On September 10, I was overwhelmed with Desire. The reason for my warm glow was that the share price of small, Aim-listed Desire Petroleum rocketed 25.5p to 90p on the company’s announcement that it had “exchanged a letter of intent” with Diamond Offshore Drilling (UK) for the Ocean Guardian drilling rig to undertake “a four well minimum drilling campaign in the North Falkland Basin” with work expected to start in “early February 2010”.
Desire has options to drill a “further four wells for itself and/or its partners” and the company believes it should “endeavour to drill as many wells as possible to test the full potential of this highly prospective area”.
The company is investigating the best course of action to raise additional funds and it is intended that Desire’s shareholders will have an opportunity to
participate in the fundraising.
Although I do not actually own any shares in Desire, I should still benefit financially from such exploration activities.
The Desire announcement saw the share price of Aim-listed Falkland Oil and Gas (FOG) rise 18p to 126p on September 10 in expectation that if Desire eventually strikes significant oil reserves, then FOG might do so too – perhaps hiring the same oil rig.
Falkland Islands Holdings (FIH), in which my self-
invested personal pension (Sipp) has a shareholding, saw its shares jump 50p to 310p. FIH, as well as owning the UK-based Ports-
mouth Harbour Ferry Company and the fine art and logistics company Momart, also has considerable
interests in the Falkland Islands – ranging from shops and a fishing agency to property. It seems likely the Falklands interests would benefit from an influx of oil workers and drilling activity.
At FIH’s annual meeting on September 10, David Hudd, the company’s chairman, confirmed that FIH continued to hold 15m shares in FOG.
Shares in Westmount Energy, the tiny oil investor in which my Sipp also has a holding, rose 15p to 72.5p on Desire’s announcement. In March, Westmount reported its interim results for the six months ended December 31 and at that time Westmount held 5.2m shares in Desire.
In the interim report, Mervyn Bradlow, company chairman, also commented on the company’s holding of 31.5m shares in Sterling Energy, stating it had been “a very disappointing investment over the last year or so” and “in view of the historic carrying value”, the board had decided to “make a provision of £2.13m to reflect a reduction which is more aligned to the current value”.
Sterling’s shares had been badly affected by the fall in the oil price, reduced production in Mauritania and lower gas prices in the US.
Earlier this year, Sterling’s share price fell to less than 1p on concerns about its debt levels and future prospects – yet it had oil and gas interests in the Gulf of Mexico, Africa and the Middle East and what it described as a “recent world-class multi-billion barrel discovery in Kurdistan”.
Fortunately, Sterling attracted new financial backers and directors – and on August 14 announced a placing of new shares to raise £62.5m and board changes that saw Alastair Beardsall join the board as executive chairman and Keith Henry as a non-executive director. Both have considerable oil industry experience. Beardsall had been executive chairman of Emerald Energy during which time Emerald had grown from a market capitalisation of less than £8m to be worth £532m.
On August 17, Westmount announced that it had subscribed for 42.45m new ordinary shares in Sterling at the placing price of 1.3p per share. Sterling’s shares are now more than double that price.
Kevin Goldstein-Jackson is an active private investor writing about his own investments. He may have a financial interest in any of the companies, securities and trading strategies mentioned.
