Shares in Namibia-focused Chariot Oil & Gas collapsed after news that drilling at the company's Tapir South exploration well had failed to encounter any commercial hydrocarbons. The short-term prospects look sufficiently dire for us to flip our recommendation from 'buy' to 'sell'.
Although drilling revealed some permeable geological intervals, the decision was taken to plug and abandon the well, prompting a 40 per cent fall in the share price. Chief executive Paul Welch stressed that Tapir South was "the first well of a longer-term drilling campaign within a frontier region". But these results could well dampen expectations for prospects within the Walvis Ridge to the south. This won't become clear until a resource update is provided after a detailed evaluation of the Tapir South data has been completed.
The focus of drilling is set to shift to the other prospects in the drilling programme, with third-quarter drilling in prospect for the Kabeljou 2714/6-1 well on the Nimrod Albian prospect, where BP is covering Chariot's costs.
