Shares plummet as Desire warns lacks of funds will curtail drilling operations
MIDLAND-registered oil and gas exploration firm Desire Petroleum has warned a shortage of funds may hamper further drilling operations in the North Falkland Basin.
Shares plunged almost 60% in early trading following the announcement, which came as the Malvern company said it was abandoning its latest well after oil deposits were found to be poor.
It said the oil reservoir at the foot of the 14/15-3 well was found to have an average porosity of just 13% and further exploration of the area was unnecessary.
It said it would therefore abandon operations on the well and move on to carry out seismology tests on other areas.
However, chairman Stephen Phipps said that while there was initially enough money to continue operations, long-term a review of drilling may have to take place.
He said: “On completion of the Ninky well Desire will have funds of circa $37m (£22.5m) which, while more than adequate for our share of rig and vessel demobilisation, completion of our 3D seismic acquisition, processing and interpretation plus general working capital needs, is insufficient to drill further wells.
“Given our continuing confidence that oil will be discovered on Desire’s acreage, further wells will need to be drilled and, therefore, once the results of the Ninky well and the 3D seismic have been analysed, we will review all financing options available with the intention of rejoining the drilling campaign later in the year if possible.”
The 3D seismic survey is taking place in conjunction with fellow exploration firm Rockhopper, which shares a number of drilling licences with Desire.
To date, approximately 1,485 km2 have been surveyed by Desire and the company said it anticipated a further 195 km2 would be completed during the programme.
The joint survey is expected to be completed during May.
Desire said processing of the new seismic data was in progress and initial indications were that data quality was good.
Priority areas have been identified to the east, between the Ninky and Sea Lion prospects. The processed data from these priority areas is expected to be available in July.
Desire said it remained optimistic that new prospects would be identified during the survey, particularly within the East Flank area within Desire’s operational licences.
