DESIRE Petroleum, a UK oil exploration company, spooked investors by revealing poor drilling results in the Falklands yesterday.
The firm’s share price fell 50 per cent after logging operations at its Liz well showed oil may be present in thin intervals but the overall reservoir quality is poor. It closed down 49p at 50p.
The announcement sent three other UK Falklands explorers’ share prices into turmoil. Rockhopper, which has a 7.5 per cent working interest in the Liz well, saw its share fall 24 per cent. Shares in Falkland Oil and Gas and Borders & Southern Petroleum also fell 13.6 per cent and 12.7 per cent respectively despite their prospects being based in the southern and eastern parts of the basin.
But analysts said there was still plenty of drilling to be done and that investor panic had been premature. Analysts at Seymour Pierce, Oriel Securities and Westhouse Securities retained their “buy” ratings for Desire.
“It’s still very early days and the reaction is disappointing considering Desire has not yet reached the end of its programme,” an analyst at Westhouse Securities said.
Desire is expected to make a further announcement this week when its operations at Liz are completed.
“Until the logging is complete and the results analysed, it will not be possible to determine the significance of the hydrocarbons encountered and whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned,” the company said.
Tensions have run high between the UK and Argentina after Desire announced plans to drill the first new oil well in the region for over a decade.
Argentina claims the British territory and the exploration has sparked protests from the South Americans.