Tullow Oil shares suffered a fresh crash — falling by as much as 20% — after it said its latest oil find is smaller than expected.
It is the third such hammer blow for the stock in less than a month, after the Irish-founded exploration company cut its production outlook, suspended dividend payments, and parted company with its CEO and exploration director.
December’s meltdown led to Tullow’s acting chief, Dorothy Thompson, saying the company is effectively open to takeover offers at the proper price.
The latest share fall — the stock pared some of the losses, but still closed down nearly 7% — followed Tullow saying its first oil discovery of the new year found a smaller-than-expected reservoir, at the Carapa-1 well in Guyana.
“Expectations were high going into this. There will be a level of disappointment about the size,” said BMO Capital Markets analyst David Round.
The viability of Tullow’s assets in the South American country was already in doubt, with the company saying, last month, that early results from wells, there, had missed expectations.
However, Tullow’s chief operating officer, Mark MacFarlane, said that the company was “encouraged” to find good-quality oil at the latest well, despite it not being commercial.
Mr MacFarlane called the Carapa-1 result “an important exploration outcome” with “positive implications” for Tullow’s two blocks in Guyana.
“In valuation terms, we do not think there is any value for Guyana — or, in fact, any exploration activity — in the current share price,” said Davy analyst Job Langbroek.
“Our current valuation of core assets, at $60 per barrel, is 144p per share. This suggests Tullow is trading at just 40% of its core assets, assuming a long-term, $60-per-barrel oil price is appropriate,” he said.