Rockhopper pleases investors with year-end update

Shares of Rockhopper Exploration climbed steadily by 7.5% on Friday to 99.93p as the North Falkland Basin oil and gas exploration company said its core Sea Lion project is progressing well with a number of key development milestones anticipated in 2014.

In its year end announcement, the company said that pre-development activities on Sea Lion are continuing as scheduled with award of FEED contracts anticipated during May. The Wiltshire-based company has also made some board changes.

Phase 1 of the Sea Lion Development is expected to recover 293 million barrels of oil, which was originally found in May 2010, with anticipated gross peak production rate increased to over 100,000 barrels per day.

The development of a four-well exploration drilling campaign in 2015 is said to be going to plan and negotiations with rig providers are advanced. Investors took heart from the company's assurance that as it nears signing a rig contract it will be able to firm up its exploration drilling programme, taking shareholders a step closer to almost 800 million barrels of oil. These are proven resources and Rockhopper has a sound reputation for its expertise and geological know-how in the north basin.

Investors have long feared that Rockhopper would be bought out at a premium to its current price but one which still does not reflect its long-term prospects.

In July 2012, the explorer entered into a conditional farm-out agreement with Premier Oil whereby Premier acquired 60% of Rockhopper's interests in its North Falkland Basin licences in exchange for an upfront cash payment of $231 million (138.68 million), a contribution of $722 million to Rockhopper's share of the Sea Lion development costs and a net exploration carry of $48 million.

On the Interactive Investor discussion boards, investors speculated that the decline in rig rates, which are said to be dropping, for all types of rig, could be the reason for the delay in confirming the rig being contracted.