Shares in Desire Petroleum (LON:DES) plunged 25% after the 14/15-1 well on the Rachel prospect became the latest in the Falklands to come up dry.
The well reached a total depth of 2,877 metres and initial wireline logging showed that no hydrocarbons were found. However, a substantial thickness of sandstone was encountered in the upper part of the target zone.
Desire offered some silver lining, saying that the Rachel well provided much new valuable data on the distribution of the reservoir targets within the Eastern Flank play and in particular the calibration of the 3D seismic data for sandstone prediction.
Based on the latest information from the well, potential sandstones have been identified downdip from the existing location closer to the mature oil source rock, which significantly reduced the oil charge risk.
Once the logging operations are complete, the well will be sidetracked to this location to evaluate the prospectivity. This is expected to take 20 days.
Expectations were high for the Rachel well as it was set in a similar setting to Rockhopper Petroleum’s (LON:RKH) Sea Lion discovery, which has so far been the only success in the closely watched drilling campaign in the Falklands.
Rockhopper has a 7.5% working interest in the Rachel 14/15-1 well.
The competent person’s report (CPR) had suggested a 15% chance of success, while Evolution Securities analysts put it at 20%. Similarly, just after the Rachel 14/15-1 well was spudded, Fox-Davies oil and gas expert Lionel Therond said that Sea Lion had de-risked the prospect.
“Given the success of Rockhopper at Sea Lion, we would attribute a higher chance of success than 15% to Rachel...Using a 25% chance of success for Rachel, instead of 15%, increases our risked valuation for the company from 150 pence to 200 pence,” Therond had said.
The Rachel well is the first in a likely four well drilling campaign operated by Desire.
Following the 14/15-1Z sidetrack it is intended to move the rig to the next location 25/5-1 on the Dawn/Jacinta prospect in the Desire 100% Tranche I licence.
Shares in Desire Petroleum last traded at 84.25 pence.