Independent explorer Falkland Oil and Gas got a boost to its share price yesterday after announcing it had made a gas discovery off the remote south Atlantic islands.
The firm, which is exploring to the south and east of the disputed Falklands, said its Loligo appraisal well had found very strong gas shows at various depths.
It said it failed to secure pressure data or samples, however, and so would now plug and abandon the well and move on to drilling its Scotia prospect – thought to contain a billion barrels of oil – instead of a second well on Loligo. FOG said this was to give it time to analyse the Loligo well results. It had said previously it would continue to target the Loligo play (prospective zone) if the well was successful, but move on to other areas if not.
Shares in FOG closed more than 5.3% yesterday at 74p after having fallen to 55p at the market opening. Shares had been trading at above 90p until last week when they fell to 60-70p.
FOG chief executive Tim Bushell said: “The initial results of the Loligo well are encouraging.
“It is clear that Loligo is a valid trap that contains multiple gas-bearing zones, with over 100 metres of hydrocarbon-bearing reservoir.
“We now need to focus on reservoir distribution within Loligo to find the sweet spots. A work programme will be undertaken to achieve this, assess the resource potential and commercial viability of this discovery.”
FOG said that if drilling, using the semisubmersible Leiv Eiriksson rig, on Scotia came in on budget the firm would be left with at least £123million at the end of this year’s drilling campaign. FOG is operator and 75% equity holder in Loligo with Edison International holding the remaining 25%.
FOG agreed a farm-in with Noble Energy recently on other areas of its Falklands acreage. This excluded Loligo.
Fellow Falklands explorer Desire Petroleum said it was seeking a high-quality farm-in partner to help it to capitalise on the exciting potential of the North Falkland Basin.
Announcing its interim results, it said its losses had dropped to £1.2million in the first half of 2012, from £24.2million in the same period last year.
It said it had cash of £12.7million at the end of the period.
The British-governed Falklands has seen increasing tension from Argentina, which claims sovereignty over the islands it calls Las Malvinas. This has not deterred the likes of US oil firm Noble and UK-based Premier Oil taking significant stakes in the region, through holdings in FOG and Rockhopper Petroleum respectively.