Falkland Oil & Gas Ltd., the explorer focused on the namesake South Atlantic islands, made the region’s second gas find this year at its Loligo well.
The well drilled through six reservoirs and encountered gas-bearing zones over a 1,300-meter (4,265 feet) interval, it said today in a statement in London. The company wasn’t able to determine how much of the discovery may be liquids. The shares reversed initial losses of as much as 21 percent to close up 5.3 percent at 74 pence.
“While significant appraisal will be needed to assess its commercial potential, we believe a liquefied natural gas development could be economically viable,” Laura Loppacher, an analyst at Jefferies International Ltd. in London, said in an e-mailed note. She lowered her price estimate on the stock to 115 pence from 195 pence.
Loligo, named after a Patagonian squid, was targeting as much as 4.7 billion barrels of oil as well as being the second-most prospective well drilled in the world this year, according to Morgan Stanley. Borders & Southern Petroleum Plc said in July that it found gas, including some liquids, south of the islands Margaret Thatcher went to war to keep British in 1982.
Falkland Oil and its partners Noble Energy Inc. and Edison SpA will now move onto the Scotia well, where they’re targeting about 1 billion barrels of oil. Loligo will be plugged and abandoned. The company will evaluate the well results further and do more seismic surveys before drilling an appraisal well near Loligo, it said.
“We now need to focus on reservoir distribution within Loligo in order to find the sweet spots,” Chief Executive Officer Tim Bushell said in a statement. The company will “assess the resource potential and commercial viability of this discovery.”
Falkland Oil secured partnerships with Noble and Edison this year to share the costs and risks of drilling. The company will have at least $200 million on its balance sheet after the 2012 drilling campaign, it said.
Rockhopper Exploration Plc found a potentially commercial oil discovery north of the archipelago two years ago.