After a string of disappointments, Britain’s Tullow Oil is under pressure to regain its reputation for successful exploration. However, the problems have continued after the oil major disclosed that a key well in West Africa did not find oil in commercial quantities. According to Tullow, the company said the Fregate-1 well off the coast of Mauritania was not a commercial find, but had encountered 30 metres of gas condensate and oil. Shares have plummeted further with the news, trading down 3.4 percent at 817.25 pence by 1052 GMT on Wednesday 12 February.
Tullow said while not commercial by itself, the well opened up a new oil area, deeper than current gas fields off the coast of Mauritania. The company will now drill two more wells off the coast of Mauritania in an attempt to see if there is more oil there, enough for a commercial development. Tullow’s shares have lost almost a third of their value over the last 12 months. In 2013 it was the biggest declining stock in the FTSE 100 blue chip index outside the mining sector. Tullow, having issued guidance for its 2013 revenue and profit in January, reported 2013 operating profit of $381 million, a 68 percent fall on the year but ahead of a consensus forecast of $349.7 million.
Analysts view
- Analysts had reportedly been keenly awaiting the result of the well and had said a positive result would be a major boost for the company, after drilling setbacks in French Guiana, Mozambique and Ethiopia last year, Reuters reported.
- “While unsuccessful, the result details reaffirm the potential of making a big oil find offshore Mauritania via the follow-on wells,” Morgan Stanley analysts said in a note.
- “We had hoped for a commercial discovery here, providing an additional offshore ‘leg’ to the exploration story,” analysts at brokerage Canaccord said. “We expect the East African program to continue to deliver success, but think an additional ‘leg’ is required to see further upside in the near term.”
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