Falklands Oil & Gas plunges on empty well
FALKLANDS Oil & Gas saw its market value halve yesterday after the company said its Toroa exploration well to the south of the islands had not yielded reserves.
Crestfallen investors, who had hoped to replicate rival Rockhopper’s successful drilling to the north of the disputed British territory, rushed to dump the stock. Falkland’s shares closed 52.7 per cent down at 95.5p, giving the wildcat prospector a market capitalisation of £295m.
Chief executive Tim Bushell said the Toroa news was “disappointing”, but added: “It has to be remembered that this is the first well in a previously undrilled frontier basin. We look forward to continuing our exploration programme once a suitable deepwater rig has been secured.”
Trading in the three other companies actively drilling in the region was mixed. Rockhopper and Desire Petroleum closed in positive territory but Borders & Southern fell nine per cent to 65.5p.
Canaccord Adams analyst Richard Slape was sanguine about Falkland’s failure to find oil. He said: “Toroa is a very big prospect and the market has taken a view as to the likelihood of that being successful. There was bound to be a negative reaction.”
Keith Morris of Evolution Securities said smart investors would be aware of the geographic and geological differences between Falkland’s prospect and Rockhopper’s fruitful Sea Lion site.
Ocean Guardian, the drilling rig being shared by the four British explorers, will now pass to Rockhopper. The Aim-listed firm is expected to begin work on its second prospect, Ernest, towards the end of the month. Analysts say it could match Sea Lion, which holds an estimated 242m barrels of crude.