Rockhopper soars on success in the Falkland Islands

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Tests on Rockhopper Exploration's oil find in the Falkland Islands have come in at the "upper end of expectations", the company said yesterday, sending its shares up by nearly a third.

The third appraisal well at the Sea Lion prospect in the North Falkland Basin – which was drilled four kilometres away from the original strike – "confirms significant reservoir development" in the area and indicates that the oil extends farther to the west, Rockhopper said.

The company first struck oil at Sea Lion in May last year, reigniting decades of speculation about the potential for major hydrocarbons in the Falklands.

Following two earlier successful tests, the latest appraisal well was "highly successful", the company said yesterday, "proving a thick, high-quality reservoir package and a substantial oil column".

Sam Moody, Rockhopper Exploration's chief executive, said: "The results of this well are at the upper end of expectations for the Sea Lion main fan complex and we're delighted to see these oil-charged sands extending to the west as prognosed."

The Falkland Islands have long excited interest in the exploration industry. And the US Geological Survey has estimated the seas around the islands could hold as much as four billion barrels of oil. But so far, Rockhopper is the only company to strike a reservoir that could prove commercially viable.

A first round of drilling in 1998 found nothing at all. And Rockhopper's rival Desire Petroleum lost more than a quarter of its share value in January after the group was forced to plug a second dry well. An earlier success for Desire, at Rachel North in December, turned to nothing as initial tests revealed within weeks that the "mobile fluid" was not oil but water.

Even with yesterday's strong rally in its share price, Rockhopper Exploration's stock is still some way off its 2011 peak of 387p, in early February. The shares were up by 48 per cent at 209p when the market closed last night.