Falkland explorers Borders & Southern down 70% as it abandons biggest prospect
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Version 0 of 1. The explorers seaching for oil off the coast of the Falkland Islands have underwhelmed the stock market once again - much to the relief of politicians hoping to avoid another military conflict - as Borders & Southern revealed it will abandon its biggest prospect after failing to find enough gas. Shares plunged from 62.6p on Friday, to just 19.1p today, down 70%. In its Stebbing well, to the south of the islands, the company said it had found good quality gas, but not in commercial quantities. It believes deeper down there is more gas, but, it can't get down that far and will instead turn its focus to its one remaining prospect in the area. In a potential understatement of the year, it said: "It is very disappointing not to have reached all the potential reservoir targets in this well." Quite. The four remaining explorers in the area all saw their shareprice fall. Desire Petroleum down 0.6p, 2.9%, at 21.7p; Argos Resources down 1.2p, 6.6%, to 16p; Falkland oil and gas down 8.8p, 10%, at 77.5p and Rockhopper down 24p, 9.4%, at 230.5p. Rockhopper – the only firm to have actually found commercial levels of oil and gas in its Sea Lion field to the north – was given a double blow when Credit Suisse cut its outlook from outperform to neutral, despite the firm signing a $1bn deal with Premier Oil last week to help fund the development of the oil field. Analyst Dougie Youngson at Seymour Pierce wrote <blockquote>Borders has completed the second well in its Falklands drilling programme. The well successfully penetrated the upper Tertiary target, but was unable to reach the deeper targets due to anomalous pressure conditions down hole which resulting in drilling being stopped.<br /><br />The Tertiary target showed very strong gas shows, but it was not possible to determine the fluid type or saturation. Consequently, the company feels that the upper target is not commercial. The well will now be plugged and abandoned and post completion the rig will move to Falkland Oil & Gas' acreage.<br /><br />This is a disappointing result for Borders and we expect the share price to be negatively impacted today. We have revised our numbers and are reducing our recommendation to Add from Buy (Buy since initiation 13/02/12). We are also reducing our target price from 113p to 60p. Future news flow will now focus on the Darwin discovery where the company is awaiting the lab analysis of the fluid samples collected during drilling.<br /></blockquote> All eyes will now focus on Falkland oil and gas, which will talk over the abandoned well from Borders & Southern, as it plans to give the market an update on its own prospects in the region later this year. The share price fall is reminiscent of Desire's efforts in December 2010 when its own shares sunk 50%. At the time the company reported it had hit oil on its Rachel well, but mere days later the company admitted it had actually discovered water. |