Rockhopper, the first explorer to find oil on the Falkland Islands, is priming a £40m cash call that could be launched this week.
The Aim-quoted oil company, one of three small UK wildcat explorers drilling for Falklands oil, has been working with broker Canaccord Adams to sound out institutional investors to take part in an accelerated book build, people familiar with the situation said.
The cash raised from the placing will pay for part of the well and flow testing of its Sea Lion discovery, which the company said last week could contain as much as 1.6bn barrels of oil, of which up to 669m barrels could be recoverable.
Rockhopper, which will raise less than 10 per cent of its market value to avoid triggering pre-emption rights, is believed to be planning a larger equity raising for the end of the year when it plans to move to the main list of the London Stock Exchange and enter the FTSE 250 index.
Rockhopper shares have surged more than 750 per cent since it announced the discovery in the Falklands, making it a darling of retail investors and one of the top-10 most valuable companies on Aim, with a market capitalisation of £508m.
The company also said last week that an independent report had concluded that a “best case” of 242m barrels of oil could be recoverable from the discovery, an increase of 42 per cent from previous estimates. The highest amount was 669m barrels and the lowest 57m barrels.
The early oil samples indicated that oil contained in the Sea Lion discovery was medium-weight crude, adding to the likelihood the discovery will be commercially viable.
Rockhopper’s current drilling campaign, which included sailing the Ocean Guardian floating drilling rig from Scotland to the Falklands, is fully funded after the company raised £50m in a share placing last November.
The controversial drilling campaign being conducted by Rockhopper, along with Desire Petroleum and Falkland Oil & Gas, has been attacked by the Argentinian government as a violation of its sovereignty.
Rockhopper is also preparing to drill the next well in its campaign, known as Ernest, but must wait until the conclusion of Falkland Oil and Gas’s Toroa well before regaining access to the Ocean Guardian rig.
Rockhopper declined to comment. Its shares fell 28¾p to 290¼p on Monday.