Tullow Oil found mild oil at its Carapa-1 nicely in Guyana, however the reservoir was smaller than the troubled firm had anticipated previous to drilling. Shares fell as a lot as 20%.
The unbiased oil producer’s first discovery of the brand new 12 months comes after a calamitous 2019 during which its inventory declined 64% and the chief government officer and exploration chief stepped down. The industrial viability of Tullow’s earlier offshore discoveries in Guyana stays unsure after the reservoirs had been discovered to comprise heavy oil.
“The Carapa-1 end result is a vital exploration end result with optimistic implications” for each blocks the corporate has within the South American nation, Mark MacFarlane, Tullow’s chief working officer, mentioned in a press release on Thursday. “While internet pay and reservoir improvement at this location are beneath our pre-drill estimates, we’re inspired to search out good high quality oil.”
About 4 meters of internet oil pay had been encountered. That was decrease than pre-drill forecasts, however Tullow highlighted optimistic features of the nicely that “suggests the extension of the Cretaceous oil play from the Stabroek license southwards into the Kanuku license.”
“Expectations had been excessive going into this,” mentioned David Round, an analyst at BMO Capital Markets. “There shall be a stage of disappointment concerning the measurement.”
Tullow shares had been four.5% decrease at 61.14 pence as of 9:55 a.m. in London buying and selling. That’s down about 95% from the corporate’s 2012 peak.
Rig web site testing indicated that the oil is 27 levels API with a sulfur content material of lower than 1%, based on Tullow. The nicely shall be plugged and deserted and an in depth laboratory evaluation of the oil high quality will observe. Tullow has a 37.5% stake within the Kanuku block. Repsol SA is the operator with 37.5% and Total SA has 25%.
“We will now combine the outcomes of the three exploration wells drilled in these adjoining licenses into our Guyana and Suriname geological and geophysical fashions earlier than deciding the long run work program,” MacFarlane mentioned.
The newest nicely concludes Tullow’s “high-impact exploration program in Guyana,” and whereas the corporate made three “technical discoveries,” none are anticipated to be commercially viable, Will Hares, a senior analyst for Bloomberg Intelligence, mentioned in a observe.
The Guyana outcomes come as Tullow searches for a brand new CEO after Paul McDade, and exploration director Angus McCoss, give up on Dec. 9. At the time the corporate forecast its complete manufacturing this 12 months shall be 70,000 to 80,000 barrels a day — decrease than in 2019 — due to weaker expectations from its fundamental fields in Ghana. A course of to cut back its stake in a Uganda mission has been delayed for years.
“The Guyana outcomes emphasize Tullow’s more and more challenged development outlook amid its Ghana mission points and East Africa delays,” Hares mentioned.
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