Shares in Falklands explorer Desire Petroleum (LON:DES) have eased back from the earlier spike following release of its resource update.
At 12.45pm, the stock was up 0.25 pence at 20.5 pence, but well off its intra-day high of 22.48 pence.
Earlier, Desire unveiled the findings of a new independent competent person's report, which looked at the Liz gas condensate discovery, the parts of the Sea Lion complex that Desire has interests in, as well as earlier stage exploration prospects.
The Liz gas condensate discovery is now thought to contain contingent resources of 495 billion cubic feet of gas and 95 million barrels of liquids. This is a 178% increase.
The report estimates there is a 25% chance that Liz could be a commercial success, while the Sea Lion Complex assets were deemed to have an 80% chance.
Desire's prospect inventory has been reinforced with the company now having 41 oil prospects and four gas prospects. Of that total, 10 are thought to have at least 30% chance of success, while the largest 12 each have more than 100 million barrels of prospective resources.
In total, the inventory represents a ‘best case’ prospective resource of 2.45 billion barrels of oil and 274 billion cubic feet of gas.
There is potential in the inventory for multiple target wells, Desire explained.
“Our prospect inventory has been greatly strengthened following the interpretation of the 2012 merged 3D survey and we are now able to promote multiple prospects for drilling with stacked targets,” said chairman Stephen Phipps.
“There are several play types to explore but the stand-out potential is in the East Flank play where there are many prospects analogous to the Sea Lion Complex. Our immediate priority will be to promote our extensive prospect inventory and to attract further investment into our licences."
The Sea Lion complex was discovered in Rockhopper Exploration’s (LON:RKH) neighbouring licence. Following this a farm-in deal was struck for some of Desire's acreage as Rockhopper believed the Sea Lion extended into this area.
This was later proven by an appraisal well. The Sea Lion field is being developed through a partnership between Rockhopper and Premier Oil (LON:PMO).
The response to today’s announcement from Desire has been broadly positive.
Repeating his ‘buy’ advice and 70 pence a share price target, Peel Hunt analyst Werner Riding said: “Given recent high-profile international entrants into the Falklands, we feel the materiality of the newly identified prospectivity, in addition to the existing discovered resource base, increases the likelihood of attracting partners into its licences to mitigate the future costs of an exploration drilling programme.”
However, there was this caveat from Seymour Pierce analyst Sam Wahab: “Whilst we expect the share price to strengthen on the back of the resource upgrade, Desire requires considerable funding to prove up these assets.
“Whilst the North Falkland basin has been validated to a certain extent by Premier’s farm in to the Sea Lion field this year, significant appraisal activity will be required to validate the region.”
However he keeps his ‘buy’ recommendation along with his 45 pence a share price target.