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Desire hunts Falklands rig
- Created:
- 1 May 2008
- Written by:
- Martin Li
Desire's shares have almost quadrupled since January, ignited by reports that an as yet unnamed "significant exploration company" is to farm-in up to three of Desire's 18 Falkland's prospects, subject to "certain awards and approvals by the Falkland Islands Government".
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This partner will bear the costs of drilling two exploration wells, while Desire drills two wells for its own account - an operation it believes it is sufficiently funded to do. With high demand from more proven, less remote regions, the challenge faced by all Falkland explorers is finding a drill rig, and the company is investigating a number of possible units.
However, drilling might spoil a good story for Desire. Its licences are in the smaller North Falklands Basin, whereas Falkland Oil and Gas (FOGL) holds larger licences in the more prospective South Falklands Basin. Due to ill health, chairman Colin Phipps will retire from the board with immediate effect, to be replaced by his son, Stephen Phipps.
| DESIRE PETROLEUM (DES) | ||||
|---|---|---|---|---|
| ORD PRICE: | 88p | MARKET VALUE: | £201m | |
| TOUCH: | 88-89p | 12-MONTH HIGH: | 94p | LOW: 20p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 14p* | NET CASH: | £21.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2003 | nil | -0.53 | -0.47 | nil |
| 2004 | nil | -0.65 | -0.41 | nil |
| 2005 | nil | 2.07 | 0.90 | nil |
| 2006 | nil | -2.48 | -1.27 | nil |
| 2007 | nil | -0.33 | -0.26 | nil |
| % change | - | - | - | - |
*Including intangible assets of £7.65m, or 3p a share |
||||
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SHARE TIP UPDATE:
Sell
Desire's exploration plans remain unclear and subject to approvals, which raises doubts over whether the sharp share price gains of recent months - it now has a significantly higher market capitalisation than FOGL - is justified. Certainly, our sell advice (26p, 9 March 2007) looks premature given the recent market excitement but, at current levels, the case for taking profits looks stronger than ever. Sell.
See also: Rockhopper leaps into action and Rigging the Falklands oil race
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