Pancontinental Energy (ASX:PCL) faced increased risks as Woodside Energy's (ASX:WDS) unit withdrew its funding for the proposed well drilling at the company's petroleum exploration license (PEL) 87 in Nambia, according to a Tuesday note by Euroz Hartleys.

On Tuesday, the company said its unit, Pancontinental Orange, received a notification from Woodside's unit Woodside Energy (GOM) Inc., that it elected not to exercise its option to farm into the PEL87 oil project, offshore Namibia.

PCL's unit currently owns 75% of the project and is the operator, while Custos Investments (Pty) owns a 15% interest.

The cost of the PEL 87 well and Woodside's carry for the farm-out deal would have represented about one-third of Woodside's $200 million exploration budget, Euroz noted, adding that it could be a possible reason WDS decided to back out.

Euroz believes that there is "not all disappointing" news as PCL on Tuesday, found further leads in the permit, that exhibit anomalies consistent with major discoveries and estimated total high case oil-in-place resources at 12.7 billion barrels of oil.

Securing a new farm-in partner to cover well costs is crucial for Pancontinental Energy and could boost its share price, Euroz added.

Euroz maintained PLC's speculative buy rating but lowered its price target to AU$0.028 from AU$0.040.