Farm-in could be catalyst for Rockhopper

But rather than hunting for oil, Rockhopper is now searching for an industry partner to help develop its major Sea Lion discovery in the North Falkland Basin. Given the remoteness of the field and the technically challenging conditions there, Rockhopper needs a partner with proven operating abilities - and deep pockets. With full field development costs expected to run to around $2bn (£1.35bn) until first oil, analyst consensus suggests Rockhopper will farm out 60 per cent of its interest and acreage in return for a full carry on Sea Lion, as well as some level of payback for the $462m the company has spent on exploration to date.

To this end, the company opened up a data room earlier this year to enable companies to take a closer look at the promising asset, where recoverable resources were recently estimated at 356 million barrels of oil. Although political tensions with Argentina have no doubt led some companies to stay away, management says several others of various nationalities and sizes are participating, with the process expected to take between three and six months.

Nevertheless, with Rockhopper’s appraisal drilling programme completed successfully last year, there are precious few share price catalysts left other than the farm-out process. Rockhopper is unlikely to carry out further exploration until the start of development drilling in 2015-2016. The company could stand to benefit, though, from shared facilities costs or increased industry interest in the basin should a significant discovery elsewhere in the Falklands be made by one of the four other UK juniors currently exploring there.