TULLOW OIL's share price fell yesterday as an update on a key well in West Africa disappointed.
The exploration company, which is under pressure to regain its reputation after a string of disappointments, said a key well off the coast of Mauritania did not find oil in commercial quantities. Shares traded down 3pc by early afternoon yesterday on the news.
Analysts had been keenly awaiting the result of the well and had said a positive result would be a major boost for the company, after drilling setbacks in French Guiana, Mozambique and Ethiopia last year.
Tullow's shares have lost almost a third of their value over the last 12 months. In 2013 it was the biggest declining stock in the FTSE 100 blue chip index outside the mining sector.
However, Tullow said the well opened up a new oil area, deeper than current gas fields off the coast of Mauritania. The company will now drill two more wells off the coast of Mauritania in an attempt to see if there is more oil there, enough for a commercial development.
Davy Stockbrokers was positive on the news. "We view any immediate disappointment with this exploration result as a buying opportunity. We maintain our 'Outperform' rating. We believe the stock is cheap despite the high quality of the group's portfolio which has delivered on average 200 million barrels of oil per annum over the past seven years."
In line with previous updates, the company reported a 70pc drop in full-year 2013 net profit yesterday after taking a $697m writedown charge from unsuccessful exploration in 2013 and in previous years. Net profit fell to $191m from $640m in 2012.
But revenues were up, rising 13pc to $2.647bn and beating analyst forecasts.
Since the doubling of its estimate of its Kenyan resources in January, Tullow said the Kenyan government's approach to the project had strengthened.
"The tone has very much changed locally and within government and they're really pushing us," Tullow chief operating officer Paul McDade said. (Additional reporting by Reuters)