Ophir gas discovery disappoints

High-flying Ophir Energy disappointed the market as it revealed its gas discovery at the Papa-1 well off the coast of Tanzania is likely to contain lower recoverable resources than it had hoped for.

The shares, which have more than doubled over the last year, took a tumble after the company said an 89 metre gas bearing column had been discovered in the Upper Cretaceous section of the well.

Based on the preliminary data available, Ophir management estimate 0.5 - 2.0 trillion cubic feet in place, although detailed core and petrophysical analysis will confirm the scale of the discovered resource.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

"The Papa-1 success now confirms similar Upper Cretaceous prospectivity outboard of the Rufiji Delta and represents the first discovery in Block 3," said Nick Cooper, Chief Executive Officer of Ophir.

The share price moving aspect of Cooper's statement, however, was as follows: "While recoverable resources are likely to be lower than pre-drill estimates, this very encouraging discovery is expected to lead to substantial additional resources from this new Upper Cretaceous play."

Papa-1 is located in Block 3, offshore Tanzania, around 53 kilometres south- east of the earlier Pweza-1 discovery. It represents the first exploration test of the Upper Cretaceous Intraslope play outboard of the Rufiji Delta and is the first well to be drilled in Block 3.

Ophir said the well is the sixth consecutive gas discovery for the Ophir-BG Group joint venture in Tanzanian offshore blocks 1, 3, 4.

"Separately, Ophir has received preliminary products from the recently recorded Block 1 3D [three-dimensional] seismic survey that is targeting the Rovuma Delta Basin Floor Fan play. Interpretation work is commencing to determine whether the area contains features potentially comparable to those discovered in the adjacent play offshore Mozambique," Cooper revealed, adding that the company expects two further well results from Equatorial Guinea by early September.

Shares in Ophir fell as low as 543.15p in the first hour of trading after the announcement, having closed the previous day at 582.5p.

JH