OIL explorer Desire Petroleum yesterday admitted that it had not found oil at its latest well in the Falkland Islands and needs fresh funds for any further drilling, wiping over half the value from its shares.
AIM-listed Desire’s shares tumbled 60.6 per cent to close at 15.75p yesterday, sending it to the bottom of the London market fallers and knocking more than £200m from its value to leave it with a market cap of just £136.9m.
Desire said while its latest well, named Ninky, had oil shows and had found a thin zone of oil, the fuel was in a poor quality reservoir and consequently the well will be plugged and abandoned.
Desire said its remaining funds of £22m would not stretch to pay for another well.
“Given our continuing confidence that oil will be discovered on Desire’s acreage, further wells will need to be drilled,” said Desire’s chairman Stephen Phipps in a statement yesterday, hinting at a cash-raising drive to follow September’s £22.8m share placing.
Analysts said the failure does not spell the end of the Falklands as a lucrative oil prospect.
“Today’s news doesn’t have any decisive impact on the Falkland Islands as a whole, in terms of their viability as a petroleum province but it raises issues specifically for Desire,” said Mirabaud Securities analyst Alex Martinos.
A large discovery made by Rockhopper at its Sea Lion well in the Falklands in 2010 has raised hopes that a new hydrocarbon basin will be opened up, but so far no other firm has managed to strike commercial oil.
Exploration in the area has sparked protests from Argentina, which claims sovereignty over the islands.
City A.M. Reporter