Falkland O&G (LSE:FOGL)
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Shares in Falkland Oil & Gas Ltd. (FOGL.LN) slumped Tuesday after the oil and gas explorer said it is unlikely it will find a rig it can use to drill at one of its license areas this year.

The company, one of a small group of U.K. explorers searching for oil off the coast of the Falkland Islands in the south Atlantic, added BHP Billiton PLC (BLT.LN) has decided not to participate in the next phase of exploration at another license area.

At 1340 GMT, shares in Falkland Island Oil & Gas were down 34.5 pence, or 22%, at 121.75 pence, making it the biggest faller in a 0.3% lower Alternative Investment Market.

Shares in peer Borders & Southern Petroleum PLC (BOR.LN), which has licenses in an area to the south and east of the islands like Falkland Oil & gas, were down almost 10%.

Shares in Falklands explorers Rockhopper Exploration PLC (RKH.LN), Desire Petroleum PLC (DES.LN) and Argos Resources Ltd. (ARG.LN) were also lower Tuesday.

Falkland Oil & Gas said due to a lack of available rigs it won't be able to drill at a prospect called Loligo in its northern license area by the end of the year as required by the terms of its license. However, it said the government of the Falkland Islands has agreed to extend the license by another year.

A spokesman for Falkland Oil & gas said the company didn't have to pay any compensation for the extension and said it is fairly confident it will be able to find a rig next year.

Also Tuesday, Falkland Oil & Gas said BHP Billiton, a mining giant, has handed back its 51% interest in the southern licenses, where the next phase of drilling was scheduled to start before Dec. 3, 2015.

It didn't specify why BHP gave up its interest but Falkland Oil & Gas didn't find any oil at a well on the Toroa prospect during drilling earlier this year. BHP has kept its interest in the company's northern licenses, the Falkland Oil & Gas spokesman said.

Analysts at brokerage Westhouse Securities said BHP's decision to withdraw after one unsuccessful well is premature. The brokerage said the decline in the company's share price Tuesday represents an opportunity for investors and switched their recommendation to "buy" from "sell".

The search for oil in the waters off the Falkland Islands has sparked excitement among investors and drawn diplomatic protests from Argentina, which fought a brief but bloody war with the U.K. over the islands sovereignty during the 1980s.

The biggest beneficiary of investors' interest in the exploration has been Rockhopper, which recently declared its discovery at Sea Lion in the North Falkland basin commercial. Its shares have increased in value more than six-fold since the start of the year, valuing the company at more than GBP800 million.

-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com