, it is the difference between our OIL DISCOVERY RNS and the one we just got. That's close and probably fixable, bet it's what they spent the last couple of days trying to work out.

Imagine OIL DISCOVERY 7.5m net pay pressure gradients show likely addition to original discovery.....for 3% Sw. DARN!

Good spot M74


--------------------------


Re: So close!! Stu255 13

Marlon,

Thats what the DST was for but it somehow went against them. I have two theories on why it produced water from a sand that sampled 20% live oil.

FWIW, there is every chance the MDT Sw figures will change +/- 5% once the samples are in Llandudno.

This well has proven everything I wanted it to. Sea Lion can and does reach this far North, someone needs to map the areal topography for the sand 3 depth.

S2 looks to be an oil bearing reservoir.

This well has now dictated the 2011 schedule, and there is plenty to go at including an S2 exploration well and likely an S2 appraisal. There are 3 or 4 more Sea Lion appraisals after 14/10-4, a well for ARG and a spare well or two.

Also I dont like siting a well to try and test two overlapping targets. It just results in compromise and total reliance on sensors.

I think there is a good chance the DST top packer was set in the second sand and they had crossflow from sand 2 to sand 3, hence the pure water production.

Unlucky to have such a thin clay (4m) in which to set the packer. Although this is just a thought.

Plenty of wells the world over produce oil at >95% Sw. As Marina says this was a gnats chuff within a discovery. But thats just an indication of how near the Sea Lion Discovery Zone actually extends to this well.

Migration is like an ink blot. They stepped out 8km... If they werent trying to target two prospects they might have only stepped out 7.5km and this would have been the P1 fantasy so many were looking for.

OG is getting an ever better tool box... cores... DST... the next well will be cored and unloaded. Hopefully there will be two DST's on 14/10-4 main fan and lower.

Then wax lyrical about the pending well test with ESP.

Cannot believe the sp is sub Ernest.

The well has proven every intended goal, but fallen short of the publishable results criteria by 3 drops of water. A figure which will change in the lab.

Wanted 5m got 7.3m.

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BobGe 13th Feb '11 28 of 55
1

Rockhopper - A big 2011 coming

Looking at the chart, I guess it must have happened then...

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Proselenes 14th Feb '11 29 of 55

http://www.offshore-mag.com/index/article-display/2367306901/articles/offshore/drilling-completion/latin-america/20110/February/sea-lion_delivers.html


Sea Lion delivers further oil off Falklands


Published: Feb 14, 2011

Offshore staff

PORT STANLEY, Falkland Islands -- Rockhopper Exploration has proven further oil close to last year’s Sea Lion discovery in the offshore North Falkland basin.


The 14/10-3 well was drilled.......

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Proselenes 16th Feb '11 30 of 55

RKH

Goldman Sachs Update :

Conviction buy, target price cut to 640p from 729p

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Proselenes 21st Feb '11 31 of 55

Nice to see they will test for deeper sands.

Now we now deeper and older fans have oil in them, thanks for cores on the last well from S2 fan system, and also they are viable, there could be some serious upside from lower down.


http://www.investegate.co.uk/Article.aspx?id=201102210700095385B

Rockhopper Exp plc
14/10-4 Appraisal Well Spud
RNS Number : 5385B
Rockhopper Exploration plc
21 February 2011


14/10-4 Appraisal Well Spud


Rockhopper Exploration plc (AIM: RKH), the North Falkland Basin oil and gas exploration company, announces that the 14/10-4 appraisal well was spudded ................

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Proselenes 15th Mar '11 32 of 55
1

New rig contract and fast track of 3D south Sea Lion.

http://www.investegate.co.uk/Article.aspx?id=201103141110088809C

.


Results of the next well due very soon, this is an appraisal well (the last was exploration and did indeed find yet more net pay as below link

http://www.offshore-mag.com/index/article-display.articles.offshore.drilling-completion.latin-america.20110.February.sea-lion_delivers.QP129867.dcmp=rss.page=1.html )


But its this appraisal well that is most important short term, a bad result and all those posting caution will be proven right.

A good result and all those posting caution and stories of how the Falklands will never deliver oil, will have to fall on their sword and admit to being very wrong and not having a clue.

Interesting times ahead in the next 10 days.

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Proselenes 18th Mar '11 33 of 55
2


a/ Poor news would be very little net pay and a high up OWC.

b/ Good news would be circa 35 metres of net pay and a low down Oil Water Contact (OWC) point.

c/ Superb news would be 35 metres or more of net pay and a low down OWC.

d/ Fantastic news would be 35 metres or more of net pay and no OWC found.

e/ Dream land would be 35 metres or more of net pay, no OWC and also a new lower down fan containing oil.

Therefore -


1/ I am expecting Sea Lion Main fan to be good with similar net pay to 14-10/2

2/ I am expecting no oil water contact point to be found. (Yippee)

3/ I am expecting Sea Lion lower to be thin at this point, due to extreme edge location, so a little net pay if any but not a lot, not the same as 14-10/2)

4/I am expecting something "new" to be found under Sea Lion lower.


So my expectation is something in Dream Land, but then I have rose tinted specs on :) and I am not going to be disappointed even with just good news :) !!


The present share price reflects "Bad News" and so, if anything good comes in then it will rerate upwards rather sharpish.

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Proselenes 21st Mar '11 34 of 55

Excellent result today !!

Well anyone not accumulating is a nutter IMO.

14-10/3 confirmed that S2 had oil stains downdip and also Sea Lion had net pay of 7M there, albeit with high water saturation.

14-10/4 has confirmed Sea Lion has filled full to spill point.


All points to the unmapped south being full, Sea Lion Main being full, Sea Lion lower being full, some of Sea Lion North being filled - BUT

S2 updip probably full as well as Fox and Stephens..... and who knows, perhaps Jason as well as Chatham.


Absolutely fabulous - IMO buy real stock with real money and hold them for a year or two, I do not think anyone is going to go wrong with that strategy.

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Proselenes 22nd Mar '11 35 of 55

Goldman Sachs update:

RKH reiterated "conviction buy", target price raised to 684 from 640

We regard the result as very positive news. The company has stated that contingent P90 volumes will go up “significantly” and that as a result, confidence in commerciality will also rise significantly. We concur with this assessment, estimating that 100 mn bls is sufficient to make the development comfortably commercial at US$100/bl assuming an FPSO development – a threshold that we believe should be close to the revised P90 volumes following this result. To reflect this increased confidence in the commerciality of Sea Lion, we increase our assumed chances of success on the field from 60% to 70%; as a result, our 12-month target price rises to 684p (from 640p). We believe the stock is trading at almost a 30% discount to the risked value of Sea Lion (assuming a P50 volume of 205 mn bls) and cash net of appraisal costs alone, and believe there is compelling additional potential from: (1) a potential extension of Sea Lion to the south from new seismic coverage; (2) a further de-risking of Sea Lion; and (3) additional exploration drilling in Rockhopper’s substantial acreage around the Sea Lion discovery.

Valuation

Our SOTP-based 12-month price target is calculated using US$100/bl oil. We assume a 12% discount rate, higher than the 10% we normally use for OECD countries to reflect the higher political risk we assume in the Falklands.

Key risks

Failure in the future appraisal is the key risk, although we believe that today’s result has removed some of this downside risk.

--------------------------------------------------------------------------------

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