Company Analysis UK

30 July 2012

Rockhopper Exploration
RKH: 177p
KEY CHANGES
TP
6.0%

Buy Target: 553p

EPS FY0
0.0%

Charlie Sharp CSharp@canaccordgenuity.com Thomas Martin tmartin@canaccordgenuity.com

+44 20 7523 4651 +44 20 7523 8382

Oil & Gas - Oil & Gas Producers - Exploration & Production
EPS FY1
0.0%

COMPANY STATISTICS
Shares Out (m): Market Cap: EV (m): 284 502m 438

Premier farm in the real value story

Investment case
We think that Premier Oils farm-in to 60% of Rockhoppers Falkland Islands licences represents a very appealing deal for Rockhopper, delivering a highly competent and motivated development operator, a significantly strengthened balance sheet with no short-term cash calls, and an enhanced exploration outlook as Premier effectively carries three further exploration wells. Rockhopper is now a very strong value play, with the financial resources to deliver the Sea Lion development, and still significant upside potential through further carried appraisal and exploration.

SHARE PRICE PERFORMANCE

Sector context
The E&P sector is trading at an average 58% of our fair value. Yet, Rockhopper is trading at only 31% and with a very strong balance sheet and a highly credible development partner in Premier Oil (once the companys farm-out of its Falkland Islands licences completes). We believe that the discount compared with its peers is unjustified. Indeed, in our view, post the Premier transaction, Rockhopper should trade above the average rating in the sector.

Rockhopper Exploration Rel to FTSE AIM All-Share

Source: Thomson Datastream

Company fundamentals
Rockhopper Exploration is farming out a 60% operated interest in its Falkland Islands licences to Premier Oil. The deal will leave Rockhopper with estimated cash of $331m (excluding CGT) and a 40% working interest in the licences (net 2C resources of 142 mmbbls, and fully carried up to first oil in H1 2017 assuming an FPSO lease and gross capital costs of $1.8 billion). Further standby financing from Premier is set aside, if the costs are greater. We think this transaction leaves Rockhopper in a much stronger position than before, and with around 150 mmbbls net resource upside potential.

Valuation
We value Rockhopper at 553p/share, underpinned by a core valuation, for the Sea Lion development together with a balance sheet adjustment, of 410p/share.

Share performance catalyst

Formal completion of the Premier farm-in, which is anticipated in September, should provide impetus to the stock. More details and timing on the restart of exploration drilling and the specific targets, and further updates from the new operator on progress towards FDP submission (expected in H1 2014), are also likely to be share price catalysts.

This research note is produced by Canaccord Genuity Limited which is authorized and regulated by the Financial Services Authority (FSA). This is non-independent research and a marketing communication under the FSA Conduct of Business rules. Please see the Important Disclosures section in the appendix of this note which are an integral part of it or visit Canaccord Genuitys Online Disclosure Database http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx for more information.

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Executive Summary
Whats in the price
We expect Rockhopper to have net cash (after adjustments) of 55p/share (155m, $248m) and no debt, once the Premier farm-in completes. Assuming net cash is given full value, which we think is reasonable as Rockhoppers cash outgoings for the foreseeable future in the Falkland Islands are negligible, then the implied market valuation for the underlying assets is 119p/share (338m, $541m). We value Sea Lion resources for Rockhopper at $14.6 per barrel so the market is effectively discounting 37 mmbbls resources for Rockhopper, compared with net Sea Lion 2C resources of 123 mmbbls, and total net 2C resources (including Casper, Casper South and Beverley) of 142 mmbbls. The market, then, in our view, is valuing the fully financed developments, to be undertaken by a well-established operator, at 30% of the net Sea Lion resources alone and 26% of the total 2C net resources.

The Canaccord Genuity view

The E&P sector is trading at an average of 58% of our fair value, but Rockhopper is currently trading at only 31% of our fair value. We believe the Premier farm-in to Rockhoppers licences is good for both companies but is especially beneficial for Rockhopper. Though Rockhoppers working interest declines to 40% in the Sea Lion development post transaction completion, the terms of the deal translate, in our view, to a 55% net economic interest to the company. The farm-in, once completed, should significantly strengthen Rockhoppers balance sheet, and the prospect of fully financed and competently developed assets should reassure investors. In addition, Rockhopper will have effectively a three-well exploration carry, with still substantial upside for both partners.

Valuation and recommendation

Our core asset valuation for Rockhoppers Sea Lion resources, post completion of the farm-in is 356p/share, which increases to 410p/share after financial adjustments. Including the upside from additional appraisal resources and the Sea Lion deterministic resource case, results in a central valuation of 499p/share and a total valuation of 553p/share with exploration. We maintain our BUY rating with a target price of 553p/share (down from 586p/share as a result of an adjusted anticipated ramp up of production from Sea Lion).

Risks to investment case

The primary risk is that the deal does not complete, although we see that as a slim probability following the signing of an SPA. Oil price weakness may impact market sentiment, though with no production expected for several years there will be no direct impact.

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Valuation
Our valuation for Rockhopper is based upon the assumption that Sea Lion is developed as a standalone field via a leased FPSO, coming onstream in H1 2017, with a ramp up of production as new wells are drilled in the first two years of production, and reaching a peak average production level of 84,000 bopd in 2019/2020. Figure 1: Rockhopper Exploration sum-of-parts valuation
Country Field License Gross Unrisked mmboe 84 24 204 9 320 WI Post Farmout % 40.0% 24.0% 40.0% 24.0% WI Reserves (mmboe) 33.6 5.8 81.5 2.1 122.9 Unrisked Value $m 491 84 1,191 31 1,797 -16 100 231 -83 231 2,028 Valuation $/bbl 14.6 14.6 14.6 14.6 CoS % 90% 90% 90% 90% Risked NAV @ 10% $m 442 76 1,072 27 1,617 -16 100 231 -67 248 1,865 m 276 47 670 17 1,011 -10 63 144 -42 155 1,166 p/share 97 17 236 6 356 -4 22 51 -15 55 410 Unrisked p/share 108 19 262 7 395 -4 22 51 -18 51 446

Falkland Islands

Development Sea Lion SL10 Sea Lion SL10 Sea Lion SL20 Sea Lion SL20

PL032 PL04b PL032 PL04b

Total Development Financials PV Overheads Net current Cash Up front Payment PV CGT liability

100% 100% 100% 80%

Total Financials Core NAV Appraisal/Development Casper PL032 Casper PL04b Casper South PL032 Casper South PL04b B15 East PL032 SL05 PL04b Sea Lion Deterministic upside Total Appraisal/Development Falkland Islands Total Core + Appraisal ('Central' Value) Exploration SL30 Casper South Casper South Beverley West Beverley B15 West George Central George South A George South B George North Berkeley S2 Chatham Chatham East Chatham South

19.3 1.8 2.4 36.6 0.7 4.6 70.5 135.9

40.0% 24.0% 40.0% 24.0% 40.0% 24.0% 40.0%

7.7 0.4 1.0 8.8 0.3 1.1 28.2 47.5

113 6 14 128 4 16 412 694 2,722

14.6 14.6 14.6 14.6 14.6 14.6 14.6

70% 70% 70% 70% 70% 70% 50%

79 4 10 90 3 11 206 403 2,269

49 3 6 56 2 7 129 252 1,418

17 1 2 20 1 2 45 89 499

25 1 3 28 1 4 91 153 599

Falkland Islands

PL032 PL032 PL04c PL04b PL04c PL032 PL032 PL032 PL032 PL032 PL032 PL032 PL032 PL032 PL032/04b

Total Exploration Total Core + Upside

13 6.2 8.1 12.8 5.4 10 29.3 34.3 51.8 17.7 28.6 50.5 30.9 47.7 25.5 371.8

40.0% 40.0% 10.0% 24.0% 10.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 32.0%

5.2 2.5 0.8 3.1 0.5 4.0 11.7 13.7 20.7 7.1 11.4 20.2 12.4 19.1 8.2 140.6

53 25 8 31 6 41 120 140 212 72 117 207 126 195 83 1,439 4,161

10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2

20% 15% 15% 30% 20% 50% 10% 10% 10% 10% 10% 20% 25% 20% 25%

11 4 1 9 1 20 12 14 21 7 12 41 32 39 21 246 2,515

7 2 1 6 1 13 7 9 13 5 7 26 20 24 13 154 1,572

2 1 0 2 0 5 3 3 5 2 3 9 7 9 5 54 553

12 6 2 7 1 9 26 31 47 16 26 45 28 43 18 316 915

Source: Canaccord Genuity Limited Estimates, Brent oil price assumption for 2012, $90/bbl, escalating at 2% per annum, discount rate 10%.

We value Sea Sea Lion net to Rockhopper, Rockhopper, including the benefit of the development carry,

at $14.6 per barrel. barrel. We value Sea Lion net to Premier, including the impact of the development carry, at $10.2 per barrel.
We still see some timing and subsurface risk related to the Sea Lion development, so

we risk the project at a 90% chance of success. This translates to a risked Sea Lion valuation net to Rockhopper of $13.1 per barrel.
Assuming the FPSO were to be purchased, we estimate that Rockhopper would require

an additional $450m net capital (in excess of the hard carry of $722m), which would be funded either directly by Premier, or could be derived from alternative sources. However, our modelling indicates that a purchased FPSO development, although

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requiring a greater level of upfront capital for both Premier and Rockhopper, would value Sea Lion resources at $14.8 per barrel (risked value $13.3 per barrel).
Our core value, on the leased FPSO projection, which includes only the Sea lion field

development and balance balance sheet adj adjustments, djustments, is 410p/share. 410p/share.
Our total valuation including appraisal appraisal and exploration upside is 553p/share. 553p/share.

Stripping out exploration results in a valuation of 499p 499p/share. Another way to view this transaction is to assess the economic interest of both Rockhopper and Premier in the Sea Lion field development after completion. Figure 2: Working Interest vs. Economic Interest
Premier Working Interest Net 2C Sea Lion Resources (mmbbls) Valuation ($/bbl) Asset Valuation ($m) Additional cost/gain of entry ($m) Total Value ($m) Economic Interest (%)
Source: Canaccord Genuity Limited Estimates; Gaffney Cline & Associates

Rockhopper 40% 123 14.6 1,797 231 2,028 55%

60% 184 10.2 1,886 -231 1,655 45%

We have assumed just the net Sea Lion 2C resources of 307.4 mmbbls (to the Premier Oil/Rockhopper Exploration partnership) determined by Gaffney Cline & Associates in its Competent Persons Report (CPR) of April 2012. Our valuation shows that though Rockhopper will have a 40% working interest, the transaction gives the company an overall 55% economic interest in the Sea Lion development.

The transaction
Premier Oil is to farm-in to 60% of all Rockhopper Explorations Falkland Islands licences and become operator of all those licences that Rockhopper presently operates. There are three elements to the transaction. 1. 2. 3. Upfront cash payment of $231m to Rockhopper on completion of transaction Sea Lion development carry of $722m net to Rockhopper ($1.8 billion gross) Exploration carry of $48m net to Rockhopper ($120m gross)

The upfront repayment is a return of substantially all the Premier pro-rata exploration

and appraisal costs so far incurred by Rockhopper in the Falkland Islands.

The gross development carry of $1.8 billion capital expenditure is designed to take

Rockhopper to first oil from Sea Lion assuming the lease of an FPSO. If further financing is required then Premier will provide that, up to an additional maximum of $1,278m, equivalent to gross capital expenditure of $5 billion. For example, if the decision is to purchase rather than lease an FPSO, then total development costs to first oil would be about $3 billion. Rockhopper could then choose the Premier facility to fund its share of that, which we estimate would be about $450m. Premier would then take an increased proportion of initial cashflows until it achieves a post-tax IRR of 15% on its investment. We think that the presence of Premier Oil as operator, and the already significant level of carry, could lead to other potential bank loan financing options.

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The exploration carry of $48m equates to a gross exploration programme of $120m

and this should be sufficient for three wells including mobilisation and demobilisation costs. As the primary prospects are already covered by 3D seismic data, we expect that almost all this carry will be applied to drilling costs. Rockhopper will take the subsurface lead on this exploration, and already has three drill ready prospects. The timing and programme has not yet been decided. In addition, Premier Oil and Rockhopper Exploration have announced an AMI covering southern Mozambique, South Africa and Namibia. This could be an exciting part of Rockhoppers portfolio in the mid and long term, but it is not likely to feature heavily in the near term, either in time or costs spent.

Capital Gains Tax

The company expects this transaction will be subject to Capital Gains Tax (CGT). The application of this tax, which is charged at 26%, is subject to change as the Falkland Islands Government (FIG) is reviewing its application. Rockhopper has received formal notification that the end result of this review, which may not be completed until 2013, will not be worse than the current legislation, and may be less onerous. CGT is applied to the transaction value less the applicable costs. At present the transaction value is considered to be the total of the cash element of the farm-in together with the discounted value of the development carry (exploration is excluded). The applicable costs are deemed to be the remaining pro-rata Rockhopper interest costs incurred so far (rather than the more intuitive pro rata costs attributable to Premiers share). The CGT would be repayable in two tranches. The first, eight months following completion of the farm-in; and the second the earlier of five years after completion or at first oil. This results in an overall estimated undiscounted CGT of $128m ($83m discounted at 10%). Figure 3: Rockhopper Exploration estimated CGT calculation
($m) Cash element of farm-in Discounted value of carry Total Transaction value Applicable costs to date Gain CGT payable (@26%) Initial instalment of CGT mid 2013 Balance payable sooner of 5 years or 1st oil NPV10 CGT
Source: Canaccord Genuity Limited Estimates, Rockhopper Exploration

231 445 676 185 491 128 44 84 83

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The Sea Lion development

The Sea Lion field has independent gross 2C resources of 321 mmbbls (Gaffney Cline & Associates GCA, April 2012), with additional 2C resources in the Casper, Casper South and other accumulations. The fields remoteness is not really an issue. The current oil facilities onshore the Falkland Islands can be quite easily expanded to allow for storage, workshops, communications and other shore based requirements. The field itself lies in a water depth of 450m, similar to the water depth at the Foinaven FPSO development to the west of the Shetland Islands. The weather, though, to the north of the Falkland Islands, is less extreme than the conditions found in the central North Sea. Figure 4: Sea Lion Field and satellite discoveries

Source: Rockhopper Exploration

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Figure 5: Gaffney Cline CPR information, April 2012

Field Gross 2C Resources (mmbbls) Sea Lion Casper Casper South B 15 East SL 05 Total 320.5 21.1 39.0 0.7 4.6 385.9 Net 2C Resources Pre FarmFarm-out (mmbbls) 307.4 20.4 24.3 0.8 2.8 355.7 Net 2C Resources Post FarmFarm-out (mmbbls) 123.0 8.2 9.7 0.3 1.1 142.3

Source: Gaffney Cline & Associates, Rockhopper Exploration, Canaccord Genuity Limited

Both Premier and Rockhopper believe that the resource estimates are reasonable and that no further appraisal drilling on Sea Lion is required. Premiers own presentation on the transaction stated that the deal adds approximately 200 mmbbls net discovered 2C resources, in line with the CPR, and 175 mmboe net prospective resources. We expect the handover of operatorship to be accomplished shortly after transaction completion, which is expected in September, following which the anticipated development plan will be refined and perhaps modified. However, it would be surprising if the development were to be substantially altered from that already envisaged by GCA. That included the drilling of a total of 34 wells comprising 21 producers, 6 dual producer/injectors and 7 injectors, in four subsea clusters, with production of around 70,000 bopd into an FPSO. At present the only notable differences have been Premier Oils initial estimated gross peak production of 80,000-85,000 bopd higher than the CPR projection; with first oil expected in H1 2017 about a year later that the CPR report indicated. However GCAs production profiles included downtime of 10%, and production is not expected to be limited by well productivity.

Dealing with Sea Lion wax

Rockhopper has spent considerable time, together with various consultancies including Genesis Oil & Gas Ltd., assessing the best means of developing the field, particularly in view of the crude oils wax content and its flow characteristics. Figure 6: Sea Lion Crude Key Parameters
API gravity GOR (scf/bbl) Reservoir temperature (C) Viscosity (cP at reservoir temp) Wax content (%) Wax appearance temperature (oC) Bulk wax appearance temperature ( C) Pour point (oC) Gel point (C)
Source: Rockhopper Exploration, Gaffney Cline & associates
o

29 265 88 7.2 22 72 50 20 8

The table above illustrates the key parameters of Sea Lion crude. Firstly, it is important to point out that the crude is of medium weight, and sweet, resulting in a likely sale price at the field of a 2-3% discount to Brent.

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The keys to the development, in our view, are the wax and gel management strategies. The 22% wax content is quite high, though not exceptionally so (many Brazilian crudes have a higher wax content), and is quite typical of oil generated from a lacustrine source rock. Wax may be formed on pipe walls when crude oil is flowing or in the body of the crude oil when there is no flow, if the temperature drops sufficiently. There are a number of ways around this problem - the addition of wax inhibitors, pour point depressants, heating, and insulation being the primary methods. All the work carried out by Rockhopper and its advisors has indicated that a combination of heating and insulation is the best solution for Sea Lion. Producing, storing, and transporting Sea Lion crude oil at temperatures above 72C will eliminate the formation of wax. At 72C and down to 50C some platelets of wax will begin to form on pipe walls, but the build-up will be very slow. Below 50C (the bulk wax appearance temperature) wax build-up will increase substantially. The answer then is to maintain temperatures at least above 50C. The Solution - Artificial lift, lift, heating and insulation The low GOR and medium viscosity of the Sea Lion crude require the application of artificial lift to assist production. Rockhopper and its consultants have determined that the use of downhole hydraulic submersible pumps (HSPs) is the best means of providing that lift. HSPs operate by pumping water down the well bore, turning a turbine, lifting the crude, which is then delivered with the water to the surface. For Sea Lion the water will be heated to around 75C before pumping, and this water forms a colloid with the crude oil, which itself is at 88C (the formation temperature), before returning to the FPSO through insulated flow lines and riser. This process has multiple benefits. It results in production of a water and crude oil mixture which flows more easily than crude alone, it provides improved well productivity, and it maintains the flowing mixed liquids temperature above 72C. Once on the FPSO, the produced liquids are processed, the water is extracted, and then reheated prior to reinjection. If the field has to be shut in for any reason then the crude oil in the production system will begin to cool until eventually it reaches the gel point at around 8C. This is the temperature at which wax forms within the crude oil and this could result in plugging of the pipe and flowlines. However, through use of insulated pipe-in-pipe technology, Rockhopper expects that there would be more than enough time to flush the system with hot water to clear the crude and eliminate the risk. Hydraulic Submersible Pumps HSPs have a long and successful track record on the UK North Sea Captain field, which has heavier and more viscous crude than Sea Lion (13-21 API, viscosity of 88 cP). The HSPs have operated over a wide variety of conditions (including substantial gas volumes) with great reliability (the mean time to failure on Captain was 12 years for HSP pumps). This reliability is attributed in part to the HSP pump design, which requires no downhole electrics. The power required to operate these pumps and heat the water will be derived from associated gas produced as a result of the crude production. FPSOs FPSOs and tankers - It is standard policy to heat crudes within the FPSO and offloading tankers to nullify the onset of wax production. For example production from the Peregrino field (operator, Statoil) offshore Brazil, which has much heavier (12-14 API), and lower viscosity, crude than Sea Lion, is processed on board the FPSO at a temperature of around 150C, and then maintained at a temperature of 65C on board, before transfer to heated tankers for refinery delivery.

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Upside potential
We see considerable upside potential both in the Sea Lion field itself, the satellite discoveries, and further exploration. Overall, we see around 150 mmbbls additional upside beyond the current Sea Lion 2C resources in the current primary areas of exploration, appraisal and development. Figure 7: Net Rockhopper upside in the current primary projects
Asset Net Pot. additional Resources (mmbbls) Sea Lion field Casper South discovery George prospects Chatham prospects Total
Source: Canaccord Genuity Limited Estimates

38.6 25.0 53.2 39.6 156.4

Figure 8: Schematic Field and Prospect Cross Section

Source: Rockhopper

Sea Lion field

The GCA CPR, dated April 2012, followed the traditional probabilistic evaluation methodology to determine both oil-in-place and recoverable resources. However, the company also provided a deterministic assessment of oil-in-place. The deterministic approach yields a bottom up technically based view of the resources rather than employing a probabilistic method, which can lead to skewed results.

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Figure 9: Sea Lion Main Complex (sands SL10 & SL20) CPR oil-in-place determinations
Method Probabilistic Probabilistic Probabilistic Deterministic Classification 1C 2C 3C Best STOIIP STOIIP (mmbbls) 650 1,067 1,563 1,303 Limited to 0.5 km radius around Sea Lion wells Full field areal extent but inferred reduced reservoir quality/thickness towards boundaries Full field areal extent but 'normal' reservoir quality/thickness towards boundaries Most likely bottom up technical approach Comments

Source: Gaffney Cline & Associates, STOOIP = Stock Tank Oil Originally In Place

Drilling results from the 2010-2011 campaign on Sea Lion were generally a very close match to the pre drill estimates, and together with the presence of high quality 3D seismic over the field, we think it reasonable to believe that the probabilistic 2C oil-inplace figure could be overly cautious. This is supported by the deterministic oil-in-place assessment. In any case, as development wells are drilled on Sea Lion, assuming oil reservoir is found, then the 1C case will increase due to the addition of further resource halos around each well, and this would positively impact the 2C case. Assuming the anticipated mid-point field recovery factor of 30% (the CPR gave a range of 20-40% and stated that 30% is the most likely estimate), the deterministic approach would result in gross Sea Lion (sands SL10 & SL20) resources of 391 mmbbls, compared with the probabilistic 321 mmbbls. That would result in additional gross Sea Lion resources of 70 mmbbls, or 28 mmbbls net to Rockhopper post farm-down. There is also potential in the additional sand intervals, SL05, SL30 and B15, just above and below the two main Sea Lion sand units (SL10 and SL20). Gaffney Cline identified gross 5.3 mmbbls contingent and gross 23 mmbbls prospective resources in these reservoirs. Clearly these sands need further appraisal/exploration drilling, but we think that is unlikely until field development drilling gets underway. Figure 10: Sea Lion Resource Evaluation
Sea Lion Unit Classification Net Resources (mmbbls) SL10 sand unit SL 20 sand unit Upside potential to SL10&SL20 SL 05/B15 East SL30 B15 West Total Potential
Source: Gaffney Cline & Associates, Assumed net resources post farm-down to Premier Oil. SL30 GCoS 22%, B15 West GCoS 53%.

Contingent Contingent Deterministic Contingent Prospective Prospective

2C 2C 2C Best Best

39.4 83.6 28.0 1.4 5.2 4.0 161.6

Satellite fields
Casper and Casper South are the two most significant discoveries other than Sea Lion in the North Falkland Islands basin. The CPR has assigned combined gross contingent resources to these discoveries of 60 mmbbls, net 18 mmbbls (post farm down to Premier Oil). Both discoveries need further appraisal. Rockhopper believes that the CPR resource determination for Casper is reasonable, but the company sees upside to the Casper South CPR resources in both the discovery sand and other undrilled potential reservoirs.

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The CPR assigns net unrisked prospective resources to Casper South of about 3 mmbbls, but Rockhopper views that as a conservative estimate, and the company believes that Casper South could have 25 mmbbls resources. Casper South looks to be a good candidate for appraisal/exploration drilling.

Exploration
A number of other similar fan prospects have been evaluated in the CPR, with geological chances of success (GCoS) assessed at between 8% and 34%. Of these Rockhopper is most excited by the George and Chatham groups of prospects. Figure 11: Key Exploration prospects groups
Prospect Group Gross Unrisked Best Case (mmbbls) George Chatham Total 133.1 104.1 237.2 Net Unrisked Best Case (mmbbls) 53.2 39.6 92.8 (%) 11% 24% GCoS

Source: Canaccord Genuity Limited Estimates, Net potential is post completion of farm-down to Premier Oil; George is a synthesis of four separate identified targets, Chatham is a synthesis of three separate identified targets. Some of these individual prospects are stacked.

Rockhopper believes that two of the individual prospects, George South and Chatham South, could be drilled by a single vertical well. This then would target about 25 mmbbls net prospective resources, and such a well could form part of the exploration drilling campaign. The 2010-2012 drilling campaign focused on basin floor fan plays, but Rockhopper has identified a number of additional play types, including basin margin pinchouts, downthrown closures, inversion trends, and traditional structural highs. The interpretation of the 2011 acquired 3D seismic data covering a number of these plays type, both in Rockhoppers northern and southern acreage is ongoing.

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APPENDIX: IMPORTANT DISCLOSURES

Analyst Certification:
Each authoring analyst of Canaccord Genuity Limited whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analysts personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analysts coverage universe and (ii) no part of the authoring analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research. An analyst has not visited the issuer's material operations.

Site Visit(s): Price Chart(s):*

____ Stock price ____ Target price

Source: Thomson Reuters and Canaccord Genuity

Date 30/07/2009 22/09/2009 05/02/2010 10/03/2010 08/04/2010 07/05/2010 11/06/2010 18/08/2010 07/10/2010 13/10/2010 26/11/2010 15/08/2011 11/10/2011 31/10/2011 08/12/2011 13/12/2011 20/02/2012 20/04/2012 12/07/2012 30/07/2012

Analyst Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Richard Slape Charlie Sharp Charlie Sharp Charlie Sharp

Rec. Speculative Buy Speculative Buy Speculative Buy Speculative Buy Speculative Buy Speculative Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy

Target price 67p 103p 142p 182p 172p 433p 563p 490p 641p 545p 494p 871p 880p 536p 517p 531p 677p 644p 586p 553p

Distribution of Ratings:
Global Stock Ratings (as of 03 July 2012)

Coverage Universe Rating

Buy Speculative Buy Hold Sell

#
590 88 263 28 969

%
60.9 9.1 27.1 2.9 100.0

IB Clients %
30.5 51.1 11.8 3.6

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Canaccord Ratings System:

BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months. HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months. SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months. NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer. Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the relevant issuer.

Risk Qualifier:

SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss.

Canaccord Research Disclosures as of 30 July 2012 Company

Rockhopper Exploration

Disclosure
1A, 2, 3, 4, 7

The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided the following services to the relevant issuer: A. investment banking services. B. non-investment banking securities-related services. C. non-securities related services.

2 3

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Corporate Finance / Investment Banking services from the relevant issuer. In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of the relevant issuer or any publicly disclosed offer of securities of the relevant issuer or in any related derivatives. Canaccord Genuity acts as corporate broker for the relevant issuer and/or Canaccord Genuity or any of its affiliated companies may have an agreement with the relevant issuer relating to the provision of Corporate Finance/Investment Banking services. Canaccord Genuity or any of its affiliated companies is a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives. In the past 12 months, Canaccord Genuity, its partners, affiliated companies, officers or directors, or any authoring analyst involved in the preparation of this research has provided services to the relevant issuer for remuneration, other than normal course investment advisory or trade execution services. Canaccord Genuity intends to seek or expects to receive compensation for Corporate Finance/Investment Banking services from the relevant issuer in the next six months. The authoring analyst, a member of the authoring analysts household, or any individual directly involved in the preparation of this research, has a long position in the shares or derivatives, or has any other financial interest in the relevant issuer, the value of which increases as the value of the underlying equity increases. The authoring analyst, a member of the authoring analysts household, or any individual directly involved in the preparation of this research, has a short position in the shares or derivatives, or has any other financial interest in the relevant issuer, the value of which increases as the value of the underlying equity decreases. Those persons identified as the author(s) of this research, or any individual involved in the preparation of this research, have purchased/received shares in the relevant issuer prior to a public offering of those shares, and such persons name and details are disclosed above. A partner, director, officer, employee or agent of Canaccord Genuity and its affiliated companies, or a member of his/her household, is an officer, or director, or serves as an advisor or board member of the relevant issuer and/or one of its subsidiaries, and such persons name is disclosed above. As of the month end immediately preceding the date of publication of this research, or the prior month end if publication is within 10 days following a month end, Canaccord Genuity or its affiliate companies, in the aggregate, beneficially owned 1% or more of any class of the total issued share capital or other common equity securities of the relevant issuer or held any other financial interests in the relevant issuer which are significant in relation to the research (as disclosed above).

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As of the month end immediately preceding the date of publication of this research, or the prior month end if publication is within 10 days following a month end, the relevant issuer owned 1% or more of any class of the total issued share capital in Canaccord Genuity or any of its affiliated companies. Other specific disclosures as described above. Canaccord Genuity is the business name used by certain subsidiaries of Canaccord Financial Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, and Canaccord Genuity Corp. The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Limited, which is authorised and regulated by the Financial Services Authority (FSA). In the event that this is compendium research (covering six or more relevant issuers), Canaccord Genuity and its affiliated companies may choose to provide specific disclosures of the subject companies by reference, as well as its policies and procedures regarding the dissemination of research. To access this material or for more information, please refer to http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx. The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance/Investment Banking activities, or to recommendations contained in the research. Canaccord Genuity Limited and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the company that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account or the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity Limited or their affiliated companies, principals or employees (other than the authoring analyst(s) who prepared this research) may at any time have a long or short position in any such designated investments, Related designated investments or in options, futures or other derivative instruments based thereon. For the purpose of UK regulation Canaccord Genuity Limited produces non-independent research which is a marketing communication under the FSA Conduct of Business Rules and has not been prepared in accordance with the FSA requirements to promote independence of research nor is it subject to the prohibition on dealing ahead of the dissemination of research. However, Canaccord Genuity Limited does have procedures in place to manage conflicts which may arise in the production of research, which includes preventing dealing head and Chinese Wall procedures. The information contained in this research has been compiled by Canaccord Genuity Limited from sources believed to be reliable, but (with the exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity Limited, its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained in this research constitute Canaccord Genuity Limiteds judgement as of the date of this research, are subject to change without notice and are provided in good faith but without legal responsibility or liability. Canaccord Genuity salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our principal trading desk that reflect opinions that are contrary to the opinions expressed in this research. Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. To the fullest extent permitted by law, none of Canaccord Genuity Limited, its affiliated companies or any other person accepts any liability whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.

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For Canadian Residents:

This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research

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and its dissemination in Canada. Canadian clients wishing to effect transactions in any Designated Investment discussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their particular jurisdiction.

For United Kingdom and European Residents:

This research is for persons who are Eligible Counterparties or Professional Clients only and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 (or any analogous legislation) on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) (High Net Worth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. This material is not for distribution in the United Kingdom or Europe to retail clients, as defined under the rules of the Financial Services Authority. For United States Residents: Canaccord Genuity Inc. and Canaccord Genuity Securities LLC, US registered brokerdealers, accept responsibility for this research and its dissemination in the United States. This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effect transactions in any Designated Investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. or Canaccord Genuity Securities LLC. Analyst(s) preparing this report that are not employed by Canaccord Genuity Inc. or Canaccord Genuity Securities LLC are resident outside the United States and are not associated persons or employees of any US regulated broker-dealer. Such analyst(s) may not be subject to Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. This research is sent to you by Collins Stewart (CI) Limited ("CSCI") for information purposes and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This research has been produced by a group company for circulation to its institutional clients and also CSCI. Its contents have been approved by CSCI and we are providing it to you on the basis that we believe it to be of interest to you. This statement should be read in conjunction with your client agreement, CSCI's current terms of business and the other disclosures and disclaimers contained within this research. If you are in any doubt, you should consult your financial adviser. CSCI is licensed and regulated by the Guernsey Financial Services Commission, the Jersey Financial Services Commission and the Isle of Man Financial Supervision Commission. CSCI is registered in Guernsey and is a wholly owned subsidiary of Canaccord Financial Inc. Additional information is available on request. Copyright Canaccord Genuity Corp. 2012. Member IIROC/Canadian Investor Protection Fund Copyright Canaccord Genuity Limited 2012. Member LSE, authorized and regulated by the Financial Services Authority. Copyright Canaccord Genuity Inc. 2012. Member FINRA/SIPC Copyright Canaccord Genuity Securities LLC 2012. Member FINRA/SIPC All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Canaccord Genuity Corp., Canaccord Genuity Limited, and Canaccord Genuity Inc. and Canaccord Genuity Securities LLC. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of the entities listed above.

For United States Residents:

For Jersey, Guernsey and Isle of Man Residents:

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30 July 2012

Sales and Trading

Toronto 1.800.810.8051 Calgary 1.403.508.3826

London 44.20.7050.6505 Montreal 1.514.284.1476

Boston 1.800.343.7096 San Francisco 1.800.830.2608

Vancouver 1.604.643.7052 New York 1.800.818.2196 www.canaccordgenuity.com

Agriculture Keith Carpenter, MBA, CFA, Toronto Neal Gilmer, MBA, Associate Analyst, Toronto Vitali Savitski, Associate, Toronto
(C) (C) (C)

1.416.869.7325 1.416.869.7294 1.416.869.7354

Chemicals Paul Satchell London

(UK)

44.20.7523.8294

Consumer Products Wayne Brown, London Laura Champine, CFA, New York Alicia Forry, London Eddy Hargreaves, London Camilo Lyon, New York Rob Mann, London Scott Van Winkle, CFA, Boston Derek Dley, Associate Analyst, Vancouver Chris Mandeville, Associate, Boston Mark Sigal, Associate, Boston Jason Smith , Associate, New York
(UK) (US) (UK) (UK) (US) (UK) (US) (C) (US) (US) (US)

44.20.7523.8368 1.212.389.8056 44.20.7523.8372 44.20.7523.8374 1.212.849.3978 44.20.7523.8290 1.617.371.3759 1.604.694.6967 1.617.371.3728 1.617.788.1591 1.212.389.8059

Financials Scott Chan, MBA, CFA, Toronto Ben Cohen, London Gareth Hunt, London Arun Melmane, London Mario Mendonca, CA, CFA, Toronto Robin Savage, London Ming Zhu, London Evan Minsky, CFA, Associate Analyst, Toronto Lemar Persaud, CA, Associate, Toronto
(C) (UK) (UK) (UK) (C) (UK) (UK) (C) (C)

1.416.869.3549 44.20.7523.8392 44.20.7523.8365 44.20.7523.8390 1.416.869.7270 44.20.7523.8376 44.20.7523.8284 1.416.869.7348 1.416.869.7319

Healthcare Julie Simmonds London

(UK)

44.20.7523.8377

Infrastructure Jared Alexander, CFA, Vancouver Sara Elford, CFA, Halifax Yuri Lynk, MSc, CFA, Montreal Juan Plessis, MBA, CFA, Vancouver Zayem Lakhani, Associate, Vancouver Catherine Siu, CFA, Associate, Montreal
(C) (C) (C) (C) (C) (C)

1.604.643.7612 1.902.442.3161 1.514.844.3708 1.604.643.0181 1.604.643.7506 1.514.844.3108

Emerging Companies Michael OBrien London

(UK)

44.20.7523.8423

Investment Companies Alan Brierley Life Sciences Ritu Baral, New York Jeffrey Frelick, Boston Neil Maruoka, M.Sc., MBA, Toronto Jason Mills, San Francisco William Plovanic, CFA, Chicago Salveen Richter, CFA, New York Randall Stanicky, CFA, New York Dana Flanders, Associate, New York Kyle Rose, Associate, Chicago
(US) (US) (C) (US) (US) (US) (US) (US) (US)

44.20.7523.8091

Energy Energy James Evans, , London John Gerdes, Houston Gordon Gray, , London Harold Hutchinson, London Brian Kristjansen, Calgary Thomas Martin, , London Braden Purkis, , London Charlie Sharp, London Phil Skolnick, New York Marcus Talbert, Houston John Tasdemir, Houston Steve Toth, Calgary Lindsay Wheeler, London Nick Coutoulakis, Associate, Calgary Chad Ellison, Associate, Calgary Lisa McCarthy, Associate, Calgary Ryan Oatman, CFA, Associate, Houston Benny Wong, Associate Analyst, New York
(UK) (US) (UK) (C) (UK) (UK) (UK) (US) (US) (US) (C) (UK) (C) (C) (C) (US) (US)

44.20.7523.8379 1.713.331.9443 44.20.7523.8383 44.20.7523.8391 1.403.691.7807 44.20.7523.8382 44.20. 7523.4648 44.20. 7523.4651 1.212.849.3933 1.713.331.9468 1.713.331.9447 1.403.508.3884 Maternity Leave 1.403.508.3824 1.403.691.7811 1.403.508.3822 1.713.331.9458 1.212.849.3910

1.212.849.3917 1.617.371.3711 1.416.869.3073 1.415.229.7166 1.847.864.1137 1.212.389.8052 1.212.849.3991 1.212.849.3953 1.847.864.1139

Vancouver Head Office(C) P.O. Box 10337 Pacific Centre 220 . 609 Granville Street. Vancouver, British Colombia V7Y 1H2 1.604.643.7000 London(UK) 8th Floor, 88 Wood Street London EC2V 7QR 44.20.7523.8000

Toronto(C) Brookfield Place, 161 Bay Street Suite 3000, P.O. Box 516 Toronto, Ontario M5J 2S1 1.416.869.7368 Boston(US) 99 High Street, Suite 1200 Boston, MA 02110 1.617.371.3990

Calgary(C) TransCanada Tower 450 1st Street SW Suite 2200 Calgary, Alberta T2P 5P8 1.403.508.3800 New York(US) 535 Madison Avenue. 2nd Floor New York, NY 10022 1.212.849.3900

Montreal(C) 1250, Rene-Levesque Bureau 2930 Montreal, Quebec H3B 4W8 1.514.844.5443 San San Francisco(US) 101 Montgomery Street, Suite 2000 San Francisco, CA 94104 1.415.229.7171

17
30 July 2012

Sales and Trading

Toronto 1.800.810.8051 Calgary 1.403.508.3826

London 44.20.7050.6505 Montreal 1.514.284.1476

Boston 1.800.343.7096 San Francisco 1.800.830.2608

Vancouver 1.604.643.7052 New York 1.800.818.2196 www.canaccordgenuity.com 1.617.371.3837 1.617.371.3875 1.902.442.3161 44.20.7523.4644 1.416.869.7364 1.617.371.3879 1.617.371.3892 1.902.442.3159

Media Simon Davies, London Thomas Eagan , New York Aravinda Galappatthige, Toronto Frank Poerio, CFA, Associate, New York
(UK) (US) (C) (US)

44.20.7523.8373 1.212.389.8115 1.416.869.7303 1.212.389.8116

Metals and Mining Steven Butler, MBA, Toronto Nicholas Campbell, Vancouver Jeremy Dibb, London Tim Dudley, , London Matt Hasson (Specialist Sales), , London Gary Lampard, Toronto Peter Mallin-Jones, , London Orest Wowkodaw, CA, CFA, Toronto Wendell Zerb, PGeol, Vancouver Rahul Paul, Associate Analyst, Toronto Jacob Field-Marsham, Associate, Toronto Adam Gofton, CFA, Associate, Toronto Gabriel Gonzalez, Associate, Vancouver Dmitry Kalachev, , Associate, London John Kratochwil, P.Eng., Associate, Toronto Chris Lerch, Associate, Vancouver Todd Liang, Associate, Toronto Adam Melnik, Associate, Toronto
(C) (C) (UK) (UK) (UK) (C) (UK) (C) (C) (C) (C) (C) (C) (UK) (C) (C) (C) (C)

1.416.869.7918 1.604.643.7027 44.20.7523.4637 44 20 7523 8385 44 20 7523.8405 1.416.867.6020 44.20.7523.4645 1.416.869.3092 1.604.643.7485 1.416.869.7289 1.416.869.7299 1.416.869.7349 1.604.643.7529 44.20.7523.4643 1.416.869.6592 1.604.643.1655 1.416.867.2649 1.416.687.5428

Sustainability & CleanTech John Quealy,(US) CPA, Boston Jonathan Dorsheimer,(US) Boston Sara Elford,(C) CFA, Halifax Bob Liao,(UK) CFA, London Honghua Chen, (C) Associate, Toronto Chip Moore,(US) CFA, Sr. Associate, Boston Josh Baribeau,(US) CFA, Sr. Associate, Boston Shannon Lynch,(C) MBA, Associate, Halifax Technology Bobby Burleson,(US) San Francisco Richard Dvis,(US) CFA, Boston Gareth Evans,(UK) ACA, London Michael Graham,(US) New York Alan Howard,(UK) CFA, London Jonathan Imlah,(UK), London Bob Liao,(UK) CFA, London Eyal Ofir,(C) CFA, Toronto Jeff Rath,(US) CFA, Boston T. Michael Walkley,(US) Minneapolis Robert Young,(C) MBA, Toronto David Delleo,(US) Sr. Associate, Boston David E. Hynes, Jr.,(US) Sr. Associate, Boston Haesu Lee(C), Associate, Toronto Matt Ramsay,(US) Associate, Minneapolis Shawn Rassouli,(US) Associate, New York Telecommunications and Cable Dvai Ghose,(C) Toronto Alan Howard,(UK) CFA, London Greg Miller,(US) New York Sanford Lee,(C) MBA, Associate Analyst, Toronto Eric Z. Chu,(US) CFA, Associate, New York Transportation and Industrials David Tyerman,(C) MBA, Toronto Chris Bowes, (C) MBA, Associate Analyst, Toronto Quest Helpdesk

1.415.229.7163 1.617.371.3862 44.20.7523.4639 1.212.849.3924 44.20.7523.4642 44.20.7523.8418 44.20.7523.4644 1.416.869.7215 1.617.371.3891 1.612.332.8069 1.416.869.7341 1.617.788.1595 1.617.371.3882 1.416.869.7329 1.612.332.2208 1.212.849.3957

Paper and Forest Products Neal Gilmer,(C) MBA, Associate Analyst, Toronto Real Estate Shant Poladian,(C) CA, CPA, Toronto Mark Rothschild,(C) Toronto Alastair Stewart,(UK) London Kevin Halmos,(C) Associate, Toronto David Chrystal,(C) Associate, Toronto Support Services Julian Cater,(UK) London James Gilbert, CFA, (UK) London

1.416.869.7294

1.416.869.6595 1.416.869.7280 44.20.7523.8336 1.416.869.3643 1.416.869.7351

1.416.869.7274 44.20.7523.4642 1.212.389.8128 1.416.867.4544 1.212.389.8129

1.416.869.7304 1.416.869.7375

44.20.7523.8425 44.20.7523.8424

44.20.7523.8493

Vancouver Head Office(C) P.O. Box 10337 Pacific Centre 220 . 609 Granville Street. Vacouver, British Colombia V7Y 1H2 1.604.643.7000 London(UK) 8th Floor, 88 Wood Street London EC2V 7QR 44.20.7523.8000

Toronto(C) Brookfield Place, 161 Bay Street Suite 3000, P.O. Box 516 Toronto, Ontario M5J 2S1 1.416.869.7368 Boston(US) 99 High Street, Suite 1200 Boston, MA 02110 1.617.371.3990

Calgary(C) TransCanada Tower 450 1st Street SW Suite 2200 Calgary, Alberta T2P 5P8 1.403.508.3800 New York(US) 535 Madison Avenue. 2nd Floor New York, NY 10022 1.212.849.3900

Montreal(C) 1250, Rene-Levesque Bureau 2930 Montreal, Quebec H3B 4W8 1.514.844.5443 San Francisco(US) 101 Montgomery Street, Suite 2000 San Francisco, CA 94104 1.415.229.7171