Desire Petroleum

<>Desire Petroleum plc (Desire) is a UK company listed on the Alternative Investment Market (AIM) dedicated to exploring for oil and gas in the North Falkland Basin.

Desire has recently completed a 6 well exploration programme. The Liz well encountered dry gas and gas condensate at 2 separate levels while other wells recorded shows.
Together with the Rockhopper Exploration Sea Lion oil discovery in the licence to the north, these wells have provided significant encouragement for the potential of the North Falkland Basin. The oil at Sea Lion is of particular interest as this has demonstrated that oil is trapped in potentially significant quantities in a fan sandstone on the east flank of the basin. It is believed that over 50% of this east flank play fairway is on Desire operated acreage.

Desire has now completed new 3D seismic acquisition which provides coverage over the east flank play, Ann, Pam and Helen prospects. The results from fast-track processing of priority areas are provided in the 2011 CPR. A farm-out to Rockhopper has been announced. The revised equities are shown on the licence map (subject to regulatory approval and completion of the farm-in well). Desire Petroleum

Rockhopper Exploration

British Geological Survey

Argos Resources



Latest Press Realeses from Desire

dd - indeed - the mms are tough to beat!

cynic
have you closed your DES short? I just cannot understand how it keeps going; there is either some information out there or a lot of punters having a good time. There aren't any wispers in the wind in Stanley that I am hearing..

no .... it's not doing any damage and i'll leave it for now

Lovely graph today!...think it's only going to get better during the rest of the day as well.

I get the feeling the whispers are saying Rachel-2 is going to be given the go ahead.......

you could well be right pro.

I hope your right Pro because if they dont and go to drill Dawn next there is going to be one almighty drop in the share price.

Bought some on Pro's say so, hope he's got broad shoulders.,.

common sense and discipline finally prevailed, so crystalised a smallish loss

Wise man - you can always put it against the wonderful profit elsewhere! RKH peut t'etre?

exactly so .... i have a modest holding in RKH already, and if DES starts to reverse, i am also short FOGL

you'll recoup that little loss - had a good day bmr - still undecided des at this sp - bmr worth a look next week again imo along with rrr which the mms appear to be loading up - lots happening by 30th nov

des - rach 2 - if they get the nod could be a turning point - watching closely - need a dip pls!?

Interesting, poster on AFN thinks the new coordinates for the next drill (Rachel-2) are :

Latitude 49 25 44.01 S
Longitude 59 04 16.28 W

And says rig should be at Rachel-2 location Monday, if that is the case should be an RNS coming Monday morning to confirm Rachel-2 is going ahead.

From AFN :

durby - 7 Nov'10 - 09:37 - 34951 of 34951

New Position - 2.9Km North West

If co-ordinates given by Granny is correct, OG is moving appx 2.9km North West from current position. See picture below (Point 1 is the new location):

http://i51.tinypic.com/2599ulk.jpg

Co-ordinates:
New location (Point 1):
Latitude 49 25 44.01 S
Longitude 59 04 16.28 W

Old location as per NOTAM (Point 2):
Latitude 49 26 58 S
Longitude 59 02 46 W

So we are heading further west - which is good news!

mini kerrchinnngg monday perhaps!?

Shorters are havimg a bad start.

Goldman Sachs releases today, DES is a buy as well as RKH and many others.


BUYS

Rockhopper started with buy rating at Goldman Sachs
Nautical Petroleum initiated with buy rating at Goldman Sachs
Northern Petroleum started with buy rating at Goldman Sachs
Nighthawk Energy started with buy rating at Goldman Sachs
BowLeven initiated with buy rating at Goldman Sachs
Desire Petroleum initiated with buy rating at Goldman Sachs
Borders & Southern initiated with buy rating at Goldman Sachs
Falkland Oil & Gas initiated with buy rating at Goldman Sachs

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NEUTRALS

Tullow Oil downgraded to neutral from buy at Goldman Sachs
Sterling Energy initiated with neutral rating at Goldman Sachs
Valiant Petroleum initiated with neutral rating at Goldman Sachs
Max Petroleum initiated with neutral rating at Goldman Sachs
EnQuest initiated with neutral rating at Goldman Sachs
Tower Resources initiated with neutral rating at Goldman Sachs
Dominon Petroleum started with neutral rating at Goldman Sachs
Cove Energy started with neutral rating at Goldman Sachs
Faroe Petroleum initiated with neutral rating at Goldman Sachs
Melrose Resources initiated with neutral rating at Goldman Sachs

------------

SELLS

Gulf Keystone Petroleum started with sell rating at Goldman Sachs
Encore Oil started with sell rating at Goldman Sachs

HOW many more times is he going to post that crap......

Well am back in!!!!!!

GS comments on DES


Source of opportunity

We initiate coverage of Desire with a Buy recommendation and a 12-month price target of 197p, believing that the companys sizable de-risked exploration acreage in the North Falklands provides it with a structural exploration advantage.

We believe that Rockhoppers Sea Lion discovery has helped to de-risk Desires substantial acreage in the north eastern part of the North Falklands basin, and, in view of this, regard our assumed likelihood of success of 20% for prospects in this acreage as conservative. Desires acreage in this part of the basin amounts to over 1000 sq km giving it substantial running room to drill a significant number of potentially transformational wells over the next few years. As Desire does not have what we would regard as an immediately commercial discovery (with the Liz discovery finding gas), it does not possess the same level of core value to support its share price as its neighbour in the basin, Rockhopper, making the stock more levered to the exploration potential in the area in our view. In the event of 100% success at the prospects that we include for Desire our valuation would increase by over 6x. Conversely, if Sea Lion has raised expectations too high and no further discoveries are made in the basin, the downside in the stock would be close to 100%. We believe that
the market tends not to be aggressive enough in valuing new basins after the initial discovery, and while we appreciate the risks involved, we are willing to give Desire value for exploration drilling out to 2013 in the area.
As a result we see substantial upside to our target price and add the stock to our Buy List. We also include Desire in our Play Openers screen.

Catalyst

We expect the key catalysts to be exploration and appraisal drilling in the companys acreage in the north east of the basin. We believe that Sea Lion has partially de-risked the area, meaning that Desire has a large and potentially material pipeline of exploration prospects to drill. Success at a Rachel follow-up or one of the other upcoming wells in Desires drilling programme are the obvious near-term catalysts.

Valuation

Our 12 month SOTP-based price target is calculated using a US$85/bl oil price. We include value for Desires exploration programme with a three-year time horizon, with catalysts falling after 12 months being given a 50%
discount. We assume an equity raise of US$200 mn to fund further drilling in the Falklands in our valuation. We assume a 12% discount rate higher than the normal 10% we use for OECD countries to reflect the higher political risk that we assume in the Falklands.

Risks

Risks to our view and price target include worse than expected drilling success in the companys acreage, a deterioration of political relations between the UK/Falklands and Argentina that impacts exploration activities, or the waxiness of the oil increasing costs to a higher level than we expect.