Rockhopper well spud puts its back on my watch list

Yesterday Rockhopper (RKH) announced it had spudded the 14/10-3 well on its PL032 licence in the North Falkland Basin, located 8 kilometres west of the Sea Lion discovery. The well will appraise the northern lobe of the Sea Lion structure and if successful resources could rise well over 600 million barrels from its current 170 million barrels. The well wil take 38 days to drill. The Ocean Guardian rig will then move to the 14/10-4 well to test the southerly extension of the field. Of course this is an exploration play and positive results are far from guaranteed as Desire Petroleum (DES) have learnt to their cost over the last few months in the North Falkland basin.

Fox Davies said "The new well is located to the North of the discovery well and will test the northern lobe of the Sea Lion fan complex which looks, from seismic mapping, to be fed from a different sediments source. We understand the seismic attributes are similar to that at the discovery well location, hence limiting the risk although the 8km distance is a large outstep from that data point and reservoir/seal risk is far from negligible."

The shares lost ground on the spud news (not the first time from what I can recall), dropping 8p at one point and finished down 1p. Given the 5 week wait for any results I'll stay on the sidelines for now and wait for a rough day on the markets before I consider putting in a small punt on this one. The upside case of at least a doubling in the share price on the right news is not to be sniffed at but after all the Desire "evian" fiascos I am cautious about the Falklands basin exploration for now. I believe that Sea Lion had a 1 in 4 chance of success, the new well looks to be lower but still not a "sure thing" like Xcite (90%+ cos) . Will be keeping a close eye over the next 2-3 weeks with a move above £4 pretty likely as target depth is approached based on previous experience of share price movements with the Falklands oilies.