Tullow shares plunge after two prospects fail to produce any oil
SHARES in Tullow Oil plummeted yesterday after the company said two prospects it had been drilling in Africa and South America failed to produce any oil.
In a statement, the Irish-led company said its Cachlote-1 exploration well in offshore Mozambique had found gas but the well was not commercially viable. A deeper target on the same site did not find gas or oil.
That well was then sidetracked but, again, what gas was found was deemed not worth pursuing. The well has now been abandoned.
While Tullow does produce some gas, it is known primarily to be seeking oil. The global collapse in natural gas prices brought on by the emergence of shale gas in recent years has made the business much less economically viable.
Tullow experienced a similar story in French Guiana, where the GM-ES-4 well was drilled into the Cebus prospect. Despite drilling to a depth of 6,292 metres, Tullow said it did not find any sign of hydrocarbons, and that well too has been plugged and abandoned.
The Zaedyus discovery in the same region was not affected by this duster, the firm said.
Tullow exploration director Angus McCoss said the data from the Cachalote-1 in Mozambique was "encouraging, although this is not a standalone commercial discovery".
"The potential for discovering oil in this region remains after we encountered wet gas shows in the deeper sidetrack. We will integrate this valuable data into our regional model to improve our chances of unlocking the oil play potential in off- shore Mozambique," he added.
"The Cebus-1 well was an ambitious wildcat exploration well which did not encounter hydrocarbons," he added.
Tullow has one more well left to drill in French Guiana as part of its current exploration campaign. If that one fails to produce as well, it will cap a dispiriting few months for the company in the region.
In April, the company abandoned the Priodontes-1 well there after it too failed to produce oil.
Analysts at Davy Stockbrokers, a house broker to Tullow, said that while the results were disappointing, growth would likely be driven by its interests in Kenya and any future farmouts it runs.
Tullow fell as much as 7.5pc in London, but recovered to be off a little more than 6pc by the close. The stock is off 22pc in the past year.