Update 1: Company discovered a major gas field but not oil in the Kurdistan region of Iraq
Heritage Oil said it discovered a major gas field but not oil in the Kurdistan region of Iraq, pulling shares in the company down by 18 percent on Wednesday.
Shares in the British oil explorer, which had risen by nearly 20 percent over the last two months, were down 17 percent to 362 pence at 0950 GMT on disappointment the discovery did not include significant amounts of oil.
"The fact that they struck gas isn't seen as a positive at all," one trader says. "It makes the whole area a little less commercial."
Analysts noted the difficulty in getting gas out of the region, given the lack of infrastructure.
Dougie Youngson, analyst at Arbuthnot Securities, said he expected the market to respond negatively to the news.
"There had been market concerns that the geology at Miran was more complicated than previously thought and we feel that today's news backs up that view," Youngson says.
Heritage Oil, which has a 75 percent interest in the field, said it was targeting first production in 2015 and studying options such as bringing the gas into Europe via the Nabucco pipeline.
"The discovery of a major gas field of up to 12.3 TCF (trillion cubic feet of gas) in place with exceptional flow rates makes this one of the largest gas fields to be discovered in Iraq," Chief Executive Tony Buckingham said in a statement.
"We are considering various development options including a tie-in to planned infrastructure that will achieve first production for both oil and gas in 2015," he added.
Panmure Gordon analyst Peter Hitchens said the company finding gas rather than oil was slightly disappointing but maintained that it had still made a "world class discovery" and said it could become a bid target. "Although the market was hoping for oil, it would appear that the well has proved up significant quantities of natural gas. This level of gas is very exciting as it should be more than sufficient to allow a major development with sufficient gas to power the nascent gas market in the country and look at the potential of exports," he said.