MercoPress. South Atlantic News Agency

Rig costs and availability delay Falklands' oil drilling

Rockhopper Exploration plc decided to maintain its farm exposure to Desire Petroleum operated licences at its current level of 7,5%, in spite of a 15% option, because the cost and availability of suitable drilling units have deteriorated significantly and the drilling timetable is likely to be delayed as a result.

In an official release Friday, Rockhopper Exploration said that the "prospectivity of the Desire acreage has not changed", but Directors feel that given the primary purpose of the farm-in was exposure to early drilling, the interest of the shareholders is best served by remaining at 7.5% and applying financial resources to maturing a number of high quality prospects for drilling within the Company's own extensive 100% exploration acreage in the North Falkland Basin".

Rockhopper Exploration is targeting "these 100% prospects to be ready for drilling during 2007, when the availability and cost of drilling units are expected to be more favourable". The recently announced 2D programme which Geophysical Service Incorporated (GSI) will shoot early in 2006 is the first step in this process. A significant 3D programme has also been designed and an invitation to tender document issued.

Desire Petroleum admitted that continuing lack of a suitable drilling rig is very frustrating, but "detailed work has continued on preparation for drilling as soon as a suitable rig becomes available".

A detailed review of the drilling programme has been undertaken in order to adapt it to the current, high-cost environment affecting the whole of the oil-exploration sector and Desire expects that the revised programme will enable it to drill three wells using existing resources despite this increased cost base.

The Rockhopper Group started trading in February 2004 to invest in and carry out an offshore oil exploration programme to the north of the Falkland Islands. The Group, which floated on AIM in August 2005, is currently the largest licence holder in the North Falkland Basin and owns a 100% interest in four offshore production licences which cover approximately 5,800 sq. km.

On 14th February 2005, Rockhopper Exploration announced it had agreed terms with Desire Petroleum for a farm in to a 7.5% interest in Falklands' Licences PL003 and PL004 in anticipation of gaining exposure to early exploration drilling in the Falklands. The farm-in agreement allowed Rockhopper to elect to increase the percentage to 15% by 31 October 2005.

Therefore Desire will continue to retain a 92,5% interest in Licences PL003 and PL004, comprising Tranches C and D, in the North Falkland Basin.