Rockhopper Exploration (LON:RKH) appears intent on de-risking Sea Lion as quickly as possible, according to analysts at Westhouse Securities.
Importantly the Westhouse analysts reckon this new rig slot could give Rockhopper a chance to drill an exploration well to follow up the recently completed 3D seismic programme.
The broker repeated a ‘buy’ recommendation, which targets 494p, this morning after the Falklands oil explorer announced that it is adding another well to the current drill programme.
Rockhopper will shortly spud its third appraisal well on the Sea Lion oil discovery, after that it has three more contracted wells which will be drilled in succession.
The second appraisal well was drilled in May and tested in June. This well, tagged 14/10-5, demonstrated commercial flow rates from the Sea Lion discovery. However the result didn’t really budge the needle as far as Rockhopper’s shares were concerned.
The next well however could make a much bigger impact, because it will appraise the Sea Lion discovery outside the ‘low-case area’ for the first time.
“The appraisal of the Sea Lion field has got off to a very good start with successful results on both wells 14/10-4 and 14/10-5, which was flow tested at commercially viable rates,” chairman Pierre Jungels said in last week’s full year results statement.
“The next well, 14/10-6, will be drilled to the west of the discovery and, if successful, will add to our view of the low case scenario of the field, of 155 million barrels recoverable.”
In last Friday's full-year results statement chief executive Sam Moody summed up the progress Rockhopper made in a period he described as 'unparalleled' in the company's history.
He listed the group’s key achievements: the group drilled five operated wells; the first Falklands oil discovery, completion of two well tests, major 3D seismic acquisition programme, it recruited a number of experienced key senior personnel, raising almost US$400 million in equity.
For Rockhopper the pivotal moment was finding oil in the first Sea Lion well, which is first and only bona fide oil discovery in the Falklands to date. Rockhopper has focussed on the appraisal of the discovery since then.
It has until April 2013 to submit a field development plan to the Falklands government. In the meantime it is trying to asses just how big the discovery is and figure out what production methods will be required.