Small caps: Desire Petroleum leads rally

Desire Petroleum led a rally among the small-cap oil explorers after Goldman Sachs took the Falklands explorer off its “sell” list.

An independent study of Desire’s Sea Lion asset and related discoveries implies net reserves of over 31m barrels of oil, Goldman said.

“We believe the overall discovery is comfortably commercial and relatively simple from a geological stand point and, as such, adopt an 80 per cent chance of success over the asset,” the broker told clients. It put a 49.3p valuation on Desire stock, which rose 5.4 per cent to 24.3p.

Goldman continued: “We believe that there is potential for a purchase of these assets from an industry participant, especially in the event of Rockhopper successfully bringing in a partner.

“But due to the relatively smaller nature of the assets and the weak financial position of Desire, we believe that, unless there is significant competition for these assets, it is therefore unlikely that the company will be able to hold out for a substantial premium on them.”

Fellow Falklands explorer Rockhopper Exploration was down 4.5 per cent to 295.5p.

Goldman also turned positive on Colombia-focused Global Energy Development , which rose 4.2 per cent to 98.5p, and diversified explorer Serica Energy , which was up 3.9 per cent to 26.8p.

Wentworth Resources slumped 19.6 per cent to 41p after the explorer plugged and abandoned an exploration well at its Manzi Bay prospect in Tanzania.

Tests on a gas find at the site indicated that it would not be commercial, Wentworth said.

Panmure Gordon, retaining a “buy” advice on Wentworth, argued that the setback had already been discounted following disappointing initial results in April.

“The Wentworth investment case is supported by 0.7 trillion gross contingent [gas] resources in the Mnazi Bay concession, the exploration activities on the prospective onshore Rovuma Basin, Mozambique, and a well capitalised balance sheet,” said the broker, which kept a share price target of 113p.

Ingenious Media took on 28 per cent to 16p on news that it had sold its stake in Cream, the nightclub brand, at more than twice its book value. The company said it would return the £13.9m raised to shareholders.