Tullow Oil has continued its run of bad luck at discovering fresh oil reserves in Mozambique as the exploration company drilled a dry hole in the Rovuma basin off the coast of the country, forcing Tullow to plug and abandon another exploration well in the basin.
The Buzio-1 well, in which Tullow has a 25 percent stake, was drilled to a depth of almost 11,000 feet, in water depths of 5,000 feet. No oil or gas was found. Buzio-1, which is operated by Statoil, the Norwegian energy firm, was the second well the two companies had drilled together off Mozambique. Earlier this year, the partners began drilling at the Cacholate-1 well, which found gas rather than the expected oil. However, the gas was not in large enough quantities to merit a standalone development and Tullow deemed it unlikely to be commercially successful.
Angus McCoss, Tullow’s exploration director, said: “Having encountered hydrocarbons with the Cachalote-1 well, we have acquired valuable information from the Buzio-1 dry hole. We will now combine the data from both offshore Mozambique wells with our extensive seismic in this licence area and determine our next steps.”
Tullow shares have fallen from highs of more than £12.80 at the start of this year to sit precariously around the £10 mark after a series of disappointments. “This is clearly bad news for Tullow and continues the poor run of exploration success seen this year,” commented VSA Capital analyst Malcolm Graham-Wood. “At current levels the psychological £10 per share mark could well be tested”, he added.
Bernstein analysts gave their view on the disappointing news: “With 105 trillion cubic feet of gas already discovered off Mozambique, further offshore gas discoveries are effectively valueless and the partners aimed to make an oil discovery.”
The oil exploration firms have made a number of giant gas discoveries in the Rovuma basin in recent years: the region is now a major gas exporter. Cove Energy, which had an 8.5 percent stake in the Rovuma 1 block in offshore Mozambique, was taken over by Thailand’s PTT Exploration and Production in a £1.22 billion deal in 2012.
- Tullow Oil drills dry hole off Mozambique (telegraph.co.uk)
- Mozambique: Staoil abandons exploration well (thezimbabwean.co)
- Tullow says wells in Mozambique, French Guiana fail to find oil (fuelfix.com)
- Tullow Oil accused of dumping human waste in Ugandan homesteads (theoilandgasworld.wordpress.com)
- Tullow tumbles on French Guiana and Mozambique drilling failures (telegraph.co.uk)