Hopes of an oil bonanza in the Falkland Islands have been rekindled after a positive update from Rockhopper Exploration, one of the companies drilling in the area.
Results from the Falklands - which still causes controversy with Argentina over ownership issues - have been mixed in recent times, with Desire Petroleum abandoning a well earlier this year after failing to find oil.
But Rockhopper said that an appraisal well at the Sea Lion discovery area had revealed a thick, high quality reservoir, a substantial oil column and the first oil-water contact in the licence so far. Chief executive Samuel Moody said:
Following this positive result we believe Sea Lion is highly likely to prove commercially viable. We can now continue to appraise the Sea Lion discovery and to explore additional prospectivity within our acreage with added confidence.Argos Resources Falkland Oil & Gas
After a period of unsuccessful exploration wells in the Falkland Islands today's news could well ignite renewed investor appetite. We have de-risked Sea Lion by a further 10% which adds a little over 50p to our core and risked net asset value which now stands at 671p a share.
Charlie Sharp at Matrix was also positive:
This was a crunch well for Rockhopper; failure would have raised enormous questions about the viability of the Sea Lion discovery. But the result appears to have matched or beaten expectations, raising the likelihood of a commercial development. There are still significant obstacles related to the scale of project, the need for a partner (greater reserves and preferably another field would be helpful), infrastructure and political issues. However, today the story looks back on track.
