Ophir Energy's successful run in east Africa came to an abrupt halt after drilling at the oil and gas explorer's well off the coast of Tanzania failed to strike oil or natural gas.
Nick Cooper, chief executive of the FTSE 250 company, on Thursday said that drilling at the Mlinzi Mbali-1 site - which lies about 210km east of Dar es Salaam - "disappointingly did not encounter live hydrocarbons".
Shares in Ophir, which have shed more than 40 per cent of their value in the past year, fell by as much as 10 per cent on Thursday. The price recovered some ground, and stood at 302p at mid-afternoon, down nearly 8 per cent for the day.
The dry well ends a string of successes in Tanzania for Ophir, which has had a 100 per cent hit rate in fields to the south of the Mlinzi Mbali-1 site. The southern blocks, which Ophir operates in a joint venture with BG Group, have yielded about 2.5bn barrels of oil equivalent.
Mlinzi Mbali-1 - a channel system with a number of prospects in a new, separate basin - was thought to contain up to 3.5bn boe. But Ophir only gave the project a 20 per cent chance of success. Al Stanton, analyst at RBC Capital Markets, called the Block 7 field, in which Ophir has an 80 per cent interest, a "substantial playmaking opportunity.
The upside was enormous". The company left the door open to further drilling in the area, saying the data gleaned from the current effort would be used to assess the block's future potential.
Over the past three years, companies including Ophir, Statoil of Norway and Exxon- Mobil of the US have discovered a number of large offshore natural gasfields in Tanzania, fuelling big hopes that the east African nation could become a significant exporter of liquefied natural gas.
Ophir, which also has assets in Gabon and Equatorial Guinea, in March raised £550m via a share placing and rights issue to fund its exploration work in the region.
It sold a 20 per cent stake last month in its three southern blocks in Tanzania to Pavilion Energy, a subsidiary of Temasek, the Singapore investment company, for $1.3bn.
"That gives you an idea that [Mlinzi Mbali-1] could have been of huge value," said Dragan Trajkov, an analyst at Oriel Securities.
He added that the share price reaction was probably penalising Ophir for the capital expenditure on the project, which he put at about $100m, rather than cutting expectations for the potential value of the project.
Mr Stanton added: "Stocks have stopped running up in anticipation of well results." Ophir signed an agreement in December to bring in Austria's OMV as a partner in Gabon, partly easing investor concerns that the London-listed group was taking on too much risk in its exploration activities.