Desire share price drops more than 62% on well news

SHARES in Midland based oil and gas exploration firm Desire Petroleum crashed by more than 62% today after the company said its latest drilling operation in the North Falkland Basin had not proved as successful as first thought.

Malvern registered Desire has now said it will plug the Rachel North Well and move on to a further site within the NFB.

The company’s shares rose dramatically last week when it announced preliminary results indicated deposits of hydrocarbons.

However, samplings of the main sand showed that the hydrocarbons were residual and that the mobile fluid was water.

Stephen Phipps, Desire chairman, said: “Having seen the highly encouraging results from the first logs, the LWD, PEX and CMR, on this well, plus accompanying oil shows, it is extremely disappointing that the subsequent wireline logs and fluids sampling have dashed all the earlier promise of this being Desire’s first oil discovery in the North Falkland Basin.

“Despite this setback, the presence of hydrocarbons and good reservoir development have been identified in a number of the Rachel fan sands and we therefore continue to believe in the prospectivity of the East Flank Play fairway for future oil discoveries.”
The rig will move to drill the Dawn/Jacinta prospect in Tranche I in which Desire has a 100% interest.

After the Dawn/Jacinta well, Desire is likely to drill another well at a location as yet still to be decided.

Desire’s current cash balances are circa £75m. These funds will enable the explorer to drill the Dawn/Jacinta well, an additional well and to cover 3D seismic costs.

Upon hearing the news, analysts immediately downgraded the shares.

Rockhopper, which has a joint interest in the well with Desire, also saw its share price reduced .