Broker snap: Desire worth accumulating

3rd Dec 2010 13:05

The share price of Falklands oil explorer Desire Petroleum has bounced around over the last two months between its 52-week high of 168.5p and a price about one pound below that, as drilling results proved patchy.Westhouse Securities advises clients to take advantage of dips to accumulate the shares, after the company announced on Thursday that the 14/15-2 Rachel North well had reached a total depth of 3,052m and that preliminary data indicated the well was an oil discovery."After the initial disappointment of the first Rachel well and subsequent inability to log its sidetrack, 14/15-1Z, yesterday's announcement was clearly a welcome development. A second discovery in the basin, following Rockhopper's Sea Lion find, is also beneficial from a development point of view, given the opportunity to share infrastructure across projects. This is particularly important in the case of smaller discoveries which, at this early stage, appears to be the case with Rachel," the broker noted.Westhouse has a new target price for Desire of 142p, based on a smaller resource figure offset by lower risk afforded by the discovery. "Having said that, we have not de-risked the prospect to the extent we have Rockhopper's Sea Lion discovery, given the still limited information available," the broker added.Rockhopper has a 7.5% working interest in the Rachel prospect. Westhouse has adjusted its target price for Rockhopper to 496p, and reiterated its "buy" recommendation.