Rockhopper statement fuels dividend speculation

Rockhopper Exploration on Wednesday announced it was seeking to cancel its share premium account to create distributable reserves.

Falklands-based Rockhopper will post a circular before the end of April to seek authority from shareholders and the approval of the UK High Court, who will need to be satisfied that the interests of the company's creditors and contingent creditors will not be prejudiced as a result of the cancellation.

On successful completion of the cancellation of the share premium account, the distributable reserves created would be available for the funding of dividends. This would facilitate any buyback of the company's own shares or for any other general corporate purposes the directors considered appropriate.

Any decision will be made once Rockhopper has completed an "evaluation of its medium-term funding requirements".

Concept selection for the Sea Lion development, which is anticipated to be in July of this year, will be a key part of this evaluation, with expected greater clarity on the expected cost and schedule of the project.

In October 2012 Rockhopper completed a farm-out agreement with Premier Oil, whereby Premier acquired 60% of Rockhopper's interests in its North Falkland Basin licences, with a view to achieving first oil production from Sea Lion in 2017.

For more on Premier, read:Edmond Jackson's Stockwatch: Premier Oil.

Analyst view

Analysts at broker FoxDavies reitered their 'buy' recommendation on the stock with a 350p price target, describing the news as the "next phase of growth".

"[The news] bodes well for the fiscal outlook for the company," they said, "but we can't help but think that this might be too early, given the fact that Sea Lion's development is yet to kick off.

"We believe that some of these funds could be used develop a second geographical area, which would provide a diversification to the existing asset base, and provide further opportunity for growth," they concluded.

Investor view

Views were diverging on Interactive Investor's discussion boards. User 'Jim Windaker' said: "[It] looks like there is going to be a share buy back. I support this. I don't support any one off dividend paid to shareholders at this stage in the proceedings."

'BoLtBlUe' disagreed: "Surely this money would be better spent on exploration - possibly even outside of the Falklands." He added: "[It] seems to me that Rockhopper are shutting up shop, sitting there waiting to be bought."

'Rogk' agreed: "Vote no to [a] share buy back."