MercoPress. South Atlantic News Agency

Falklands’ Rockhopper raises £48.5 million to fund more offshore drilling operations

A second exploratory well is to be drilled at prospect Ernest in the North Falkland basin

Rockhopper Exploration announced on Tuesday it had raised £48.5m from the stock market to fund its drilling operations off the Falklands Islands. Last week Rockhopper revealed that its first well in the North Falkland Basin, called Sea Lion, had found much more oil than expected.

It plans to use the funds to develop Sea Lion, and dig a second exploration well at a site named “Ernest”.

Rockhopper raised the money through a share placing, selling 17.3m new shares at 280p each. This is just 10p below Monday’s closing price. The City welcomed the fundraising plan, pushing Rockhopper's shares up to 293p.

The funds will be used to develop Sea Lion in the North Falkland Basin, and dig a second exploration well at a site named “Ernest”.

The company’s shares soared on Friday after it reported that Sea Lion had discovered 242 million barrels of recoverable reserves, more than the original estimate of 170 million barrels, and at a higher quality too.

The placing shares represent 9.9% of the ordinary shares currently in issue. The placing price represents a discount of 3.5% to Monday’s closing middle market price for an ordinary share.

The placing will provide Rockhopper with the necessary funds for completing its current drilling program in the North Falkland Basin. In particular, the company intends to use the proceeds of the placing for the following purposes: Flow testing the Sea Lion exploration well £21m; Demonstrating financial capacity to the Falkland Islands
Government in relation to suspending the Sea Lion exploration well £3m; Demonstrating financial capacity to the Falkland Islands Government in relation to spudding an exploration well on the Ernest prospect £8m; Operational contingency, technical and engineering studies and working capital £16.5m, totalling £48.5 million.

On 16 April 2010 the Sea Lion well was spudded by the Ocean Guardian rig and on 6 May 2010 Rockhopper announced that the initial data collected indicated the first oil discovery in the North Falkland Basin.

Further logging and data collection occurred through to mid-May and the well was then successfully suspended on 19 May 2010 for future flow testing.

Over the next few months the Ocean Guardian rig will be used for drilling programs around the Falklands by a number of oil and gas exploration companies, including Rockhopper. For Rockhopper, this will include flow testing of the Sea Lion exploration well and the spudding and drilling of an exploration well on its Ernest prospect.

It will also include the spudding and drilling of up to two exploration wells on prospects operated by Desire in which Rockhopper has a 7.5% interest.

On 4 June 2010 Rockhopper announced the results of the fluid sample testing for the Sea Lion exploration well and reported a resource update, completed by RPS Energy Limited, on its Sea Lion prospect.

The samples analysed in a dedicated laboratory were confirmed to contain medium gravity crude oil – ranging from 26.46° to 29.17° API. Further testing is underway in a dedicated laboratory to determine a number of additional fluid characteristics.