* 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 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
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.
CONTROVERSIAL AND COMPLICATED
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
"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.