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Last Updated: Wednesday, 18 May, 2005, 12:27 GMT 13:27 UK
Shares hit as oil firm runs dry
Oil well
Oil is flowing but not enough to be commercially viable
A dramatic fall in the share price of oil explorer Regal Petroleum - hit by poor drilling news - has had a ripple effect on related shares.

Shares in Regal plunged 62% after oil drilled from a key well in Greece was judged to be non-commercial.

The news hit other stocks, notably the stockbroker which placed the oil explorer's stock, Evolution, whose share price fell 12.5%.

Regal's shareholders include Morgan Stanley, Goldman Sachs and Fidelity.

Oil flows falter

A statement from Regal cast doubt on whether any oil would ever be sold from what had been its most-valued asset, the Kallirachi prospect, and the company said it would not commit any further cash to drilling the well.

Despite oil flowing to the surface at the well, it only gushed at a commercially-unviable 30 barrels a day, Regal said.
The value of the oil and gas assets is probably not that great
Richard Slape, Seymour Pierce

Regal previously said the well could hold up to 227 million barrels of usable oil.

"It would seem to indicate that Kallirachi is not a commercial oil field," said Richard Slape at Seymour Pierce.

Evolution woes

The knock-on effect hit Evolution hard despite the stockbroker's denial that it actually held shares in Regal.

Last month, it placed Regal's shares at 390 pence each.

Fears that major institutions would avoid dealing with Evolution in the future were the real reason behind the fall in its share price, analysts said.

At the time of Regal's placing, the broker rated the stock a "buy" with a price target of 465p.

Regal's other drilling expeditions have been disappointing, with results from Romania and Ukraine also failing to match expectations.

"The value of the oil and gas assets is probably not that great. You'd have to say that at best the jury is out," added Richard Slape.


FTSE 100
23.70 0.44%
19.54 0.34%
Cac 40
14.48 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
BBC Global 30
20.65 0.36%
Data delayed by at least 15 minutes

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