From ii16 Jan 2012 08:58
All eyes are on Rockhopper Exploration (RKH) as markets open on Monday following press rumours that the company is in talks withi oil and gas giants Cairn Energy (CNE) and BP (BP.).
Cairn is considering a move into the Falklands area which could involve a partnership with or the acquisition of Rockhopper, according to an article in The Sunday Times newspaper, which did not cite sources.
The newspaper said Rockhopper has appointed Bank of America Merrill Lynch to find it a partner to take on some of the development costs
The funds are certainly there as Cairn is sitting on a $1.4 billion cash pile since selling its 40% stake in Cairn India to Vedanta Resources (VED).
That move, announced on 10 January saw a return of $3.5 billion (£2.26 billion) to Cairn shareholders via a B share scheme, with a view to providing UK tax resident shareholders with flexibility to elect to receive cash in the form of income or capital, or a combination of both.
The positive news was an oasis in an otherwise disappointing year which saw a series of dry wells for the company in the Greenland, prompting Cairn shareholders to call for exploration in other regions.
Interest in the Falklands has heightened since Rockhopper's successful development of its Sea Lion complex there.
Patient investors in the AIM-listed company have gradually reaped rewards and last month the stock jumped after the company discovered hydrocarbons across four reservoirs at its latest exploration well, 14/15-4. All four targets were revealed to be hydrocarbon bearing and no water-wet sands were observed in the well, Rockhopper said.
The December news prompted Rockhopper's shares to hit a five-week high, while fellow Falklands explorer Desire Petroleum (DES), which has a 40% interest in the well, gained nearly 12%.
Rockhopper chief executive Sam Moody said the result would further increase the company's minimum estimates of oil in place for Sea Lion and Casper, in addition to proving two new discoveries in Beverley and Casper South, Rockhopper's third oil discovery in the Basin.
Keith Morris, analyst at Evolution Securities, said at the time the success should drive the firm's net asset value higher.
"In addition, the upper reserves case in the Sea Lion Main Complex should start to convince investors (and perhaps more importantly industry farm-in partners) that they have a large economic field development," he said, raising his target price for the stock from 450p to 540p.
But in the meantime, Rockhopper is thought to have several suitors including BP (BP.), North Sea-focused Premier Oil (PMO) and also Noble Energy and Amerada Hess in the US.
One negative aspect for any newcomers to the Falklands is the threat by the Argentine government to boycott oil explorers doing business there.
It remains to be seen whether Cairn will be one of them.
Sign In
Follow the stocks
