STANLEY, Falkland Islands, May 6 (UPI) -- After disappointing results earlier in the year that caused dismay and panic among investors, the Falklands' first oil discovery was reported Thursday by the company prospecting in the British-ruled archipelago's northern basin.
Rockhopper Exploration said exploration of well 14/10-2 on the Sea Lion prospect in the North Falkland Basin had produced promising results after it reached a depth of 9,055 feet.
"Initial data collected indicate that this well is an oil discovery, which would be the first in the North Falkland Basin," Rockhopper Exploration said in a news release.
The company said it had run a suite of wireline logs and logging data indicate that the well has encountered a 500 feet gross interval of sand and shales.
Citing the technical data for the find, the company said the well has 175 feet of net pay distributed in multiple pay zones, the thickest of which has a net pay of 83 feet. These pay zones have an average porosity of 19 percent.
"Net pay" is a key parameter in reservoir evaluation, because it identifies those penetrated geological sections that have sufficient reservoir quality and interstitial hydrocarbon volume to produce oil in significant quantities, analysts said.
Rockhopper Exploration has headquarters in the United Kingdom and is listed on the London Stock Exchange Alternative Investment Market.
AIM is the LSE's international market for smaller growing companies and attracts a wide range of early stage businesses, as well as more established companies seeking access to growth capital.
Rockhopper became involved in the North Falkland Basin in the 1990s when Shell drilled two wells on its licenses in 1998. One recovered oil, the other encountered significant quantities of gas.
Low oil prices discouraged further prospecting before renewed interest in the area in 2009 saw Rockhopper and other companies pooling resources to hire the Scottish rig, Ocean Guardian -- an event that triggered a series of verbal clashes between Britain and Argentina.
The countries fought a 74-day war over the Falklands with the loss of 907 lives in 1982 -- before overt publicity over the oil deposits -- after a military-led Argentine expedition tried to capture the archipelago.
The Argentines retreated in defeat but refused to abandon their sovereignty claim, which was revived by Buenos Aires last year.
A previous report on oil prospecting in Falklands by Desire Petroleum sent shares in that company plummeting in March but also quietened the rhetoric between Argentina and Great Britain.
Rockhoppper's upbeat announcement cited its preparatory work that has included three seismic surveys.
Rockhopper raised $90 million by equity placement in 2009 and plans to drill five wells using the Ocean Guardian.
Samuel Moody, managing director, said, "We are extremely excited by the results" of the first well.
"We will now focus on analyzing in more detail the data gathered from the well, in addition to continuing preparations for the drilling of our Ernest prospect later in the year," he said, citing other areas as part of the license.
Falklands Director of Mineral Resources Phyl Rendell told MercoPress, "We are really very, very encouraged by the news. It is early days but good news for the Falkland Islands and we hope it will result in continued activity in the area and increased confidence."
Member of the Falkland Islands Legislative Assembly Emma Edwards said,"The news is likely to boost confidence in the industry in the islands."
Falklands companies and individuals have a direct stake in the exploration results, as many have invested into the companies drilling for oil and gas.
