Mexican snag halts rise of British-Borneo shares

The rise in the share price of British-Borneo Petroleum Syndicate ended abruptly yesterday after the announcement of an uncommercial oil find in the Gulf of Mexico, source of some of the oil group's most successful recent oil investments.

The news that the exploration well drilled on the Green Canyon 37 prospect had produced oil which was too heavy to produce commercially is the first real bad news to hit the group during 18 months when the share price has multiplied more than seven times.

Having hit an all-time high of pounds 15.42 only on Tuesday, the shares plunged 148.5p to pounds 13.91 yesterday. The fall wiped almost pounds 95m from the company's stock market value, taking it down to pounds 887m.

But Alan Gaynor, chief executive, attempted to salvage something positive from the announcement. "We believe the result of this well is very much anomalous for this region of the Gulf of Mexico."

Other wells within a few miles of Green Canyon 37 had shown oil reserves of much lighter oil. "Together with our partners, we will be conducting a thorough review of the additional drilling opportunities in the area in the light of this result, before moving forward." The review is expected to take around six months.

British-Borneo is the operator of the Green Canyon 37 block, where it owns a 40 per cent "working interest", alongside partners Kerr-McGee Corporation and the Consolidated Natural Gas Company.

The 14,430-ft well recovered oil samples at 8.6 degrees API, a measure of the liquid's thickness, which compares with 20 to 30 degrees on nearby finds.

One analyst said they would be lucky to get this oil out of the ground. "This is a huge surprise. There is not a big history of finding that weight of oil in the Gulf of Mexico. It's almost certainly going to be uncommercial."

NatWest Securities analyst Ian Reid said the well, drilled on one of a cluster of six blocks in the area, could have been worth 90p a share on British-Borneo's net asset value if it had helped prove up potential additional reserves put at 50 million barrels.

The company said yesterday that, had the oil been commercial, those reserves would have been 100 million barrels.

Market Report, page 24