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Rockhopper boosted by Sea Lion resource audit

"In our view this new audit confirms the potential of the North Falklands to be a billion barrel basin,” said Sam Moody, Rockhopper chief executive.

Offshore oil operations
Calmer oil markets may be needed, but Sea Lion has plenty of size.

Rockhopper Exploration Plc (LON:RKH) today unveiled a new third party assessment of its Falkland acreage which has estimated a total of 747mln barrels of discovered oil equivalent resources in the Sea Lion area.

That equates to 382mln barrels oil equivalent for Rockhopper’s stake in the undeveloped oil field.

The independent resource audit, prepared by ERC Equipoise (ERCE), follows successful drill programme which made new discoveries and concluded in February.

ERCE outlined 1.6bn barrels of oil in place (834mln barrels net to RKH).

It also identified some 207mln additional barrels of what are described as ‘low risk’ exploration upside, and noted additional upside in the West Flank of the Sea Lion area which Rockhopper estimates could host another 60mln barrels (if it is oil bearing).

The Isobel Elaine discovery area, meanwhile, was estimated by ERCE to host some 277mln barrels of oil in place, and the consultant outlined 20mln barrels of discovered resources.

Rockhopper’s in-house estimates currently see some 31mln barrels of resources in the Emily, Isobel and Isobel Deep J fans.

The ERCE Audit confirms in excess of half a billion barrels of 2C oil resources in reservoirs that together make up the Sea Lion Complex, and those resources are intended to be developed in two phases.

Phase 1 will focus on the resources in the north-east of the Sea Lion area.

"In our view this new audit confirms the potential of the North Falklands to be a billion barrel basin,” said Sam Moody, Rockhopper chief executive.

“The Sea Lion Complex itself holds over half a billion barrels with almost 270 million barrels of low risk near field upside (including the SL20 west flank in oil-bearing case) which we believe could be assessed with as few as 3 or 4 more optimally targeted wells.”

Sea Lion moving into Phase 1 development is expected to rely upon Premier Oil (LON:PMO), the operator, and its plans to bring in an additional partner to share costs.

Premier in its recent trading update highlighted that an 18-month front end engineering design (FEED) phase began in January. The operator added, however, that a final investment decision for Sea Lion remains dependent upon the “evolution of project economics” and the oil price outlook.

Broker Mirabaud Securities, in a note, said: “Sadly for RKH the commercialisation of this resource hinges on the outcome of Premier’s farm-out process.

“For this to succeed we feel a recovery in oil prices and farm-out markets is needed more than resources.”

Nevertheless, with crude prices pushing towards US$50 per barrel at the start of this week sentiments may well start rising.

Quick facts: Rockhopper Exploration PLC

Price: 6.405 GBX

AIM:RKH
Market: AIM
Market Cap: £29.37 m
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