23.07.10 Shares in Falkland Oil & Gas drop
Shares in Falkland Oil & Gas fell sharply recently after the company announced that it was giving up on one of its wells in the area surrounding the Falklands Islands. This was a major blow to the company which had expected to find oil in the region.
The well in question, Toroa, is situated just off the coast of the South Falklands. Drilling began at Toroa, in which the firm has a 49% stake, at the end of May 2010. Despite being very optimistic at the time, the firm has just announced that there are no hydrocarbons to be found there.
Forecasts had previously predicted that there could be up to three billion barrels of oil in the area. But this recent setback suggests that this was slightly optimistic. Still, Falkland Oil & Gas hopes that there is still oil to be found in the area, which is located 90 miles south of Stanley, the capital of the Falklands.
Shares plummeted 60% on the news, despite then recovering slightly and closing 53% down. Last month the shares had rocketed to 244p after the firm had announced that it had discovered a new field.
There are a number of UK companies currently looking for oil in the area in a move bitterly opposed by Argentina. The islands are known there as the Islas Malvinas, and the country claims the territory as its own.
Tim Bushell, the chief executive of the firm, said that whilst the results are disappointing, “it has to be remembered that this is the first well in a previously undrilled frontier basin", adding that they believe “these results have helped to reduce some of the key risks of the plays in the deepwater areas of our licences”.
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