Why Rockhopper Jumped 9%

Rockhopper Exploration (LSE: RKH.L  ) jumped 9% to 300 pence this morning after announcing a farm-out agreement with Premier Oil (LSE: PMO.L  ) .

Rockhopper, which was established in 2004 to explore for oil around the Falkland Islands, is to sell 60% of its production licenses to Premier for an initial $231 million. Premier will also fund Rockhopper's portion of development costs up to $722 million. Premier's shares advanced 3% to 370 pence on the details.

Today's news follows Rockhopper's successful drilling campaign, which lasted between April 2010 and January 2012 and witnessed three oil discoveries and three gas discoveries. In particular, the operator's Sea Lion field was the first to produce oil in Falkland Island waters and has been classified as containing 355 million barrels of oil.

Sam Moody, chief executive of Rockhopper, said: "This is an excellent transaction for the company and its shareholders. It helps crystallise the value of our discoveries in the North Falkland Basin area centred on the Sea Lion field, as well as providing the funds to examine further the remaining potential of our acreage in the region."

This morning's update from Rockhopper underlines how oil explorers can become wonderful investments for ambitious investors; the shares traded as low as 11 pence during 2008 and have since multiplied in value 26 times.

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Maynard Paton owns no shares of the companies mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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