Desire Draws Another Blank

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By

Alan Oscroft

Published in Company Comment on 29 December 2010

Desire Petroleum's latest well comes up dry.

Oil and gas explorer Desire Petroleum (LSE: DES), delving in the North Falklands basin, disappointed investors on Wednesday with the news that drilling at its Jacinta prospect has uncovered no sign of hydrocarbons.

The Jacinta oil prospect, at a depth of 1,310 meters, has been examined by well number 25/5-1, and drilling at that well will now continue to explore a deeper gas prospect, Dawn, at 1,670 metres.

Second failure

This latest comes after news in early December that the company's Rachel North well, which had sparked early optimism with its initial discovery of oil, actually contained no commercially viable quantities of the stuff and would be closed.

The bad news drove the Desire share price down by around 20% in early trading, and it is now down around 70% since its highs of over 160p in October, standing at 48p at the time of writing.

This second failure, coming so hard on the heels of December's disappointment, must cast some doubts on the overall potential of the Falklands basins, with Rockhopper (LSE: RKH) being the only explorer in the region with significant finds on its books -- and not a drop of Falklands oil has yet made it to market.

The share prices of fellow explorers in the region don't seem to have been troubled, though. Rockhopper and Borders & Southern (LSE: BOR) moved up a tad, while Falklands Oil & Gas (LSE: FOGL) and Argos Resources (LSE: ARG) dropped insignificantly.

Deeper prospect

The future of Desire, which has so far failed to produce any oil or gas in its 12 years of exploration, must be looking a little less solid this week, and shareholders will now be earnestly hoping for better news from the deeper Dawn prospect.

If you're an investor in Desire, or any of the other explorers in the regions, please feel free to offer your thoughts, below.

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Comments

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5753225 29 Dec 2010 , 1:59pm

I invested in Falkland Island Holdings. They are the shovel sellers in this gold rush. They run the ports and infrastructure that the drillers need. I don't care which one of the explorers finds oil (although I hope FOGL does as Falkland Island Holding owns shares in this one), I expect to make money as long as some commercial oil is found.

whutchilarious 29 Dec 2010 , 2:53pm

Your research is a little deficient Alan.

DES did make a gas discovery with their Liz drill (see http://www.desireplc.co.uk/investor_relations_announcements.php?article_id=158) and as far as I know Dawn is a gas prospect!

TMFTigger 29 Dec 2010 , 3:43pm

Thanks whutchilarious. I've amended the article.

DaveTMF 30 Dec 2010 , 10:04am

Having previously lived in the Falklands, I wanted to invest in the oil exploration action merely as a punt. I went with "Rockhopper" mainly because they were my favourite of the five penguin species on the islands! So far seems to be the right decision. I am expecting further major price movement on RKH when data has been analysed and further drilling takes place (mid to late 2011). Just hope it is upwards!

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