Rockhopper Exploration, the Falkland Islands focused oil and gas company, has risen this morning on rumours of a possible takeover by Cairn Energy.
The Sunday Times reported yesterday that cash rich Cairn, which made billions by developing fields in India, is interested in taking over Rockhopper's key asset, the Sea Lion field, 80 miles north of the Falklands.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The problems for investors in Rockhopper are two fold.
Firstly, there needs to be huge investment in the Falkland Islands to build the infrastructure necessary to support a major oil industry, the estimated cost is £2bn.
The second problem is a slight issue with the neighbours.
Argentina still claims sovereignty over the Falklands and is supported by Brazil. Both of those countries will refuse any logistical support to production.
Argentina has also said it will prevent any companies engaged in the Falklands from working in its recently discovered shale fields.
The one problem a purchaser of Rockhopper does not face, however, is a lack of oil.
Current estimates are that the company is sitting on 500 million barrels of black gold, which would fetch around $55bn at today's prices.
Shares in Rockhopper have gained 10% this morning.
Over the last 12 months the stock has dropped 19%, although since the Sea Lion discovery in 2010 the shares have gained nearly 650%.
Its current market cap is £858m.
BS
-
5 alternatives to Reeves’ inheritance tax raid on rural Britain as families face ‘splitting up or selling’ farmsInheritance tax limits are now so low they attack small working family farms rather than just going after tax loopholes, one Cotswolds farmer has said
-
High earners at risk of £65k retirement shockHigh earners could face some of the biggest pension shortfalls when they retire, as the cost of maintaining an expensive lifestyle could erode their retirement savings
