The 26% drop in Sound Energy PLC’s (LON:SOU) share price on Monday is “probably overdone”, so says oil companies expert Malcolm Graham Wood.
Sound on Monday revealed that despite the ‘encouraging’ gas shows, reported recently, the apparent discovery in the Badile well would most likely be ‘sub-commercial’.
In London, Sound Energy’s AIM-quoted shares fell around 20p, 26.6%, to trade at 56.5p each by midday.
WATCH: Sound Energy drop 'undue' after 'sub-commercial' Badile revelations - analyst
Malcolm Graham Wood, in his daily market blog, noted that he had valued Badile’s potential at around 50p per share before the exploration drilling began.
“Despite further ‘significant gas shows’ in the reservoir, unfortunately water influx and mud losses into what are believed to be fractures in the formation appear to have put paid to the commerciality,” he said.
“Although I have carried a potential value of 50p in case of success for over three years now, I dont think that any of that was really in the price and so today’s fall is probably overdone, this result back then would have been little short of disastrous.”
The analyst highlighted that Sound’s investors would now turn all attentions on Morocco, where he describes the assets as being “much more serious”.
“Eastern Morocco is showing signs of great prospectivity, strongly financed with good partners, backed by local funds and with exciting prospects that are quick, relatively easy and cheap to develop, certainly by Italian standards.
“Today’s 20% odd fall in the shares probably reflects sky-high ambitions, but with Sidi Moktar still drilling may represent a buying opportunity for the wise.”