Falkland oil firm’s shares slump as well abandoned

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Shares in Falkland Oil & Gas almost halved in value yesterday after telling investors it would abandon a well in the South Atlantic following disappointing results.

The firm has a 40 per cent stake in the Scotia well, about 200 miles north-east of the Falkland Islands, and began drilling there in September. However, it said it had encountered a “poor quality” reservoir and would search for better prospects nearby after abandoning the well.

Chief executive Tim Bushell said: “During 2012 we have drilled two encouraging wells, both of which found hydrocarbons and were completed safely and within budget. They reinforce our confidence in the potential of the basin.”

Despite his upbeat comments, shares in Falkland plunged 48 per cent or 30.25p to 32.75p.

Exploration in the area has sparked anger in Argentina, which claims sovereignty over the islands it calls the Malvinas. Oil was found to the north of the Falklands in 2010 by Rockhopper Exploration, which has enlisted Premier Oil to fund development, while explorer Desire Petroleum last week reported “excellent exploration potential” from its discoveries in the region’s Sea Lion complex.

Sam Wahab, oil and gas analyst at Seymour Pierce, said drilling in the South Falkland basin has yielded mixed results so far this year, “and we may see investor appetite in the region begin to wane in favour of the North Falkland basin, which encompasses the oil-bearing Premier-operated Sea Lion field”.