July 16, 2012 / 7:23 AM / 5 years ago

UPDATE 1-Borders & Southern says Falklands well disappoints

* Says Stebbing well does not find commercial quantities of gas

* Says well fails to reach deeper targets due to technical problems

* Shares down 68 pct

LONDON, July 16 (Reuters) - Borders & Southern Petroleum reported disappointing results in the Falkland Islands from the latest well to be drilled as part of the controversial search for oil in the British islands over which Argentina claims sovereignty.

Shares in the company plunged nearly 70 percent to a three-year low of 19.75 pence after it said on Monday that the Stebbing well found evidence of gas but not in quantities that were likely to be commercial.

Technical difficulties meant the well did not reach lower targets, a result it called disappointing.

Oil exploration by British companies off the Falklands is irritating old wounds with Argentina and tensions between it and Britain have been risen this year, the 30th anniversary of the war the two fought over the islands.

Borders & Southern's disappointment follows the company's initial success when its first well, also drilled south of the islands, found gas condensate, a liquid which often trades at a premium to crude oil.

The Falklands look set to be transformed into a new oil producing region following an oil discovery made by another British firm, Rockhopper Exploration, two years ago off the north coast of the islands.

Rockhopper signed a $1 billion deal with Premier Oil on Thursday to help fund the development of the oil field.

Borders & Southern is leading the charge to find oil off the south coast of the islands. The rig will now go to drill for Falkand Oil & Gas.

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