What’s that?
Yep, is the unmistakable whiff of burnt fingers.
From Falklands explorer Desire Petroleum on Friday morning:
Desire Petroleum plc (AIM:DES), the oil and gas company wholly focussed on the North Falkland Basin, advises that the 14/15-1 well on the Rachel prospect has reached a total depth of 2,877 metres. Initial wireline logging shows that no hydrocarbons have been found. However a substantial thickness of sandstone was encountered in the upper part of the target zone, comprising 103m of gross sandstone of which 81m is net reservoir with an average porosity of 23%.
No oil but there is a lot of sandstone.
So, on to the early price action in Desire.
Ouch.
And to think Desire recently raised £23m via a placing of new equity at 140p a share.
Update: 10:06am (BST).
It would appear Friday’s news was not a surprise to everyone.
Then again that sell-off could have been caused by Rockhopper’s disagreement with its competent person.
Update: 10:10am (BST)
Here’s what the sector watchers think of Desire’s duster.
Alan Sinclair at Seymour Pierce reckons there is still huge upside:
The primary target on the Rachel exploration well (14/15-1) does not contain hydrocarbons. However, potential sandstones have been identified down dip from the existing well location and Desire will sidetrack the well to evaluate these formations. This sidetrack is likely to take 20 days. Once operations at Rachel are complete, Desire intends to move the rig to spud well 25/5-1 on the Dawn/Jacinta prospect, Desire 100%. A further two wells are planned after this. Whilst the initial results of the Rachel appear disappointing, the potential in the down dip location is encouraging. Desire’s portfolio of prospects is extensive and does offer potentially huge upside. BUY.
Yeah right.
Nick Copeman at Oriel strikes a more realistic note:
The well will now be side-tracked into deeper targets which is expected to take 20 days to complete. These targets look higher risk given the sands are likely to be worse quality and thinner in the deeper part of the basin. However these deeper sands should be better located relative to the source rock.
Desire is expected to be funded to complete a further 3 wells (including the sidetrack) which was expected to include Dawn/Jacinta and Elaine, which we estimate are worth 117p/sh on a risked basis. However all these prospects look high risk following the failure of Rachel and our recommendation is under review.
And finally Evolution’s David Farrell:
The immature source rock appears to have struck again, with no shows in the upper reservoirs, which showed good porosity. From the RNS there is no indication that the expected reservoir was found in the lower objectives. The well is now being side-tracked towards the oil kitchen in the centre of the basin with the hope of finding the lower reservoirs which will hopefully be charged. This should take 20 days to complete. Today’s result is a clear reminder of how early stage exploration currently is in the Falkland Islands.
Amen to that.
Related link:
The acrid stench of burnt fingers – Falklands oil edition