LONDON -- The shares of Falkland Oil & Gas (LSE: FOGL.L ) crashed 28 pence, or 44%, to 35 pence in early trade this morning after the company announced bad news about an exploration well.
Falkland Oil & Gas, which has licenses to drill in areas around the south and east of the Falkland Islands, admitted its Scotia well is to be abandoned following poor quality results from a reservoir analysis.
Earlier this year, Falkland Oil & Gas raised almost £50 million from investors to help fund drilling at the Scotia well. The firm had believed the prospect possessed the equivalent of more than 1 billion barrels of oil.
Today's news rattled other shares within the Falklands oil sub-sector, with Borders & Southern diving 12% and Desire Petroleum sliding 4%.
Tim Bushell, the chief executive of Falkland Oil & Gas, took a very optimistic view this morning and claimed: "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."
Of more importance to dazed shareholders, Bushell confirmed the company's cash balance after plugging the well would be $220 million, or roughly £138 million or 43 pence per share.
The current market cap of Falkland Oil & Gas is £112 million with the shares at 35 pence.
However, the group's last results revealed cash of $58 million, or £36 million, was held in escrow or other restrictive accounts. In addition, the figures showed liabilities of $20 million, or £13 million, as well as no revenues and no profits.
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