(Updates with closing share price in fourth paragraph.)
By Brian Swint
Dec. 2 (Bloomberg) -- Desire Petroleum Plc
, the U.K. energy
explorer, said a well off the Falkland Islands made the region’s
second discovery this year, threatening to reignite a diplomatic
dispute between the U.K. and Argentina.
In May, Rockhopper Exploration Plc
made the first
potentially commercial find around the South American islands
8,000 miles from the U.K. that Prime Minister Margaret Thatcher
went to war to defend in 1982. Argentina
sovereignty and is protesting the drilling by forbidding vessels
to load cargo at its ports, while the Falkland Islands has said
no Argentine company will be given a license there.
“The more successes that happen, the greater the prize and
the more that diplomatic tensions will rise,” said Peter
Hitchens, an analyst at Panmure Gordon & Co. in London. Desire’s
discovery “has proved up another play in the area and it could
become a major hydrocarbon zone.”
Desire shares jumped 26 percent after the company said
drilling at the Rachel North well encountered 57 meters of net
pay in multiple zones at a depth of 3,052 meters (10,000 feet).
Desire will now complete logging and sampling to analyze its
quality and significance, it said.
The shares closed at 132.25 pence in London. Rockhopper,
which owns a 7.5 percent interest in the well, jumped 8 percent
and Argos Resources Ltd.
, another explorer in the islands,
climbed 9 percent.
“This discovery, combined with Rockhopper’s Sea Lion
discovery, confirms our belief that the eastern flank play
fairway in the North Falkland Basin is highly prospective and
that further oil fields will be discovered in this area,”
Stephen Phipps, chairman of Malvern, England-based Desire, said
in a statement.
Desire’s Rachel discovery may yield about 50 million
barrels of recoverable oil, which would make it “borderline
commercial,” Panmure Gordon’s Hitchens. “It’s not a slam-dunk
like we’ve seen with Rockhopper.”
Speculation about new strikes, as well as several
disappointing wells, have given Desire and Rockhopper the
largest average daily price moves
in the last 180 days among
U.K.-traded companies valued at more than 100 million pounds
($156 million). The U.S. Geological Survey says the islands’
waters may hold 4 billion barrels of oil.
Desire, Argos and Salisbury, England-based Rockhopper are
focusing on the northern side of the islands, while Borders &
Southern Petroleum Plc and Falkland Oil & Gas hold licenses in a
different geological formation on the southern side.
Borders & Southern said this week that it signed a contract
with Ocean Rig UDW Inc. to provide drilling rigs. Falkland Oil &
Gas has plans drill two prospects early next year, subject to
The summer drilling season in the Falklands runs from
October to April. Desire plans to drill two more wells this
year, and Rockhopper holds a 7.5 percent interest in both.
Diamond Offshore Drilling Inc., the largest U.S. deep-water
oil driller, has offered Rockhopper the Ocean Guardian semi-
submersible rig for three wells and possibly five extensions.
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--Editors: Alex Devine, Stephen Cunningham.
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