Falkland Oil hits oil shows at Isobel Deep

Falkland Oil and Gas and its drill partners - Premier Oil and Rockhopper - have encountered oil shows in a suspected high pressure formation above the target reservoir at the 14/20-1 Isobel Deep well in the South Atlantic. Eleven days after it began drilling there, operator Premier Oil has taken the precaution of running an additional casing string before drilling ahead through the main reservoir target to total depth.

This means results will be delayed by a further 10-15 days. They're now expected in early June. But if Premier has penetrated a hydrocarbon bearing section above the targeted Isobel sands, it could be worth the wait.

"Whilst the partners are correctly not fanning any flames here it must be at least encouraging what they have seen so far," says oil industry veteran Malcolm Graham-Wood.

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Premier is targeting about 55 million barrels of resource and represents 9p, or 3%, of unrisked upside to Deutsche Bank's Premier net asset value. It thinks the shares are worth 210p. The partners have said previously that the total prospective resource for the Isobel Deep well could be as high as 500 million barrels of oil equivalent (mmboe).

"In our view, oil shows are inconclusive at this stage but a positive indication that suggests source extends this far south in the basin," adds Deutsche, pointing out that Isobel is arguably the highest potential prospect in Premier's 4-well campaign in the North Falkland Basin.

"The well is testing the southern extent of the basin and success could establish a second, discreet hub, potentially equivalent in size to Sea Lion to the north."

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