Tullow Oil in trading slump

Tullow Oil slumped to a four-month low in London trading yesterday after failing to make a commercial find at the Zaedyus-2 well off French Guiana in South America.

Tullow plunged as much as 6.8% to 1,278p, the lowest intraday price since Aug 3, after drilling results showed the well was not connected to the earlier Zaedyus-1 offshore find.

The well “encountered a total of 85m of reservoir quality sands with oil shows in several objectives but did not encounter commercial hydrocarbons at this location”, Tullow said in a statement.

Tullow, along with partners Royal Dutch Shell and Total, spent over $250m (€191m) last year drilling the Zaedyus-1 well, which discovered light and heavy oil. In March, it increased the oil province’s resources estimate to 840m barrels of oil equivalent from 700m barrels.

“Very disappointing result,” said Stuart Joyner, an analyst at Investec Securities in London. “This was not an aggressive step out from the original discovery and it appears at this stage that 60m to 100m barrels of oil equivalent of the prospectivity has been impacted.”

Shell holds a 45% stake in the Guyane Maritime licence, while Tullow has 27.5% and Total 25%. Northpet Investments, a company jointly owned by Northern Petroleum and Wessex Exploration, holds a 2.5% interest.

Northern Petroleum fell as much as 18% after the announcement and Wessex lost as much as 28%.

“The French Guiana block remains highly prospective, particularly down-dip and still offers excellent potential for multiple exploration successes,” Tullow’s exploration director Angus McCoss said.

“These early lessons learned by the joint venture are being incorporated into our ongoing well campaign.”

Zaedyus-2 was appraising 60m barrels of oil equivalent resources and targeting a further 130m as an exploration well. Priodontes-1 will target a reservoir with an estimated 300m barrels of oil equivalent resources, according to Tullow.

Bloomberg