Oil explorer Sterling Energy (SEY:AIM) falls 20.9% to 35.5p after announcing its Bamboo-1 well on the Ntem concession offshore Cameroon has failed to find hydrocarbons in commercial quantities.

We added Sterling as a Play of the Week in October last year when it was almost entirely underpinned by its cash reserves. The group was fully carried for the costs of this drilling by partner Murphy Oil (MUR:NYSE) and, having re-rated ahead of the result, the shares have roughly retreated back to its $120.8 million cash value.

The company is set to issue an interim management statement alongside its AGM on 25 April and may give an update on its plans for Ntem at that point. Today's news is also notable in being the latest in a string of underwhelming drilling results which have undermined investors' faith in the E&P (exploration and production) sector.

Citing the absence of any imminent exploration prospects or other catalysts broker Westhouse Securities cuts its recommendation from 'buy' to 'neutral' and its price target from 141p to 35p. It comments: 'Sterling also has a 30% stake in the Ampasindava block offshore Madagascar (ExxonMobil (XOM:NYSE) owns 70% and is operator) where the partners are working up the 1.2 billion barrel Sifaka prospect, however at this point there is no clarity on when a well might be spudded and hence we carry no value for it in our risked NAV (net asset value).'

Westhouse adds that the company 'has a 25% stake in the Odewayne block, onshore Somaliland (Genel (GENL) is operator), but this is an early stage exploration prospect and as yet there is no visibility on prospectivity.'

Issue Date: 08 Apr 2014