Desire shares hit once again on its latest Falklands blow

Shares in Desire, which were trading at over 160p in October, fell by 26.2 per cent to close at 35.25p.

Yesterday's announcement followed news in December that its Rachel North well would be abandoned, even though four days earlier it had said there was evidence of a discovery. Shares had almost halved on the Rachel North news.

Panmure Gordon analyst Peter Hitchens said he believed the company now had "major problems" and raised concerns that it is starting to run out of cash.

But Evolution analyst David Farrell said the disappointing result was not a surprise and pointed out that the well had only been predicted to have an 8 per cent chance of success.

Analysts at Oriel Securities also said they would retain their "hold" recommendation on Desire as they see longer-term potential in the firm's acreage in the northern part of the basin being explored.

Oil exploration in the Falklands has resulted in only one commercial discovery, at Rockhopper's Sea Lion well, some 100 kilometres away from the Dawn prospect.

The rig used for the Dawn well would now move to drill a well on acreage owned by Rockhopper.

Desire has been exploring the Falklands since 1998 and has so far failed to find any significant reserves of oil or gas.