The All Ordinaries Index (ASX: XAO) is down 0.9% in early afternoon trade today, and it's certainly not getting any help from ASX All Ords energy stock Melbana Energy Ltd (ASX: MAY).
Shares in the oil and gas company closed yesterday trading for 6.1 cents. Morning trade started well for the stock, with shares reaching 6.3 cents apiece, up 3.3%.
Then the company released an intraday update on its appraisal well Alameda-3. And investors sent the ASX All Ords stock crashing.
At the time of writing, shares are swapping hands for 3.3 cents each, down a painful 45.9%.
Here's what's happening.
Image source: Getty Images
Why did the ASX All Ords stock just crash?
Melbana Energy holds a 30% interest in and is the operator of Block 9 PSC. The oil project is located onshore in Cuba, where the Alameda-3 well is situated.
Flow testing of the Alameda reservoir kicked off at the beginning of this week. Today, the ASX All Ords stock is under heavy pressure after management reported that, consistent with Melbana's recent results from the deeper Marti reservoir, drill string fluids were unable to be recovered during the flow testing.
While no uncontaminated oil samples were obtained, Melbana said that oil samples were recovered on reverse circulation of the DST string. Those have been sent for lab analysis.
Management noted that the inability of the well to flow does not fit with previous observations and expectations.
They added that the latest failure is consistent with the similar recent failure of the deeper Marti reservoir to flow hydrocarbons to surface. That's despite both reservoirs demonstrating an ability to do so in the Alameda-1 exploration well.
Commenting on the disappointing results that are seeing the ASX All Ords stock under heavy selling pressure today, Melbana Energy CEO Andrew Purcell said, "Both the Marti and Alameda reservoirs have previously shown the presence of freely moveable hydrocarbons that flowed to surface unassisted."
Purcell continued:
That both reservoirs should now fail to do so when the appraisal well trajectory is minimally offset to the original exploration well means studies need to focus on the new data that has been acquired and the limited drilling parameters that have changed.
We will incorporate local and international expert advice as to how to remedy such reservoir responses into the newly acquired data to help focus our studies.
Looking to the months ahead, he added, "Our immediate plan is to work on the steps required to export production from the Amistad reservoir this year and to develop more appraisal wells in the Amistad reservoir thereafter."
With today's intraday losses factored in, the ASX All Ords energy stock is down 63% over 12 months.
