Broker snap: Cash aplenty at Rockhopper

1st Jul 2011 12:46

Falklands oil explorer Rockhopper Exploration has brought out its profit and loss figures but Matrix says the numbers are largely irrelevant, with the cash balance the most vital thing on which to focus."We think our estimate for cash at end June of $230m looks about right (there was $271m as of 31 May). By our estimate, even at full tilt, that should last until sometime in Q1 [first quarter] 2012, more than enough to complete the currently anticipated remaining four-well programme (there are three commitment wells, and we expect the company to exercise one further option)," Matrix analyst Charlie Sharp said.Matrix rates the shares a "buy" and has a target price of 400p, well above the current level of around 265p."We expect the next appraisal on Sea Lion, well 14/10-6, to spud in the next week or so. That will be a critical well to pin down the likely scale of the potential development, as it sits in the so far uncharted 'mid-case' area. We would expect the well to take 30-35 days to drill," the broker said.Merchant Securities also downplayed Rockhopper's results but added that "owners of the company can use the preliminary results to take stock of behind the scenes activities that, while not as exciting as well results, set the stage for a development project in comparison to the current exploration and appraisal stage of the Sea Lion project."In particular, the company is advancing screening concepts for the offshore development of its Sea Lion project, the broker noted. "Additionally a full time development manager was brought into the company. Also, Rockhopper has already initiated discussions with banks to assess the financing of the offshore development project," Merchant Securities analyst Brendan Long said."As no final go-ahead decision has been made on the project, owners can take comfort that preliminary preparations are underway to move it into a development project," Long said.--jh