- By Region
Shares in oil explorer Borders & Southern Petroleum fell 70 per cent on Monday after it said a well it had drilled near the Falkland Islands failed to find any oil.
Borders reported that it had been unable to drill to the targeted depth at its Stebbing well, about 150km south of the islands, due to the presence of high-pressure gas that threatened the integrity of the well. It will now be plugged and abandoned. Shares in the company fell to 19p, their lowest level in three years, on the news.
“Obviously it’s disappointing, but it’s what you’d expect from frontier drilling,” said Laura Loppacher, an equity analyst at Jefferies.
Borders is one of a number of small exploration companies whose drilling programmes in the Falklands have generated huge interest from investors.
The area’s attractiveness was confirmed last week when UK oil and gas group Premier Oil agreed a $1bn deal with Rockhopper
, one of the few explorers to have found sizeable amounts of oil in the region. The money will be spent developing Rockhopper’s Sea Lion field, which it discovered in 2010.
But shares in Falklands-focused companies tend to be volatile, reflecting mixed drilling results and the fraught state of relations between the UK and Argentina, which remain at odds over the South Atlantic islands 30 years after going to war over them.
Argentina continues to claim sovereignty over the islands it calls Las Malvinas, and has threatened legal action against British companies drilling in the region.
Shares in other Falklands-focused explorers also fell on Monday, with Falkland Oil & Gas, which is drilling in the same area as Borders, dropping 8.4 per cent, Desire Petroleum off 1.73 per cent and Rockhopper down 12.4 per cent.
Analysts said that, in the case of Borders – which has five production licences in the South Falkland Basin covering an area of nearly 20,000 sq km – all eyes were now on an announcement on its Darwin discovery, which is expected in the coming weeks.
In April this year, the company’s shares fell sharply after it announced it had found gas condensate rather than oil at Darwin, its first exploration well in the region. Liquid samples taken from Darwin are now undergoing laboratory analysis, with the results expected some time in August.
“The obvious question for the company now is what the remaining potential is around Darwin,” said Ms Loppacher.
At the time, analysts had said that the Darwin discovery would have to be large to justify a big investment, considering the remoteness of the Falklands and their vast distance from large natural gas markets.