Oil and Gas Eye Q3 2012

Performance of the Oil and Gas Eye index and FTSE 350 Oil & Gas Producers index

Source: Ernst & Young, Thomson Datastream

43% of companies in the AIM oil and gas universe registered a fall in share price in Q3, reflecting drilling disappointments, and the negative perception of certain farm-outs and funding challenges.

Red Emperor Resources announced that its 20% owned Shabeel North well in Puntland, Somalia, had not found oil or gas shows and will be plugged and abandoned. It added that it is fully funded to cover any seismic programme undertaken and at least two more wells in Puntland. Its shares ended Q3 down 84%. Range Resources, which also has a 20% interest in the project, registered a 29% fall in share price.

Chariot Oil & Gas' share price fell by 73% over Q3. In September, it announced that its Kabeljou exploration well offshore Namibia had found no commercial hydrocarbons and will be plugged and abandoned. It will give a resource update of the remaining prospectivity in the block once all data has been evaluated.

In September, Resaca Exploitation said it was in non-compliance with its credit facilities. Since February 2012, its capital projects have been limited to those funded through operating cash flow. As a result, it is not expecting to increase production to target levels. It is currently exploring alternatives, including the possible sale of assets, to reduce debt and bring its credit facilities into compliance. Resaca's share price fell 65% over Q3.

In July, Borders & Southern Petroleum reported it had not been able to reach the lower targets on its Stebbing well in the South Falkland Basin. It said the upper target was unlikely to be commercial and the lower targets remain unevaluated. A decision to stop drilling was made when it became impossible to maintain well integrity. The well has since been plugged and abandoned, and the rig assigned to Falkland Oil and Gas. The company's share price fell 61% over Q3.

In July, Rockhopper Exploration announced it has entered into a farm-out agreement with Premier Oil for Premier to acquire 60% of its interests in its North Falkland Basin licenses. This means Rockhopper will be fully funded on its share of the Sea Lion development, and provides for an Area of Mutual Interest for future cooperation in the North Falkland Basin and similar plays in South Africa, Namibia and Southern Mozambique. Despite this, investors reacted negatively to the perceived reduction in potential future upside, and Rockhopper's share price fell 34% over Q3.

Lochard Energy announced the start of a formal sale process in September. It had previously initiated a farm-out process for its Thunderball and Moby discoveries in the UK North Sea in 2011, but now believes there would be more interest if it were to look for a buyer for the company. Its shares ended Q3 down 9%.

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