FAROE Petroleum has announced it has made a discovery off Norway but shares in the company fell amid indications the find was much smaller than hoped for.
Aberdeen-based Faroe said a well drilled close to the Pil discovery it made in the Norwegian Sea last year had struck oil.
The company said initial estimates suggested the find could contain 13 to 31 million barrels oil equivalent (mmboe) of recoverable reserves.
Faroe has a 25 per cent stake in the licence, putting it in line for around three to eight million barrels additional reserves from a find of that size.
As the company had around 31m barrels reserves at the start of the year, such a field could represent a notable addition to its portfolio.
The find was made soon after Faroe suffered two reverses in quick succession off Norway, where the Portrush and Bister wells proved to be dry.
But shares in the company fell around five per cent following yesterday’s announcement, before recovering to close down one per cent.
The fall may reflect disappointment with the results of a well that Faroe had high hopes for.
Announcing the start of drilling in June, Faroe noted the Boomerang well was close to the significant Pil find it made last year. This has been estimated to contain 72 to 172mmboe.
Analysts at joint house broker Stifel Nicolaus said yesterday: “We acknowledge that some investors may look at the results as slightly negative as the discovered resources are lower than the pre-drill targeted unrisked resources of 50-270mmboe.”
Faroe said a side-track well drilled into the southern segment of the Boomerang had failed to find moveable oil or gas.
The results of this year’s drilling by Faroe have underlined how challenging exploration work can be, even without the crude price slump to contend with.
In April Faroe said the Skirne East well off Norway resulted in a discovery that was smaller than predicted. However, the company said then the find was still promising.
Yesterday, chief executive Graham Stewart said: “We are pleased to announce the results from the Boomerang well, which adds further resources to the Pil area from a new reservoir. This appraisal and exploration well has provided a significant amount of important data and again proven how prospective the Pil area is.”
Mr Stewart said Faroe will start drilling the Blink well off Norway shortly. He added: “Blink is an exciting independent prospect targeted as a potentially large addition to the already significant Pil and Bue discoveries announced in 2014.”
Stifel Nicolaus said the results of the Boomerang were positive.
Analysts at Cenkos Securities said Boomerang was a modest discovery at the lower end of expectations but added: “More resources in the wider Pil/Bue area can only be a good thing.”
Oil and gas firms can recover 78 per cent of the costs of qualifying exploration activity off Norway.
Shares in AIM-listed Faroe Petroleum closed down 1p at 70.5p.
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