Molisht-1 well (PMI photo)

Molisht-1 well (PMI photo)

Bad news for Petromanas Energy (PMI.tsxv) shareholders this morning, myself included.

The company is exploring for oil on shore in Albania's Berati thrust belt in a joint venture with Royal Dutch Shell, after their first well, Shpirag-2, made a discovery in late 2013.

Petromanas has temporarily suspended the Molisht-1 well at 4200 meters depth, which originally started drilling in August 2013. The well was unable to get through the lower flysch schale zone on its way to the lower carbonate reservoir, despite penetrating approximately 250 meters of oil bearing rocks.

CEO Glenn McNamara said the joint venture needs a more powerful rig to reach the target depth. The partners intend to re-enter the well in the future, but did not specify when.

In September, Petromanas secured a 3,000 horsepower rig which will drill the Shpirag-3 appraisal well, and will be on site in Albania late this year or early in 2015.

The problem Petromanas has now is cash. We've seen estimates the Molisht-1 well cost the joint venture $75-$90 million, of which Petromanas was carried for the first $52 million, but is responsible for 25% of the additional costs. This could mean Molisht-1 cost the small company as much as $10 million. PMI had $26 million as of June 30, 2014.

Shell will carry Petromanas for a third well to a maximum of US $42.5 million gross drilling costs.

Petromanas has retained financial advisors Peterson and Co to help review all options to support the exploration and development of the Albanian assets.

The company is also working with Macquarie Capital Markets Canada on finding partners for its French assets.

Shares in Petromanas were off 35.7% in early trading Thursday, last at $0.09. The shares had reached as high as $0.40 in June 2014, when expectations for Molisht-1 were building.

Here's the news release: Petromanas provides update on European assets