Falklands-focused Rockhopper Exploration (LSE: RKH) buoyed the market this morning by announcing it had been granted a 40% holding in an offshore block in Croatia.
The company will now embark on a three-year seismic acquisition and processing during the first exploration phase of Block 9 with operator Eni, which has been awarded a 60% stake in the venture. Rockhopper is required to sign a production sharing contract with the Croatian Hydrocarbon Authority by April 2 to seal the deal.
The block sits in the highly promising Northern Adriatic gas province, and contains the already-proven Ksenija asset as well as the Klaudija prospect.
Production outlook on the up?
The announcement is further good news for Rockhopper, whose production profile could be in store for a bumper 2015. The oil play purchased previously listed Mediterranean Oil and Gas for £29m last year in order to acquire the company’s promising assets in Italy, France and Malta. And Rockhopper has described the Mediterranean as “one of the most exciting regions in the industry.”
And Rockhopper is also developing the potentially blockbusting Sea Lion asset in the North Falkland Offshore Basin with Premier Oil (LSE: PMO), a project in which it also holds a 40% stake and whose production visibility improved markedly in November. The firms announced plans to develop the field in phases using a leased floating production, storage and offloading (FPSO) unit, yielding first output 160 million barrels of oil by 2019 at a cost of $2bn.
Rockhopper is moving a drilling rig into position to get a four-well exploration programme slated for the first quarter under way, positive results from which could drive its production profile through the roof.
Declining oil price casts a shadow
However, the plan to slash costs at Sea Lion was drawn up in response to nosediving black gold prices, and at a time when the Brent oil benchmark was changing hands at $80 per barrel. But the commodity’s collapse shows no signs of slowing, and prices slumped to fresh multi-year lows below $55 just today, the cheapest since April 2009.
Rockhopper’s strategy of developing low-cost assets across the globe is more important than ever before given these challenging market conditions. But should these pressures persist as expected, Premier Oil could still pull the plug on the updated Falklands programme, while Rockhopper’s projects across the Med could also come under the cosh.
