Shares in Desire Petroleum (LON:DES) plummeted by nearly 50% to 66.7p in early trading today on news that the Falkland Islands oil explorer was set to abandon its Rachel North well after discovering that it was full of water. Last week, investors were buoyed on reports that the well actually represented Desire’s first oil discovery in the region. Further tests have now confirmed that while oil shows were present in the well, mobile fluids that had previously been detected are water.

Desire began drilling the Rachel North well early in November and just days after an initial well ended in mechanical failure. Despite the setback on the original Rachel well, the company said it was encouraged enough by what it saw to consider drilling another well in more or less the same place. Last Friday, the company said that preliminary results from the interpretation of the initial log data indicated that the well had encountered a 349m gross interval of sands and shales with hydrocarbons, of which 57m was net pay in multiple zones.

However, sampling of the main sand has shown that the hydrocarbons are residual and that the mobile fluid is water. “Analysis of the formation water recovered by sampling indicates much lower salinity than anticipated and when this value is incorporated into a revised log interpretation it is confirmed that the sands are water bearing,” Desire said. It noted that formation pressures and sampling had confirmed the presence of good reservoir quality in the upper sands of the well. In turn, a deeper target in Rachel North is still interpreted to be oil bearing, but the interval is thin and reservoir quality is poor.

The wells drilled by Desire in the Rachel area have identified five fan systems of varying areal extent and reservoir properties. Good reservoir development has been recorded in a number of the fans. Some of the sands are of a similar age to the sands in the Sea Lion discovery made by Rockhopper Exploration (LON:RKH) earlier this year. All of these fans will now be remapped incorporating the data from the wells to identify areas where better quality reservoir can be expected and stratigraphic traps developed. As these fans can only be mapped on 3D seismic, final…

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here