Today's big sell-off in Chariot Oil & Gas (CHAR:AIM) is the latest in the litany of examples of resource exploration stocks which have crashed and burned on disappointing drilling results.
In wild cat oil exploration (drilling in areas previously unproven to have delivered oil or gas) investors often face a binary outcome. Either a well finds oil or gas in commercial quantities and the shares will surge or it doesn't and the shares collapse.
Chariot is down 55.3% to 3.53p as it reports that its Prospect S well offshore Namibia failed to find any hydrocarbons (oil or gas). Chariot had a 65% interest and was the operator of this drilling effort.
The news will be particularly painful for investors who participated in the placing or open offer at 13p earlier this year.
The company does have other assets in its portfolio but Cantor Fitzgerald is not optimistic on its future.
'While the company claimed that this was low risk, this failure is testament to the risk of wildcat exploration in (relatively) undrilled basins.
'With little cash left, we see little chance for a farm-in or for the ability to exercise the option to farm in to Mauritania with Shell.
'Whether investors would be willing to fund any further wildcat exploration by this company is the remaining question, and we think the track record of failure is likely to make survival difficult.'