Jersey Oil & Gas collapses 75% following 2 dusters

It's not a good morning for Oil & Gas exploration stocks today.

Jersey Oil & Gas (LON: JOG) reported the results from two high profile prospects, Verbier and Partridge, both of which came back as dusters.

Verbier, which is a Statoil operated well in which JOG has an 18% share, came back with water bearing sands. The Group are considering whether to drill a side-track, but this is usually industry-speak for "this is a write-off" and in fact, Management says as much when by confirming "at this stage JOG considers this to be unlikely".

The other disappointment was the lack of hydrocarbons discovered in the Partridge prospect, as announced by partner Azinor.

Assuming the sidetrack doesn't happen, both wells have, or will, be plugged and abandoned.

JOG confirms the Verbier well was fully carried so had no cost impact on its Balance Sheet. However, it also confirms the Group's cash position will be c.£2.5m by September month end.

Talking to analysts in the city, most of the value JOG represented in the market was tied up in the risk-weighted potential in these wells, primarily Verbier. The fact both have come back dry therefore explains the c.75% fall in shares this morning.

The market cap has fallen from £22m last week to £4.5m today, of which £2.5m is cash, according to Management. There is now little value baked into the share price for future value creation, which is understandable given today's announcement and the uncertain future prospects for the Group. It was always going to be a high-risk share for investors with significant upside opportunity offsetting the more likely scenario of severe losses.

As usual with the exploration sector, it is very much a case of caveat emptor...