SHARES in Falkland Oil and Gas lost over a fifth of their value in a single day yesterday after the oil and gas explorer said BHP Billiton had pulled out of a joint venture drilling project in the Falkland Islands.
Falkland Oil and Gas said BHP had elected not to enter the second phase of drilling on its southern licence area, adding that the company will take back the oil giant’s current 51 per cent interest in the project.
It will now continue work on the second phase of the project alone, aiming to drill a single exploration well by 2015.
“Falkland Oil and Gas believes, based on the drilling results from the Toroa well analysed to date, that these licences are still prospective,” the company said in a statement.
In a further blow to the Aim-listed firm, it admitted that the next phase of drilling at its northern licence area is increasingly unlikely to commence before the end of the year, though the Falkland Islands government has agreed to extend the first phase of the licences by a year.
“We welcome the Falkland Islands government’s understanding in agreeing to extend the licence terms. We intend to continue actively exploring the southern licences and with our joint venture partner, to secure a deepwater rig to resume drilling in the northern licences as soon as possible,” Falkland Oil and Gas chief executive Tim Bushell said.
The setback for the company came after rival Rockhopper Exploration discovered substantial reserves of oil at its own North Falklands basin project, sending the shares leaping to an all-time high.
However, the extent of available resources in the region is still far from clear and drilling has led to protests in Argentina, which claims sovereignty over the islands it calls the Malvinas.
Argentina fought a war with Britain after briefly taking possession of the islands in 1982.