Three companies have been hit this week on bad news on wild cat drills in the North Sea - Jersey Oil and Gas (JOG), Providence Resources (PVR) and Faroe Petroleum (FPM). It demonstrates the risks of frontier exploration, the high costs associated with it and the impact it can have on shareholders when things don't go to plan. In the case of JOG and PVR, these wells were pivotal for the companies and the shares were clobbered.
On 11th September 2017, Jersey Oil and Gas plc announced the results from their Verbier and Partridge Well. The Statoil operated 20/05b-13 exploration well drilled on the P.2170 licence Blocks, 20/05b & 21/1d to test the Verbier prospect (in which the Company owns an 18 per cent interest), reached the planned target Total Depth of 4,267m on 10 September 2017. The well encountered water bearing Upper Jurassic sands, deeper than anticipated.
Azinor Catalyst Limited made an announcement on 8 September 2017 relating to its 14/11a-2 well on the Partridge Prospect in which JOG had a contingent financial interest, as announced by the Company on 5 January 2016. While that well encountered excellent quality reservoir rocks, hydrocarbons were not present and it has now been plugged and abandoned. Accordingly no contingent payments will be received by the Company from Azinor.
The shares dived 85% on the news! From around 220p pre-news, today they sit at 58p, valuing the company at £8.5 million. Ouch!
Also on September 11th, Providence Resources announced its operational update from the Drombeg Frontier Exploration Licence ("FEL") 2/14 prospect 53/6-1, on the Southern Porcupine Basin offshore Ireland. FEL 2/14 is operated by Providence Resources plc (56%) on behalf of its partners Capricorn Ireland Limited (a wholly owned subsidiary of Cairn Energy PLC, 30%) and Sosina Exploration Limited (14%). 53/6-1 is situated in the deepest water of any exploration well ever drilled offshore Ireland
The 53/6-1 (pre-drill designation 53/6-A) well, which spudded on July 11 2017, is located in c. 2,233 metres of water and c. 220 kilometres off the south-west coast of Ireland. The well, drilled by the Stena IceMAX drill ship, reached a final total depth of 5,281 metres, having penetrated the north flank of the Lower Cretaceous Drombeg Prospect, which was encountered within the pre-drill depth prognosis. Logging together with down-hole sampling has confirmed that the Drombeg Prospect contains a porous water-bearing reservoir interval at the well location. The possible presence of bitumen was reported in drill cuttings within the Drombeg reservoir interval which may indicate that it received an oil charge which was not retained at this location. However, further studies will be required in order to confirm this interpretation and its implications for the wider prospectivity within FEL 2/14.
The shares fell nearly 40% on the RNS from 8p to 5p.
On September 12th,. Faroe Petroleum PLC announced the Goanna exploration well results. It announced that drilling has reached the target depth on the exploration well 33/9-22 S (Faroe carried interest 30%) in licence PL 881, which had been drilled to a total depth of 2,730 metres. The well encountered approximately 49 metres of gross water bearing reservoir in the primary target, the Upper Jurassic Munin Formation sandstones. Data acquisition including logging and pressure points has been carried out. The Goanna exploration well, operated by Wellesley Petroleum (70%) using the semi-submersible drilling rig Deepsea Bergen, is now being plugged and abandoned as planned.
Surprisingly the shares went up on the news, up 2% to 99p.