current affairs energy

Oil in Falklands! … oh wait, sorry…

Friday’s news:

  • Desire Petroleum has struck oil off the Falkland Islands, threatening to reignite the diplomatic row between Britain and Argentina over sovereignty in the region. (Independent)
  • Shares in Desire Petroleum rose by 24% in a day after the Falklands explorer said it is testing to see whether an oil discovery is commercially viable. (Telegraph)

Monday’s news:

  • Desire Petroleum has admitted a well described as an ‘oil discovery’ last week in fact contains just water. The oil company’s share price crashed by almost half, dropping 66 to 67¼p, following the embarrassing reversal of fortunes. (Telegraph)
  • Less than a week after proudly announcing an oil discovery in the Falklands, Desire Petroleum has today revealed the well had in fact hit water. The Rachel North well will now be plugged and abandoned. (Guardian)

Easy come, easy go, as they say. And the company is called Desire Petroleum. I’m also amused to discover that Desire was recommended by Goldman Sachs last month in a briefing called ’50 E&Ps to change your portfolio’. Any investor slow into the office yesterday will be certainly have found their portfolio changed.

Aside from being very funny, it’s also a bit of a relief. Britain fought a short and nasty war with Argentina over the Falklands Islands. Britain ostensibly won, in as much as it’s still considered an overseas British territory. Finding oil there was going to reopen old wounds. Without wanting to wish ill on Desire or the other operators in the field, it would probably be best if we don’t make any substantial finds in the area.

3 comments

  1. Hmm…. I don’t see it as being amusing, that’s all part of their game.
    That recommendation by Goldmans was neither foolish nor bad advice to their clients, because they’re not recommending on long term investments. It just needed to be seen in context & used the right way.
    Making money in trading is not about buying the right stock then sitting around for years while it grows in value. Remember these deals are done with funny money. If you’d bought when they said and watched the price like a hawk & sold after the jump on Friday that advice would have made you a large return (at someone else’s expense).

    Or, if you really wanted to work it:
    Buy shares cheap in early November.
    Hype the stock up at briefings & press reports to raise the price.
    Once there is awareness, get a hopeful news report out which really bumps the prices up (like Friday’s)
    When the big jump happens, borrow as many more shares as you can and quickly dump everything (both bought & borrowed) back on the market before the bad news is announced. (to be eagerly snapped up by unsuspecting mugs on the street who have seen the price rocket up and who will lose big time when the price gets real).
    Once it has hit the bottom, buy back enough shares at a bargain price to replace the ones you borrowed for your short position. All in all a very profitable 6 weeks trading.
    Walk away with blood on your hands and a smile on your face & book your Christmas holiday.
    The more volatile the market is, the bigger the ups and downs, the more money can be scraped out of the punters during the rough & tumble.

    1. True, that aspect of it isnt’ funny, and I bet Goldman still made a fortune out of it one way or another.

      What I find remarkable is that Desire would announce so soon. They only had to wait two days to carry out the basic checks, and now they won’t be trusted again.

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