* Plugs and abandons Scotia well offshore Falklands
* Move comes after it failed to find oil
* Company shares fall 48 percent
* Top shareholder RAB says stands by firm
By Kate Holton
LONDON, Nov 27 (Reuters) - Falkland Oil and Gas, on a rollercoaster ride to find oil offshore the disputed South Atlantic islands, lost almost half of its value on Tuesday when it said it would abandon a well after disappointing results.
The statement wiped 48 percent off FOGL's volatile stock, sending its shares to an historic low of 32 pence, giving it a market value of 103 million pounds ($165 million).
The stock price hit a high of 267 pence in July 2010.
FOGL, which is partnered with U.S. firm Noble Energy and Italian utility Edison on the project, said a reservoir at its Scotia exploration well appeared to be of poor quality, with low permeability.
"Today's much anticipated well results will come as a disappointment for investors in FOGL, following their gas find at the Loligo prospect in September," analyst Sam Wahab at Seymour Pierce said.
Investors had been hoping that Scotia would find oil, he said.
FOGL's top shareholder RAB Capital, which holds 11.3 percent of the company according to Thomson Reuters data, said it remained convinced of the firm's viability.
"We have held FOGL since its inception in 2004 and it is still early in its drilling history, consequently we believe in the long term potential for the company," RAB said in a statement on Tuesday.
But with FOGL representing over 28 percent of RAB's Special Situations Master Fund, the fund's net asset value per share would be materially impacted by the fall in the explorer's shares, it said.
Oil exploration by British companies in the area has been controversial and complicated from the start.
It has sparked anger in Argentina, which claims sovereignty over the islands it knows as the Malvinas and which has called the drilling there 'illicit'.
However, while many investors have shrugged off the geopolitical risk, some analysts have started to question the likely chance of commercial success of the finds.
Oil was found to the north of the Falklands in 2010 by Rockhopper Exploration, which has enlisted Premier Oil to fund development, while Desire Petroleum also confirmed the positive potential of its licence in the North Falkland basin last week.
But the southern basin, where FOGL and Borders & Southern have been exploring, has had less success. Gas, which is harder to extract and transport than oil, has been found there.
"Drilling in the South Falkland Basin has yielded mixed results so far this year, following Borders' two well programme, and we may see investor appetite in the region begin to wane in favour of the North Falkland Basin, which encompasses the oil bearing Premier-operated Sea Lion field," Wahab said.
FOGL now intends to plug and abandon the Scotia well.
The company remained upbeat on its campaign, with further tests set to determine whether there was a higher quality reservoir elsewhere in the region.
"The results of the Scotia well provide further endorsement of the hydrocarbon potential of the South and East Falkland Basin and have proven the presence of hydrocarbons within the mid Cretaceous Fan Play," FOGL Chief Executive Tim Bushell said.