Dry holes cool prospects for Desire Petroleum. Financial Times, October 23
By Thorold Barker
Desire Petroleum, the Falklands exploration company which listed on Aim in April, warned shareholders on Thursday that cuts in exploration budgets across the industry were likely to effect the speed of exploration in the North Falklands Basin.
Colin Phipps, chairman, said if the next two wells drilled there by Amerada Hess and Shell were unsuccessful, it was "probable companies will put the Falklands on the back burner like everywhere else" Desire would then consider trying to get together a consortium to drill another well, but Dr Phipps was not sure it would be possible in the present low oil-price environment, unless there was a fall in drilling costs.
The company still has $11m (£6.4m) in cash from the original £15m raised on flotation, but at about $10m for each well, Desire would not drill alone and might be forced to wait until a rise in the oil price made the prospect of drilling attractive to potential partners. Desire is obliged to drill one more well in the next eight years.
John Penhale, international drilling manager at Amerada Hess, said: "The drillings we have made have not been encouraging enough to warrant keeping a rig in the Falklands". If there are no approaches to drill further wells after Shell has finished, Amerada will probably move Borgny Dolphin, the drilling rig which cost more than $10m to tow to the Falklands, to another region.
Desire had no turnover and received interest of £151,754 (£29,374) in the six months to June 30 on its cash balance, as drilling expenses are capitalised. Cash outflow before financing rose to £1.98m (£693,443).
The shares, floated at 125p, reached 495p this year on the back of "Falklands fever", as initial wells found that all the necessary conditions required to find oil were present. They closed down 14p at 60p.
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