SHORTLY after Desire Petroleum issued a positive update on its operations in the the Falkland Islands, Falklands Oil & Gas (FOGL) has abandoned its Scotia exploration well in the south basin after disappointing results.
FOGL has announced: Whilst reservoir quality at this particular location was poor, it should be recognised that .... Scotia covers an area of approximately 350 square kilometres. As such, further technical work is required to assess just how representative this result is, and whether or not better quality reservoir may exist elsewhere within Scotia.
It also said that after the 2012 drilling programme was completed it would have $220m cash in the bank. But the market has taken the news badly, with the company's shares slumping 46% to 34p.
Merchant Securities said: The immediate result is a disappointment as the well did not confirm the presence of oil or high quality reservoir. We are reducing our target price to 57.7p from 152.0p to reflect that the Scotia well results did not confirm a commercial discovery. We are changing our recommendation from buy to sell.
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