Rockhopper Exploration (LON:RKH), the oil and gas group operating in the Falkland Islands, is raising £48.5m by selling 9.9% of its share capital in a placing with investors priced at 280p. The company said the fundraising would be used to progress its current drilling programme in the North Falkland basin, including flow testing of its Sea Lion exploration well and drilling an exploration well on its Ernest prospect.

The value of shares in Rockhopper has soared from 37p to around 290p since the end of May when it became the first of a group of companies operating in the Falklands to strike oil. 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 the Ocean Guardian rig will be used for drilling programmes around the Falklands by a number of oil and gas exploration companies, including Rockhopper, Desire Petroleum and Falklands Oil & Gas. For Rockhopper, this will include flow testing of the Sea Lion exploration well and the spudding and drilling of an exploration well on its Ernest prospect. It will also include the spudding and drilling of up to two exploration wells on prospects operated by Desire in which Rockhopper has a 7.5% interest.

Rockhopper said the placing would provide it with enough cash to complete its current drilling programme. Of the new cash, £21m has been earmarked to flow test the Sea Lion well while £11m will be used to prove to the Falkland Islands government that the company has the financial capacity to carry out work on the Sea Lion and forthcoming Ernest wells. A further £16.5m has been allocated for operational contingency, technical and engineering studies and working capital.

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