Shemen Oil & Gas Resources Ltd. plunged the most on record after production tests at the explorer’s Yam-3 well offshore Israel revealed a “dry hole.”
The shares tumbled 87 percent, the most since they began trading on the Tel-Aviv Stock Exchange in December 2011, to 0.126 shekel at the close. The drop pared the company’s market value to 67 million shekels ($19 million). Investors traded 55 times the three-month average daily volume. The benchmark TA-25 Index advanced 0.8 percent.
Rig operator Caspian Drilling Co. reported production tests in two sections of the drill showed the well was a dry hole, according to Shemen’s filing with the exchange yesterday after markets closed. The explorer said today it does not plan production tests for gas at a depth of 3,440 meters at the site 16 kilometers (10 miles) from the Mediterranean port city of Ashdod.
“This is very disappointing news for Shemen,” Guil Bashan, an analyst at Tel-Aviv based IBI-Israel Brokerage & Investments Ltd., with over 27 billion shekels under management, said by phone. “This raises very big questions about continued efforts, by other explorers, in the same area.”
The company said in December it was targeting as much as 120 million barrels of crude oil potential and 1.8 trillion cubic feet of gas potential. The U.S. Geological Survey estimates the Eastern Mediterranean’s Levant basin, of which Israel covers approximately 45 percent, contains about 1.7 billion barrels of recoverable oil.
Shemen holds a 77.69 percent stake in the Shemen 387 license, according to yesterday’s filing. Caspian Drilling owns 10 percent, Zerah Oil & Gas Explorations LP 7.15 percent and Zmiha Investment House Ltd. holds about 5 percent.
Zerah plunged 59 percent, the most on record, while Zmiha shares dropped 51 percent today.
“It will be harder to convince investors to put money into oil exploration efforts in the area,” Noam Pincu, an analyst at Psagot Investment House Ltd. in Tel Aviv, said by phone.