More bad news for Tullow as it hits water in Ethiopia
Shares in exploration firm Tullow Oil closed down 1.4pc in London yesterday after it said one of its wells in Ethiopia had hit water.
The stock has lost more than a third of its value in the past 12 months, following a string of disappointing exploration updates.
"It's another disappointing result in East Africa for Tullow and the market, in our view, already prices in success above the existing discoveries in this region," said Brian Gallagher, an analyst at Investec.
"This means that Tullow needs to start finding the mark soon or the upside assumption could soon be challenged."
Tullow operates the South Omo block in onshore Ethiopia with a 50pc equity interest – Africa Oil has a 30pc stake and Marathon Oil another 20pc stake.
The oil and exploration company said Shimela-1 in the block was drilled to test a prospect but encountered lacustrine and volcanic rocks, as well as about 100 metres of sandstone reservoir.
Trace thermogenic gas was recorded at 1,900 metres, it added.
"Although the Shimela well only found traces of thermogenic gas, it has provided key data to continue to build our understanding of the north-western part of the Chew Bahir basin," said Angus McCoss, Tullow's exploration director.
"The prospectivity at the Gardim-1 well, which is targeting an independent petroleum system in a separate south-eastern sub-basin, is not affected by this result."
Last month it was revealed that Tullow had sold its majority stakes in two UK North Sea gas fields.
Stockbrokers Davy took an upbeat position. "While disappointing, the Shimela-1 well was a rank wildcat and, as such, a high-risk drilling event," it said. "Moreover, the well result contained some early encouraging indications that the basin has a working petroleum system."