Falklands : Desire Petroleum Upturn
Submitted by Falkland Islands News Network (Juanita Brock) 07.01.2004 (Article Archived on 21.01.2004)
Edmond Jackson explains that oil exploration companies Cairn Energy and Desire Petroleum provide positive updates this morning.
Oil exploration companies Cairn Energy and Desire Petroleum provide positive updates this morning.
Cairn (CNE) has recently been a favourite among various institutional brokers that follow the Mid 250 sector. Its shares have been steadily rising from about 300p last summer to test 400p. However they have retreated from 412p to 396p after Williams de Broë advised sell on 26 November.
Today Cairn updates on an extensive exploration and appraisal programme in South Asia, across a 5,000 sq km exploration block in the Rajasthan Basin.
Of the fourteen wells drilled on the block to date 10 have encountered hydrocarbons, although some have mixed results. Remember, news about 'finding substantial hydrocarbons' as some companies are apt to declare, does not necessarily imply the discovery will be commercial. Much depends on the nature of oil bearing sands, reservoir quality and so on.
Cairn is open as regards exploration drilling on the Central Basin High located in the southern part of the block. Wells targeting the shallow Thumbli and Dharvi Dungar plays have encountered variable reservoir quality and sand thickness. Without copying a lot of technical detail from the announcement, I sense it is fair news for investors - and there is still plenty of potential, with a significant amount of additional drilling and evaluation work.
Since taking a positive stance on the shares various times in the low 300p area, and feeling they merited holding with the rise from 350p, I would be inclined to run gains if one are already in. It intrigues me how the City is apt to latch on to favourite oil exploration shares in the Mid 250 - Premier (PMO) is another in vogue. Both companies' exploration progress and potential ought to support the shares, despite re-ratings last year. The main caveat is a downside surprise for the oil price, but as things stand the prospect looks positive.
It is some five years since Desire Petroleum (DES) caught punters' imaginations with its Falkland Island drilling campaign - and after setbacks the company is still trying.
After soaring to the stratosphere the shares are bumping around the 10p level, little changed on today's update about commencing a 3D seismic survey over Tranches C and D in the North Falkland Basin before the end of January. Good summer weather there is expected to enhance the rate of data acquisition and quality. The objective is 'to refine the definition of what are currently considered to be the three largest, potentially oil-bearing prospects in the North Falkland Basin.
So the prospect dangled from Desire is one of potential news, if highly speculative in my opinion. This kind of share is liable to fizz if the exploration campaign is early stage and hopes run high - but the bubble burst on Desire some years ago and punters have deserted. For this reason, even though I do not have high expectations and am not a buyer, I am interested to keep an eye on progress. The oil exploration business has lots of potential to surprise.
©2004 Citywire
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