Will Falklands Oil and Gas Limited, Rockhopper Exploration Plc & Premier Oil PLC Thrive In The Falklands?

Will Falklands Oil and Gas Limited (LON:FOGL), Rockhopper Exploration Plc (LON:RKH) And Premier Oil PLC (LON:PMO) Thrive In The Falklands?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The latest news coming from the Falklands explorers has been disappointing. As most know by now, Falklands Oil & Gas (LSE: FOGL) drilled a dry well at its Humpback prospect, but the 510 million barrel prospect wasn’t the gamechanger that many had hoped it to be. The company announced the well had encountered hydrocarbons but not in a commercial volume, and rather disappointingly no sample could be taken.

This leaves the Southern Falklands Basin (where much of FOGL’s acreage is) in a tough spot. Humpback promised to be the well that opened up the basin and de-risked other prospects. Instead, the Erik Raude rig leaves the area and moves back up to the much more encouraging North Falklands Basin. To make matters worse for the company, the well was over 80 days late — this obviously increases costs drastically. Day rates from the rig will have been expensive so it’s a bitter pill to swallow for Falklands Oil & Gas.

In my opinion, Rockhopper Exploration (LSE: RKH) looks much better value if you really want to invest in the region. It made the Sea Lion discovery in 2009 and since then has farmed out part of its interest to Premier Oil (LSE: PMO). Currently, the market’s attributing virtually no value to Sea Lion and instead is looking at Rockhopper’s European assets. Premier last week said it’s looking for a partner to take some of its stake — this could be the price catalyst Rockhopper needs. If a major comes in and pays well for a percentage interest, then the company’s shares should re-rate and settle significantly above current levels. 

The 2015 drilling campaign has been a success, with two successful wells in the North Falklands Basin and the one unsuccessful well down south. Discoveries at Zebedee (the Competent Person’s Report should be released soon) and Jayne East have increased the likelihood of a development in the basin. There are two more wells planned in the next few months: the Rhea Stack (Noble Operated) and a re-entry into Jayne. Successful results here would really improve the sentiment for the stocks and provide some upward momentum. 

As for Falklands Oil & Gas, its interests in the North Falkland’s basin must now be the core and focus of the company. It will be very interesting to see what the final well cost for Humpback was, as most people expect it to be close to double the original budget. That then opens up the possibility of an equity raise to pay for wells in the North Basin.

Investing purely in  Falklands explorers is a risky business, so my preferred stocks to buy would be Rockhopper and Premier due to the more diversified portfolios of assets. All eyes now turn to the last two wells of the campaign which , if successful, could give shares a much needed price catalyst. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

7%+ dividend yields! Here are 2 of the best UK shares to consider buying in June

This Fool has been searching for UK shares with the best dividend yields. Here are two he thinks investors should…

Read more »

Investing Articles

5 FTSE 100 shares to consider buying for passive income right now

The FTSE 100 is having its best start to the year for ages, and that's pushing the top dividend yields…

Read more »

Investing Articles

One overlooked cheap share to tap into the year’s hottest theme?

This Fool describes the key things to think about when investing in copper stocks and analyses one cheap share to…

Read more »

Investing Articles

A cheap FTSE 100 stock that’s ready for a dividend hike in 2024

This banking giant is one of the FTSE 100's greatest dividend stocks. And at current prices, our writer Royston Wild…

Read more »

Growth Shares

Is the BP share price set to soar after Michael Burry invests in the firm?

Jon Smith takes note of a recent purchase from the famous investor behind The Big Short and explains his view…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

I’d focus on Kingfisher now after the Q1 report leaves the share price unmoved

With the share price near 262p, is the FTSE 100’s Kingfisher a decent investment now for dividends and business recovery?

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£500 buys me 493 shares in this 7.4% yielding dividend stock!

The renewable energy sector remains out of favour. As a result, there are some high-yielders around, including this dividend stock.

Read more »

Road trip. Father and son travelling together by car
Investing Articles

If I’d put £10k into Tesla stock 2 years ago, here’s what I’d have now

Tesla stock has fallen in the past few years. But the valuation looks temptingly low now, as we approach a…

Read more »