Listed explorer Pan Andean Resource's share price plunged by almost 13 per cent yesterday after it announced that its latest exploration drill failed to strike oil or gas.
The company announced that an exploratory drill in the Blackstone Day number one well in Texas had been completed and that no hydrocarbons - oil or gas - had been found.
The news wiped 12.8 per cent off its share price by close of business in London last night.
Pan Andean closed on the exchange's Alternative Investment Market (AIM) at £9.375 (€13.76), £1.38 lower than its opening quote.
However, in the course of the day, it tested lows of £9.25 as investors digested the news.
Pan Andean and its partner, Zachry Exploration, are planning to shift the rig to the nearby Neff Geissen number one well, where drilling is expected to start in about two days. Last night, Pan Andean chairman, John Teeling, said that the company had hit water once it reached the target area, which he added was "two miles underground".
Pan Andean had a 9.375 per cent holding in the Blackstone Day well, and its bill for the exercise was $120,000 (€99,000), Mr Teeling said.
Its next drill will target 450,000 barrels of oil and 1.5 billion cubic feet of gas at a depth of 8,900 feet. Drilling is expected to take 10 to 12 days. The area in which it is drilling lies between Galveston and Heuston, around 40 km from Texas' gulf coast.
Mr Teeling described the wells as "relatively low-risk reservoirs".
"We are involved in a number of projects there and some of them are producing for us," he said.
"This one [ Blackstone] had the same characteristics as the ones that are producing.
"We had high hopes as it had all the right characteristics, but you never know until you drill." He added that generally, one in 10 drills strikes a productive reservoir.
High oil and gas prices in the US and around the world now mean that there is a quick return on productive wells.
Mr Teeling pointed out that gas prices in the US meant that it was taking wells just three months to repay the investment cost once they started producing oil.
