Desire Petroleum shares dive with U-turn on Falkland oil discovery

It turns out Desire Petroleum (LON:DES) doesn’t have an oil discovery in the North Falkland basin after all.
Last Thursday it proclaimed a new oil discovery after preliminary results indicated that it had found 349 metres of sands and shales with hydrocarbons, including 57 metres of net pay in multiple zones.
This morning Desire told the market that sampling of the main sand has shown that the hydrocarbons are residual and that the mobile fluid is water.
The response from investors was both swift and severe, with Desire shares falling around 50 percent in early deals, to 68.25 pence.
“It is extremely disappointing that the subsequent wireline logs and fluids sampling have dashed all the earlier promise of this being Desire's first oil discovery in the North Falkland Basin,” chairman Stephen Phipps said.
The company stressed that drilling on the Rachel prospect has so far identified five ‘fan systems’ with varying areal extent and reservoir properties, and good reservoir development has been recorded in a number of the fans.
Phipps added: “Despite this setback, the presence of hydrocarbons and good reservoir development have been identified in a number of the Rachel fan sands,
“We therefore continue to believe in the prospectivity of the East Flank Play fairway for future oil discoveries."
According to Desire, some of the sands are of a similar age to those in Rockhopper Exploration's Sea Lion discovery.
The company plans to remap these systems after it has completed its 3D seismic programme in 2011.
Desire’s next drill target will be the Dawn/Jacinta prospect, which is on the southern margin of the basin. The next prospect is independent of Rachel and it is targeting sands at a number of levels.
Another well is also planned after Dawn/Jacinta, but the drilling schedule has not yet been finalised.