Shares in AIM-listed Pan Andean Resources collapsed on the London market yesterday after the Irish-based company revealed that a deep exploration well in Bolivia had failed to find gas. In heavy trading on AIM, Pan Andean shares fell by more than 31 per cent with a 13 3/4p sterling fall to 30 1/2p having peaked at almost 75p two months ago in the run up to the drilling.
The results from the 3,750 metre well came as a major surprise to the market and especially those small investors who have bought heavily into the stock. But Pan Andean managing director Mr David Horgan played down the absence of gas and instead emphasised the possible presence of oil in a secondary information in the Chipiriri structure.
Pan Andean, chaired by Dr John Teeling, owns 100 per cent of the Chapare licence area in which the Chipiriri well was drilled but this first $6 million well has been half-funded by a group of local investors while a share placing earlier this year has left Pan Andean with sufficient funds to cover its share of this first well and a second well.
Commenting on the slump in its share price following the announcement that this well is not gas-bearing, Mr Horgan said he was not disappointed. "The market always reacts to fear and greed, there are a lot of people who not aware of the technicalities of drilling."
Pan Andean shares have risen from less than 10p sterling to more than 70p in the past year as investors flooded into the shares in anticipation of a successful well in Chipiriri. The reassuring words from the company about possible oil formations has clearly not reassured the market and dealers believe that the shares will remain under pressure until the current oil testing is completed in the next few weeks.
The latest results, however, will bring unpleasant memories of previous drilling in the Chapare licence four years ago, which led to a previous collapse in the Pan Andean share price and a Stock Exchange investigation into how results from this drilling were leaked into the market.