Desire Petroleum, the oil and gas explorer focused on south Atlantic waters, was more upbeat yesterday about a well in the North Falkland Basin.
The firm said its Liz prospect had proved highly encouraging, but this did not prevent its shares falling again.
The announcement came just a week after its shares nearly halved in value to 50.5p when it emerged initial drilling by the Ocean Guardian rig had been disappointing, and just five days following a statement that Desire planned to drill a deeper target.
The company, which has a 92.5% stake in Liz with partner Rockhopper Exploration holding 7.5%, said yesterday it had found gas with almost 56 feet of net pay in two intervals.
It added that the well was now being plugged and abandoned as a discovery.
Desire said: “Much work is now required to evaluate the reservoir quality, to determine the trapping mechanism and to assess the potential of this discovery.
“Dry gas was also recovered from a deeper interval indicating that gas pay is present in a generally poor-quality reservoir but there is considerable uncertainty on the rock type and more work will be required to assess its potential. Good oil shows were recorded while drilling but logging and sampling confirmed that this reservoir interval was tight.”
Desire chairman Stephen Phipps said: “This well has proved complex and highly encouraging.
“Hydrocarbons have been found in two separate intervals, the geological model for the basin has been confirmed and at least two petroleum systems have been drilled, with hydrocarbon shows recorded over a wide interval.
“New reservoir targets have been identified and the challenge will be to predict where these may occur in better quality. The prospectivity of the basin has been greatly enhanced. We now intend to carry out technical work to assess and analyse the information from this well and we are looking forward to resuming our drilling campaign later in the year.”
Gavin Farquhar, a partner in legal firm McGrigors’ energy and infrastructure team, said although Desire had decided to abandon and plug the Liz well the company would have learned valuable lessons.
He said: “It is fair to say it’s not been the success everyone was hoping for, but it is encouraging that hydrocarbons have been found and Desire clearly remain upbeat about the overall drilling programme.
“It is all a learning process and the information gathered will be useful in giving an insight in to the wider nature of the North Falkland Basin and will shape how the exploration of the basin proceeds. Now all eyes are on Rockhopper.”
Liz was the first well in a multi-well campaign to explore the North Falkland Basin. Rockhopper will now drill two wells in the basin and BHP one in the East Falkland Basin before the Ocean Guardian returns to Desire for further drilling.
Desire said subsurface support on the well had been provided by Aberdeen-based Senergy and the results reported were based on the work of that company’s operations team.
The British Geological Society has estimated that waters around the Falklands could hold more than 60billion barrels of oil equivalent.
Desire’s shares fell 6.5% to 47.25p yesterday on disappointment that the Liz well was being abandoned, while shares in Rockhopper rose nearly 20% to 54.25p on expectations for its forthcoming two wells. The latter’s shares had dropped 16% to 45p last week on the news of initial drilling results.