Rockhopper plugs sidetrack well, shares drop

Oil explorer Rockhopper Exploration says it has completed drilling a sidetrack well at its 14/10-9z site in the North Falkland's basin.

The well was drilled to a total depth of 2,600 metres, with a total 60 metres of core cut through the Casper and Sea Lion prospects.

Brendan Long, an investment analyst at Merchant Securities, suggested that the latest news should not have any material impact on the price, "but operationally this is very important as more core samples will allow for a more successfully engineered development plan of the Sea Lion reservoir."

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"Extensive coring will also increase the chances of a successful monetisation of the company's assets," Long suggested.

The market appeared to disagree with Long's judgement on the price sensitivity of the announcement, as Rockhopper fell 10.75p to 254.5p in early trading. The decline may be because Rockhopper said the well will now be plugged and abandoned - always an emotive phrase when it comes to generating price movements of oil explorers - but in this case Rockhopper said abandoning the sidetrack well was always part of the plan.

Operations will now move on to the next exploratory site.

Rockhopper was the first company to discover oil in the North Falkland Basin back in 2010. It then successfully tested the so-called "Sea Lion Prospect" between September 2010 and June 2011.

The successful testing period saw considerable excitement about the amount of oil that may be available in the waters surrounding the Falkland Islands. In late September last year Rockhopper's share price rose around 50% to 500p. Since then it has dropped significantly, but Merchant Securities is keeping the faith, rating it a "buy" with a price target of 428p.

Resources sector specialist Westhouse Securities is also a buyer. "Rockhopper's progress in the North Falkland basin continues as expected. No change in our BUY recommendation or 658p target price," the broker concluded.

BS