SHARES in Desire Petroleum plunged more than 26 per cent yesterday after the Falkland Islands-focused oil explorer said it had abandoned its latest well, the Dawn/Jacinta prospect in the southern part of the North Falklands basin.
The mile-deep well is Desire’s latest disappointment, having found no hydrocarbons at its Rachel prospect in the same region in October.
“We now believe that Desire Petroleum has some major problems in that the company is now starting to run out of cash,” says Panmure Gordon analyst Peter Hitchens.
Oil exploration in the Falklands has resulted in only one commercial discovery at Rockhopper’s Sea Lion well last spring in the northern part of the North Falklands basin, some 100km away from the Dawn/Jacinta prospect.
The oil rig that was used by Desire will now be subcontracted to Rockhopper, which plans to drill one or two separate wells. Desire will then use the well to explore one well in an undisclosed location.
“It [the dry hole] really shouldn’t come as too much of a surprise to people. It had just an eight per cent chance of working,” says Evolution analyst David Farrell, adding that Rockhopper’s Ernest well is the only other well to be drilled in the vicinity and that was also a dry hole.
Analysts at Oriel Securities retain their “hold” recommendation on Desire as they see longer term potential in Desire’s acreage in the Northern part of the North basin.
AIM-listed shares in Desire closed 12.75p down at 35.25p. The stock has lost more than 80 per cent of its value since the firm revealed the failure of the Rachel prospect in October.
Meanwhile, shares in AIM-listed colleague Rockhopper closed up 0.7 per cent at 370p.