Broker snap: Westhouse still has Desire for Rockhopper

27th Oct 2010 10:39

Westhouse Securities has reminded investors that oil explorers tend to have more failures than successes, and believes that despite some disappointing results from drilling in the Falklands recently, local operators Desire Petroleum and Rockhopper Exploration are still worth a punt.The two companies have signed a contract for marine seismic acquisition services with Polarcus Limited, for the use of the seismic vessel MV Polarcus Nadia. "Under the terms of the contract, the companies will acquire 3D seismic on areas of licences PL003 and PL004 (Desire, 92.5%; Rockhopper, 7.5%), as well as areas within Tranche F and Tranche I (Desire, 100%) and PL024 (Rockhopper, 100%). The Nadia is expected to commence the joint survey in December 2010, with completion by end April 2011," Westhouse states.In making its "buy" case for both companies, Westhouse concedes that while the share prices of explorers are, naturally, event driven and that recent events in the Falklands have disappointed, "from a longer-term perspective, the picture is not nearly as gloomy, given additional funded drilling planned by Desire and appraisal activity planned by Rockhopper.""That said," the broker goes on to say, "there may be further bad news in the near term for Desire, with a sidetrack at Rachel currently drilling ahead, and due to finish in the coming days. With an unsuccessful sidetrack, we would expect a modest fall in the shares, given that most of the bad news from Rachel is priced in already."Westhouse has reduced its price target for Desire to 109p to reflect the initial disappointment with Rachel and also trimmed its Rockhopper target price to 492p.