Oil and gas explorer Otto Energy Limited (ASX: OEL) has seen its share price plunge 39% to 3.7 cents, after disappointing news for its Hawkeye-1 exploration well.
The well, offshore Palawan Basin in the Philippines, will now be plugged and abandoned.
As Managing Director and CEO Matthew Allen noted, "The Hawkeye-1 exploration well has proven the existence of hydrocarbons in SC55. The hydrocarbon size discovered is however at the very low end of expectations and is not economic to develop." (Bold emphasis mine). It must be hugely disappointing for the company and shareholders – just last month the company said in a presentation, "Success at Hawkeye unlocks significant follow-up potential at Cinco and associated prospects."
The results show the toss of a coin outcome of drilling deep sea oil and gas wells. They are hugely expensive, with some running into the hundreds of millions of dollars, but the odds of drilling an un-commercial well are high. Find one that pays though… and that could be enough to establish the company as a major oil and gas producer.
Otto is now preparing for upcoming exploration programs in its Alaskan and Tanzanian assets.
