Disaster Petroleum finds oil [updated] | FT Alphaville

Disaster Petroleum finds oil [updated]

At last the plucky Falklands explorer has found some of the black stuff.

Unfortunately, it did’t find very much – two oil shows over a 1-metre section – and that means the game is almost up for Desire. The company has just £22m (or 6p a share) of cash left, which should just about cover rig demobilisation costs and the rest of its 3D seismic programme.

Naturally, Desire is a putting on a brave face, saying that it will now review all financing options. But no one seriously thinks another equity fund raising is a possibility, particularly given its string of drilling disappointments. (The East Flank fairway and the Ann/Orca South prospects high priority areas apparently).

According to Canaccord Genuity:

Whilst the group says it will now review all financing options, I would imagine that a straightforward equity raise would prove difficult (and hugely dilutive), given the group’s disappointing exploration record, and a general waning of interest by equity markets towards the Falklands in general. I also can’t see industry queuing up to buy the company, or indeed to farm into the group’s Falklands acreage. The exception to this may well be RKH, given that it already has 7.5% of the licence, and that it has previously said there is an outside chance that the Sea Lion discovery extends into the acreage. However I’d guess that any potential farm-in deal that RKH might get involved in would certainly be on better terms for it than DES, given its far stronger financial/strategic position.

Indeed, that’s been reflected in Desire’s share price this morning.


And to think the last fundraising was done (last September) at 140p.

High risk investments, these E&P companies.

Update: 3.19pm
Header changed after hearing the new name for the company at lunchtime.

Related links:
Un-Desire-a-ble – FT Alphaville
Keep calm and carry on – FT Alphaville