Shares in Tullow Oil slip 1.9pc despite new Kenya strike
Published 27/11/2012 | 05:00
SHARES in Tullow Oil slipped yesterday, despite the company striking oil again in Kenya.
In a statement to the stock exchange yesterday, Tullow said it found oil at its Twiga South-1 exploration well in the north of the country.
Tullow has a 50pc operating interest in the well, with the remainder held by Africa Oil.
This is the second significant find by Tullow in the region. Earlier this year it became the first exploration firm to strike oil in Kenya.
Crucially, the oil found yesterday is in a separate field to the Ngamia-1 well, which hit oil during the summer.
The company said it encountered 30 metres of net oil pay with further potential "to be assessed on test". The company also encountered a tight fractured rock section with hydrocarbon shows over a gross interval of 796 metres. That section was found to have "movable oil" but Tullow said it was a new play for the region and would need further testing.
The Twiga South structure is the second prospect to be tested in the area as part of a multi-well campaign in Kenya and Ethiopia and is the first oil discovery in the immediate area.
The well's flow test rate will now be tested over the next two months.
Tullow exploration director Angus McCoss said the discovery "reaffirms the considerable prospectivity of the Lokichar Basin".
"Having significantly expanded our plans in Kenya and Ethiopia, there is much to look forward to as the exploration campaign and testing programme move ahead," he added.
The discovery was welcomed by Davy Stockbrokers' Job Langbroek, who said the results "demonstrate the full potential" of the region.
"No update of the immediate volume potential was provided but the implication of the section encountered for the basin in general is that a billion barrel potential is still very much on the cards.
"The Twiga South well has confirmed the upper sand play in a separate trap to the Ngamia structure and has also opened up a new type of target. Apart from the positive implications of the sand package above the shale section, the 800 metres of oil-filled fractures at the base of the well demonstrates that a huge volume of oil has been generated in the basin.
"We think this news unwinds the risk of the immediate Twiga structure, adding five pence per share, but more importantly has to give a greater level of confidence that the overall Kenya play will deliver material upside," he added.
By late afternoon, Tullow shares had fallen 1.9pc in London to 1,367 pence.