Borders & Sth. Share News (BOR)

(Adds analyst comment and detail.) By Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Oil and gas explorer Falkland Oil & Gas Ltd. (FOGL.LN) Monday said it didn't find oil at an exploration well off the coast of the Falkland Islands, marking the second disappointment in a mixed campaign by a small group of U.K. companies looking for oil in the waters near the disputed south Atlantic territory. Falkland Oil & Gas said it plugged and abandoned the Toroa well, located some 120 kilometers due south of the islands' capital, Stanley, after failing to find any hydrocarbons during drilling to depths of almost 2,500 meters. The news sent the company's shares tumbling. At 1149 GMT, shares in Falkland Oil & Gas had almost halved and were down 99.5 pence at 102.25 pence, giving it a market value of just under GBP150 million. Chief Executive Officer Tim Bushell said although the result was a disappointment it has to be remembered that Toroa was the first well ever drilled in the South Falklands Basin, an enormous virgin frontier for oil exploration. Falkland Oil & Gas's licenses, in which mining giant BHP Billiton Ltd. (BHP) holds a 51% stake, cover roughly 100,000 square kilometers and contain many other prospects, a spokesman added. Falkland Oil & Gas and Borders & Southern Petroleum PLC (BOR.LN), which is also exploring in the southern basin, are currently scouting for a drilling rig capable of reaching depths much greater than Toroa to continue their campaign. Borders and Southern shares were also down Monday, falling 3.25 pence, or 4.5%, to 68.75 pence. The southern basin is a true frontier and is less well understood geologically than the North Falklands Basin, said Keith Morris, an analyst at brokerage Evolution Securities. A consortium of companies including Royal Dutch Shell PLC (RDSA.LN) did some drilling in the northern basin in the late 1990s, and it is there, several thousand miles away from Toroa, that Rockhopper Exploration PLC (RKH.LN) made a discovery at a prospect called Sea Lion in May. Further drilling will be required to prove oil can be produced commercially from the discovery but estimates suggest Sea Lion could contain about 242 million barrels of oil that could be recovered, according to figures published in June. Another northern basin prospect, Liz, drilled earlier by Desire Petroleum PLC (DES.LN), didn't find much oil. Morris said there's optimism about a successful commercial development in the northern basin and investors seemed to agree. Shares in both Rockhopper and Desire rose Monday. Rockhopper shares were 1.3% higher at 330.25 pence while Desire shares were 4.8% higher at 103.75 pence. The campaign by this small group of London-listed explorers to plumb the waters near the Falklands for oil has drawn diplomatic protests from Argentina. The islands, 300 miles off the Argentine coast, remain in British hands following a brief but bloody war over their sovereignty between the U.K. and Argentina almost 30 years ago. Argentinian officials previously condemned the exploration activities as "illegal." The U.K. said the exploration is a perfectly legitimate commercial activity. -By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com (END) Dow Jones Newswires July 12, 2010 07:53 ET (11:53 GMT)