Rockhopper Exploration The Way To Play The Falklands Now

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Trading developments have caused a giant forward spike in (LSE:FOGL) Falkand Oil & Gas. Nearing the 40p range pre spud. Frankly a red flag has come out at the Chris Oil HQ. While (LSE:RKH)  Rockhopper Exploration is now way undervalued given its strong balance sheet and net asset value on discovered Sea Lion 458m P50 recoverable light oil said to be commercial at $20 a barrel stated by Rockhopper Chief Financial  officer Steward MacDonald recently at  Oil Barrel conference excluding the FSPO lease costs.

Its clear (LSE:FOGL) Falkland Oil & Gas has moved faster than even i thought before spud let alone more than a week before spud, now trading around £200m market cap parity with (LSE:RKH) Rockhopper Exploration which is madness, 68p cash plus exploration carry using dollar conversion. This action makes Falkland Oil & Gas overvalued until a discovery is found at Zebedee.

The other Point i personally am concerned about is a splash and dash fund raising when the rig turns up for (LSE:FOGL) Falkland Oil & Gas. If investors read the operational RNS  dated 2nd Feb the company  quotes “Based on operator cost estimate. FOGL is funded four agreed wells. FOGL funding commitment for fifth well will be dependant on location, FOGL equity interest in the well and an apprasial or exploration. A further update will be provided once location is finalised” This is a coded word for an issue at some stage or a high chance of one when the rig turns up in the Falklands pre spud.  The other option letting go of more percentage in the prospects to Noble Energy and that will effect my 75p target on discovery down to 60p.

Another point concerns me now regarding Borders & Southern Petroleum and some vague money drain in some form of partnership with FOGL due to rig sharing in the S.Basin. However that is a personal concern. The money concern is real and now see  Feb RNS operation update yourself. Not enough money for fifth well.

Now before my followers wave there hands, Zebedee Sea Lion extension 52% cos  would mean 60p now to FOGL and £1.25 to (LSE:RKH) Rockhopper Exploration. Therefore there seems at this point more upside to Rockhopper Exploration. The technicals pre spud also point to 40p max for FOGL and 90p for RKH greater upside.

Furthermore Rockhopper is fully funded with exploration carry and cash  68p with Sea Lion valued nearly at NIL development carry $674m at NIL plus unused $750m Premier Oil Loan valued at NIL. Never mind odd Italian assets. Remember Sea Lion does not need another farm in partner now due to new phased development (see more details on Rockhopper Exploration  ADVFN in depth article)

Most brokers are stating Rockhoppers value at £2.00 at the present time taking into account the 60% fall in oil prices. I would say at $78 a barrel net asset value is £3.25 which is the normal priced environment.

The company has two low risk 50% cos drills Zebedee and Chatham SL20 which means your money is far safer in the N.Basin  before  wildcating on 20%cos S.Basin assets after Zebedee regarding FOGL. More to the point If you recall Chatham hit the corner with live oil on 1998 regarding Shell. FOGL has no share in this prospect.

So the time has come to choose and i choose Rockhopper Exploration which is safer and due to the compounding  effect buying from Falkland Oil makes a better investment. No wonder Deutsche Bank has recently added 2%.

More information on (LSE:RKH) Rockhopper Exploration can be heard on a special March 5th ADVFN Justin Waite Show or Doc Holiday Falkland Specials by tuning into my blog including indepth articles on both companies mentioned.

If you are interested in Adfvn they have excellent data and level 2 worth registering below to gain more knowledge about the Falklnads but hurry or you will miss out again.

Until the next time more ramblings from the castle can be seen @chrisoil






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