Broker snap: Falkland fall-out fears overdone

12th Jul 2010 13:18

The share price of Falkland Oil and Gas (FOG) virtually halved on Monday morning after the company's Toroa F61/5-1 exploration well in the East Falkland basin turned up dry, and the only consolation for shareholders would appear to be that the shares were down by almost two thirds at one stage.House broker Oriel Securities was putting a brave face on things, saying that the oil explorer's shares "will obviously come under pressure today but we would highlight that exploration is at early stage in this large frontier basin with significant remaining prospectivity."Oriel's Richard Rose noted that "Toroa was not the partner group's first choice prospect, its selection dictated by rig constraints; however the well has provided useful geological data which should help refine future prospects."Keith Morris at Evolution Securities also looks on the bright side of things, observing acidly: "No doubt those with a lack of appreciation of geography (let alone geology) will "beat up" all the Falklands exploration companies as a result. However, smart investors will be aware of the massive geological and geographical 'gap' between the South and North Falklands basins - the latter having been massively derisked by [Rockhopper's] Sealion discovery.""Attention will switch to the next prospect to be drilled - Ernest - a structure similar to the successful Sealion discovery in the North Falklands Basin," Morris added.