Rockhopper Exploration (LON:RKH), the oil and gas group operating in the Falkland Islands, this morning reported that early indications suggest that it has drilled a dry hole on the Ernest prospect in the North Falkland Basin. The news will come as a blow to the company and its shareholders following the surging stock price that was triggered when Rockhopper became the first Falklands driller to make a discovery in the region in May this year. Shares in the company fell by 9.7% to 275p in early trading.
In an update on operations at its 26/6-1 exploration well, Rockhopper said the well had reached a depth of 2240 metres and logging operations had commenced. “Initial logs confirm that no hydrocarbons have been encountered at the well location and that the well is a dry hole”, the company said.
The well was drilled approximately 120km from the Sea Lion discovery in a previously undrilled part of the basin, and was testing a different play type from that encountered at Sea Lion. The well encountered good quality sands with high porosity and permeability. Rockhopper now intends to undertake detailed post-well studies of all data and information gathered from the well once all samples have been returned to the UK and analysed in a specialist laboratory.
Sam Moody, Rockhopper’s managing director, said: “The result of Ernest is disappointing, but the well was always designed to investigate an entirely different geological play type from Sea Lion, to which our focus now turns. Once operations are complete at Ernest, our intention, subject to the usual regulatory consents, is to test the Sea Lion discovery and gain as much information from the well as possible as we continue to plan a potential appraisal campaign.”
The value of shares in Rockhopper has soared from 37p to around 304 since the end of May. Analysis of the company’s Sea Lion discovery so far appears to show that Rockhopper has opened up a new play fairway in the region and that the well penetrated a regional seal between 2,250 metres and 2,374 metres subsea. Every sand in the well beneath that regional seal is charged with oil leading independent consultants RPS Energy to upgrade its best estimate of recoverable contingent resources from 170m barrels to 242m barrels. You can read further analysis and discussion of Rockhopper here.
Over the next few months…
