May 13

Rockhopper Finds Oil According to a recent article on Rockhopper Exploration PLC from Interactive Investor, the AIM-listed small oil and gas exploration company licenced to survey and drill in the North Falkland Basin has reported on not only its first oil discovery, but also potentially good quality of the reservoir, and is now waiting for lab results to further confirm that the oil is indeed moveable without any free water. So far, investors have responded to the two reports quite positively, pushing shares up almost three folds, from around 70p before the news to 195p at the close of 11 May. It looks like that the field is to be commercial, said Evolution Securities in a note, as long as the flow rate is in line with the rock properties.

By any means, investors’ jubilant reactions are justified, not to mention that their patience is finally being paid off. Investing in AIM-listed shares of small, start-up companies requires a lot of entrepreneurial spirit and taking on a new business adventure about the old oil commodity calls for a keen judgment in the mid of all the renewable-energy talks that are flowing around. Sometimes, narrower investor participation in smaller-scale business undertakings that are nonetheless well-planned and focused, like the one being conducted by Rockhopper, set up in 2004 to explore for oil and gas in the Falkland Islands, could potentially yield much greater investment rewards than the mass lingering at big oil establishments.

However, trading AIM-listed shares often entails greater precautions, as shares, if thinly traded, may be subject to price manipulation. Unless you’re an active trader, most likely trading through CFDs (Contract For Difference) using leverage, it’s a good idea to buy and hold your AIM-listed shares and keep an eye on the shares’ underlying business and do your research. Drilling by Rockhopper soon following the tests could potentially gush out oil in the thousands or even millions of barrels in a region allegedly holding up to 60 billion barrels. Its shares would then be worth much more than what it is now, which reflects only the good testing news so far.

No risk consideration is too much of a contemplation, especially for the oil industry. Oil production around the globe has been known for its political risk association because of many unstable corners of the world that happen to be rich in oil reserves. For Rockhopper, if Argentine government’s political stance on the Islands translates into any adverse business effects in the future, the company’s newly found fortune is surely to be affected and so are those of investors.

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