We are in a phase of the drilling and proofing-up process where market expectations can increase, and a greater percentage of blue-sky valuations are added. The drilling process is continuing in the Sea Lion field, and the company is now looking into expansion of the North Falklands Basin. The cost for exploration of the Basin field will be shared with Rockhopper’s partner in this venture, Noble Energy.
While Rockhopper is still in this exploration and resource-proofing stage of its development, it is not yet able to generate enough revenue to cover its costs. The burn rate of funds is therefore particularly important, and in the first half of this year it has spent $3.4 million. Year-on-year this is down from $6.4 million.
We have seen a relatively muted reaction to the share price today. This is partly because, after the preliminary earnings conference call in August, the shares put on 30p, or some 25%. Today’s statement has gone some way to clearing up the uncertainty that was hanging over the company about tax liabilities due to the Falkland Island government.