Desire shares plummet as Falklands oil discovery quickly turns sour

SHARES in oil explorer Desire Petroleum almost halved yesterday after it was forced to admit that it has not made an oil discovery in the Falklands Island just days after saying it had.

The company said that further analysis of data from a key well had shown it had struck sands holding water rather than oil. Shares fell by 49.5 per cent - or 66p - to close at 67.25p.

Only last Thursday Desire, one of a number of UK companies, including Rockhopper Exploration, hunting for oil around the Falklands, said it believed it had made a discovery at its Rachel North well in the North Falkland basin, sending its shares up by 25 per cent.

Hide Ad
Hide Ad

Analysts said yesterday's turnaround was embarrassing for the company and a confidence blow to exploration in the region.

Desire's share price is hugely volatile--soaring as much as 114 per cent in one day in October without the company issuing any news.

"They were obviously under a lot of pressure from the stock market to announce something last week and they hadn't finished acquiring the data," said one analyst, who did not want to be named.

"In a normal course of events, you wouldn't put a press release out until you finished doing all the data acquisition."

Evolution analyst David Farrell added: "This is a major blow to Desire and the prospectivity of the North Falkland basin."

The update follows news last week when leaked US documents revealed ExxonMobil said oil resources in the islands were insufficient to be profitable.

Desire said the Rachel North well would now be plugged and abandoned and the rig would be moved to drill another prospect.

The firm said it had cash of 75 million which would be enough to fund two further wells and better understand the geology around the Rachel prospect.

Hide Ad
Hide Ad

Chairman Stephen Phipps said Desire continued to believe in the potential for oil discoveries in the prospect.