North Sea Oil Strike

Published in Company Comment on 5 January 2011

A new discovery is good news for Premier, Nautical and Encore, but there is more disappointment for Desire shareholders.

News of another oil discovery in the North Sea gave a welcome fillip to three UK-listed oil exploration companies on Tuesday.

Premier Oil (LSE: PMO) owns 35% of the successful venture, with Nautical Petroleum (LSE: NPE) and Encore Oil (LSE: EO) each having a 15% stake. 

All saw their share prices boosted on the day -- Premier shares rose 57p to 2,003p, Nautical 34p to 430p, and Encore 15.5p to 149p.

Nice strike

The strike was made by the Varadero exploration well, which was drilled to a depth of 5,200 feet to investigate a Tay Sandstone formation. Of the formation's total thickness of 186 feet, 84 feet apparently contains economically viable oil of high quality, with a further 22 feet of lower quality but still viable hydrocarbons. 

The new discovery is in the same block as the Catcher field, where there was a significant find last year by the same group of companies. Varadero is the first of four proposed wells that will be drilled in quick succession. The same rig will now target two nearby larger prospects, called Burgman and Carnaby, before returning to Catcher North. 

Quite how much commercially viable oil there is in this block overall is as yet unknown. Last year Encore estimated that Catcher and Catcher North might contain as much as 300 million barrels of oil, although not all of this would be commercially recoverable.

It looks like capping off a great week for Nautical Petroleum shareholders. It was also the best performing company in the 2010 Nicky Fraser share competition, run by the Fool Community!

No Desire

Sadly, it wasn't all good news for oil and gas explorers yesterday, as Desire Petroleum (LSE: DES) struck out again for the second time in a week.

On December 29, we learned that Desire's Jacinta prospect being explored by its 25/5-1 well hard turned out dry. That well was then drilled to a greater depth to check the company's Dawn prospect, but unfortunately that has turned out not to contain any significant hydrocarbons either, and the well will now be plugged and abandoned. 

Desire still has further prospects, and enough money for more drilling, but its recent string of failures will certainly hamper its ability to raise more cash once this current campaign has been completed.

More from Alan Oscroft:

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