Shares in Rockhopper Exploration (LON:RKH) fell by 16% to 385p this morning on news that the Falkland Islands oil and gas explorer was facing the prospect of having to carry out a great deal more test work on its Sea Lion discovery in the North Falkland basin. The company said it was also considering its funding options, which may include an equity issue, in order to bolster its cash position and pay for the exploration plans.

Rockhopper had intended to publish a competent persons report covering Sea Lion by the end of this year. However, it has now emerged that the P50 oil in place and 2C contingent resource numbers might reduce by a factor in the region of 30% if a great deal more work is not carried out. The company says it now wants to shoot more 3D seismic data over the basin, reprocess existing data and carry out a raft of technical studies in order to fully understand what the Sea Lion discovery well has actually encountered. As a result, publication of the competent persons report has now been shifted to the second half of 2011. Rockhopper also said it had agreed the outline terms with the Ocean Guardian rig operator, Diamond Offshore Drilling, for a new contract including a possible three firm wells and five options extension. Two vessels for the 3D seismic data shoot have also been agreed.

Shares in Rockopper have soared since it made its oil discovery in May this year – from 37p to 460p at the close yesterday. The company raised £50m in October 2009, shortly after its partner in the Falklands, Desire Petroleum (LON:DES) , agreed the rig contract for a drilling campaign starting earlier this year. That was followed by a £48.5m fundraising in June to pay for flow testing work at Sea Lion together with drilling an unsuccessful well on the Ernest prospect. Rockhopper indicated that the possible new fundraising would be used to fund the extra exploration activity and prove up the potential of the basin. It also insisted that it was “very confident” about the commerciality of the Sea Lion discovery and the prospectivity of the North Falkland basin. For further discussion about Rockhopper and oil exploration in the Falklands, click here.

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