Shoal Point said the Canada-Newfoundland and Labrador Offshore Petroleum Board rejected the company's request to extend an exploration licence for hydraulic fracturing by one year, to January 2015.
The company disclosed the decision to investors after the close of business on Thursday. The C-NLOPB's decision was made Dec. 5, it said.
Shoal Point also said that in its application it was willing to surrender much of the 499,000 acres in its licence area, including the area that sparked the most controversy, near Gros Morne National Park.
'Disappointed by this decision'
Instead, Shoal Point wanted to focus its exploration efforts on another area, south of the park. It said it was also willing to pay an extra $250,000 to extend its licence for the year.
"We are disappointed by this decision," chief executive officer Mark Jarvis said in a statement.
"We feel that our proposal recognized and respected the importance of Gros Morne National Park, a UNESCO world heritage site. Our proposal balanced a desire to protect this unique and beautiful park with a desire to safely and responsibly develop a much needed economic opportunity on the west coast of Newfoundland."
Opponents to Shoal Point's plan have expressed concern that Gros Morne National Park could use its UNESCO status if fracking was pursued just off the park's coastline. The park is prized for its geological features, some of which are located on the coastline itself.
Shoal Point said the C-NLOPB has not yet finished laying out environmental rules for the area.
"Shoal Point submitted to C-NLOPB that it would be inequitable to lose [the exploration licence] and the $1 million deposit due to a change in the regulatory environment beyond its control," the company said in a statement.
Shoal Point's two other exploration licences on the west coast of Newfoundland are not affected.
The company said its best-case expectations for prospective oil resources drops sharply from 968 million barrels to 202 million barrels, with the exploration licence now out of the mix.
In early November, the Newfoundland and Labrador government introduced a moratorium on fracking in areas within its jurisdiction.