MercoPress. South Atlantic News Agency

Falklands: Rockhopper Exploration spuds Sea Lion

Ocean Guardian rig

Rockhopper Exploration (AIM: RKH) has spudded its 100% owned Sea Lion 14/10-B exploration well in the Licence PL032 in the North Falkland Basin. Once drilling is complete, Sea Lion’s results will be eagerly anticipated among investors following the prospective Falkland oil and gas play.

Sea Lion 14/10-B is being drilled to an estimated target depth of 2,700 metres, and drilling operations are expected to take approximately 34 days.

Sea Lion is the second well in the North Falkland basin and follows the Liz 14/19-1 well, operated through a JV between Desire Petroleum (AIM: DES) and Rockhopper. The initial results from the maiden exploration well disappointed. Whilst the primary Liz target was encountered with indications of hydrocarbons, subsequent logging operations confirmed that oil may be present in thin intervals but the reservoir quality was poor.

Undoubtedly the outcome of the Sea Lion well will be important to investor sentiment and appetite for the speculative Falklands play. The long-anticipated drilling in the Falklands North Basin has been subject to high levels of speculation over the past 12 months or so, and following the disappointing outcome of the first well, the main players in the Falklands were initially hit hard on London’s AIM market.

After an initial announcement on the 29th March, the JV partners conducted further testing on Liz 14/19-1, and determined two levels of gas in the well. The well was plugged and abandoned as a gas discovery. Desire concluded, on the 6th April, that Liz ‘proved complex and highly encouraging’ and that it provided some promising results, with gas being discovered at two levels, and consequently the prospectivity of the basin has been greatly enhanced.

Desire and Rockhopper held 92.5% and 7.5% respectively in the Liz well, and since the previous result both shares have been fairly subdued. The outcome of the Sea Lion well is likely to have a considerable impact on investor confidence on the overall prospectivity of the North Falklands basin.

In response to the initial result in the North Falkland basin, back in March, Fox-Davies Capital noted that the Liz well results have no impact on the prospectivity of Borders & Southern (AIM: BOR) or Falkland Oil & Gas (AIM: FOGL), as the two companies operate in the South Falkland basin, a region with a very different geological and structural setting.

Source: Proactive Investors UK