Shares in UK-Falklands Desire Petroleum slumped Monday as the company officially confirmed a disappointing result from the first drilling in its exploration campaign in the North Falkland Basin.
In a brief release Desire Petroleum said that the Liz well, in the North Falkland Basin, reached a depth of 3570 metres and logging is underway.
“The primary Liz target was encountered at around 2550 metres with indications of hydrocarbons while drilling. Subsequent logging operations have shown that oil may be present in thin intervals but that reservoir quality is poor”.
Deeper gas shows have also been encountered while drilling, particularly below 3400 metres and these have still to be evaluated by wire-line logging and sampling.
Desire Petroleum say that 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.
Operations are expected to be completed later this week when Desire will be making a full announcement.
Following the company’s announcement, shares in Desire plunged by nearly 60% when trading began, down 58p at 41p. Rockhopper Exploration, which owns 7% of Desire's well, tumbled 35%.
Alan Sinclair, analyst at stockbrokers Seymour Pierce, argued that all may not be lost.
On balance, whilst the market may have been looking for seagull-scorching test results from Liz, it should be borne in mind that this is the first of a potential six-well program by Desire. It is encouraging that initial indications suggest that potentially all the ingredients, reservoir, trap and hydrocarbons, are present in the general area, he added.
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