West Seahorse is easily big enough to develop given any oil price over $60 in 2009 (more likely $200 though) - it is very cheap as offshore projects go due to ability to pipe straight to shore at low cost from a local platform. The resource potential has not actually been reduced by this drill as the secondary targets were intersected much further down than they expected and there may be a lot of oil further up. Look on the net for geology of reefal hydrocarbon reservoirs - much like in real reef you can get large "holes" where the reef dips down a steep hole (usually where a current passes through washing away the sand) so a formation can drop a long way in a few meters and if your well just happens to hit that spot it is tough luck. These dips may be too small to pick up on seismics.
The downward price pressure is because the well has not upgraded the oil reserve as much as hoped (It has upgraded a bit as the primary target's LKO (lowest known oil depth) has been lowered). The well has not upgraded reserves in the lower formations as they have not hit oil there at the lower than expected depth, so LKO remains as it was on the previous drill (though there is oil there - known from past drilling - and reservoir quality is excellent - as expected for buried reef plays). This means that they will need to drill those formations again to tap into the higher reservoir and to establish an idea of reservoir size.
I think this is undervalued on what we know already, so long-term downside is minimal. If Wardie comes in then this will surge much higher as oil in Wardie does not add to costs other than initial drilling and any oil there is pure profit. If it doesn't have oil then the SP will clearly drop temporarily and TDO would become a fantastic buy for the West Seahorse resource alone at 40c (worth about $1.00 or more per share IMO). Note that this permit has other targets and they have lots of other permits.
TDO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
