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“No hydrocarbons flowed to surface,” was what Faroe Petroleum plc (LSE:FMP) said today, after performing a formation drill stem test (DST) in one of the targets reached by its Cooper well in the Norwegian Sea.
Shares lost 8.9%, equivalent to 14.25 pence, to £1.45 an hour after the announcement was released – a reversal of the investors’ delight back on 26th July 2012, when the independent oil and gas firm said the Cooper well encountered hydrocarbon on the Garn Formation.
That fact is true, nonetheless. Faroe said oil was found in a 59-metre gross section within the Garn Formation, it just wouldn’t flow. An additional 10 metres was also found with the Ile Formation, one of the main targets of the well and within the Cretaceous Lysing and Lange Formations.
Tight
It wasn’t a question about whether there is oil or not, it’s how to get it is what faces the partners in the joint venture. Faroe holds 30% interest, the other 30% held by Suncor Energy and 40% controlled by Centrica plc (LSE:CNA), the operator of the well.
“Several formation and pressure tests were also carried out and confirmed restricted flow within the reservoir, however no interpretation of potential fluid contacts was possible,” the company explained.
The well was plugged and abandoned but according to Faroe’s Chief Executive, Graham Stewart, data collected from the well will be analysed to understand why hydrocarbon was “tight” in the said formation and “whether this is likely to be a local or a field wide reservoir phenomenon”.
The partners to the first drilling programme in the PL477 block in the Norwegian Sea are now to discuss the impact of the latest development to assess the “remaining licence potential” of the area, which lies between Statoil’s (NYSE:STO) producing Morvin and Smørbukk Fields.
“Although the DST results on the Garn formation were disappointing we take encouragement from the discoveries made at multiple horizons,” CEO Stewart commented, nonetheless saying the discoveries are a testament to Faroe’s technical team.
Shares barely recovered and were still down 8% to £1.465 by 12:00 PM GMT. On the other hand, Centrica was unaffected by the poor results as shares were up 1.5% to £3.28, in response to the completion of the acquisition of energy retailers by its subsidiary in the United States.
Company Spotlight
Faroe Petroleum plc is an independent oil and gas exploration, appraisal, and production company holding over 40 licences and permits across the Atlantic Margin, the UK North Sea, Norwegian Sea, and the Barents Sea.
The company was established in 2002 in the United Kingdom as a holding company of Føroya Kolvetni, a Faroe Islands-incorporated company. Faroe joined trading on the Alternative Investment Market in 2003.
