Sterling Energy, a UK based explorer and producer, finishes drilling in Iraqi Kurdistan, but it remains to be seen if the company can find oil in its well.
Sterling Energy failure to find oil hits shares
Sterling Energy's investment in Iraqi Kurdistan is proving costly.
After spending much of the US$103 million raised in capital to fund drilling in northern Iraq, the UK-based explorer said this week it had yet to find out if there was any oil in its concession.
The company said in a statement to the London Stock Exchange it had detected gas content while drilling and decided to carry out more tests.
With the shares down as much as 17 per cent in trading yesterday, it appears investors have grown impatient.
Sterling began drilling the well in February last year but ran into trouble when corrosive gas shattered the drill pipe.
Investors will now have to wait three more weeks until they can find out whether the Sangaw North well was worth the wait.
Keith Morris, an analyst with Evolution Securities, yesterday highlighted investor concerns. "As we are getting close to the end result of the Sangaw North drilling campaign and have no clear idea of any potential resource discovered or any future exploration either in Kurdistan or elsewhere, we place our target price and recommendation under review," he said in a note to clients.
Sterling has been unlucky in its concessions elsewhere, too. The company has interests in Cameroon and Madagascar, both of which appear to be facing their own challenges.
Sterling's block in Cameroon has been suspended under the force majeure provisions of the licence owing to a border dispute with Equatorial Guinea.
In Madagascar, the progress of exploration has been hampered because of the political upheaval following a coup in March 2009. The government has not been recognised by its African neighbours or by the UN.
Sterling plans to drill in the country once political stability is established, which is unlikely to be before 2013, the company said.
Sterling's chief financial officer Jonathan Cooper resigned last month.