Tullow shares slip as Ethiopian drill finds gas

Shares in Tullow Oil slipped marginally yesterday on the back of a disappointing update from its operations in Ethiopia.

The Irish-founded exploration firm reported that drilling activity at its Shimela-1 well in the onshore South Omo Block encountered water-bearing reservoirs, but only traces of thermogenic gas.

While the drill wasn’t enough to seriously damage Tullow’s share price — the stock was down by around 1.2% in London — the news wasn’t deemed good by analysts, given that it was a highly-anticipated drill in the Chew Bahir basin.

“Despite the indication from Tullow that the follow-on wells in Chew Bahir are independent of Shimela, the result is clearly disappointing from the perspective that it provides an initial marker in terms of the potential to be derived from the basin. The fact that the well only logged gas shows clearly diminishes that potential,” according to Gerry Hennigan of Goodbody Stockbrokers.

Davy Stockbrokers was a little more positive, noting that the rocks encountered during drilling suggest an ancient lake setting, “an important element of the discoveries in Kenya. While disappointing, the Shimela-1 well was a rank wildcat and, as such, a high risk drilling event. Moreover, the well result contained some early encouraging indications that the basin has a working petroleum system,” added Davy’s Job Langbroek.

For Tullow’s part, the Shimela well (of which Tullow owns 50% and is partnered by Marathon Oil Ethiopia and Canada’s Africa Oil) has provided “key data to continue to build our understanding of the north-western part of the Chew Bahir basin”.

The Gardim-1 well — to where drilling will now move — which is targeting an independent petroleum system, in a separate south-eastern sub-basin, is not affected by this result, according to Angus McCoss, Tullow’s exploration director.

Tullow’s share price, in London, was down by just over 1.2%, yesterday, at a little over £8.40.