Tullow drilling in spotlight after mixed 2012



REUTERS

Published — Saturday 12 January 2013

Last update 12 January 2013 12:32 am

| نسخة PDF Print News | A A

LONDON: Tullow Oil Plc has a record 49 wells planned this year, and drilling engineers due to deliver news by February are under pressure after a disappointing trading update from the Africa-focused company yesterday.
After a mixed year for one of the industry's best performing drillers of recent times, Tullow's output guidance for 2013 at 86,000-92,000 barrels of oil equivalent per day (boepd) came in below some analysts' forecasts, and its 2012 output at 79,200 boepd undershot company guidance.
In addition, parts of the update on drilling in Uganda and Kenya were more cautious than some analysts had hoped from Europe's largest oil and gas exploration and production company outside the industry's integrated giants.
Tullow's shares, which have tripled since 2007 while peers have flatlined, fell 5.3 percent to 1,160 pence by 1135 GMT.
But finance director Ian Springett said the company's view of its east African assets was unchanged and stressed that exploration, not production, remained Tullow's driving force, with a record 49 wells to be drilled during the year.
He said the negative Ugandan well results were establishing the margins of the basin and were relatively low cost, while in Kenya "it's very, very early days."
"We need to drill a lot more wells in Kenya before we really understand where are the best locations and what the flow rates are," he said. "We have a very large exploration program active in a number of countries with some basin opening potential in a number of them. It's a big and wide program."
The company said it would continue to focus on "high value oil and early monetization" in its exploration-led growth strategy - selling assets where it has found oil relatively early in the development and production process.
Some investors have begun to worry it is losing that focus, especially since December last year when it bought Norwegian driller Spring Energy, and attendees at a Macquarie investment conference this week expressed a desire to see it maintained.
Out of the more than 30 who responded, 65 percent said Tullow should avoid getting sucked into a production target structure, and err on the side of early sell-out.
Macquarie analyst Mark Wilson tagged Tullow shares as underperform early last year, and other analysts have moved in that direction since.
"While still a best-in-class explorer, we see ongoing challenges for Tullow as it continues to seek the right balance between the "E" (exploration) and "P" (production) sides of its portfolio," said Brian Gallagher of Investec, who rates the stock a sell, in a research note on Friday.
Analysts at Charles Stanley yesterday downgraded the stock to hold from accumulate.
In Kenya and Ethiopia, Tullow said it was expecting a result from its high-risk PaiPai-1 well in February and a flow rate test completion at its Twiga-South-1 well it shares with Africa Oil in the same month. The flow rate from the Twiga-South-1 test is unlikely to be more than 500 barrels a day, it said. Drilling on the Sabisa-1 well in the South Omo block in Ethiopia is expected to commence within the next two weeks.
In Uganda, Riwu-1, Raa-1 and Til-1 did not encounter commercial hydrocarbons, Tullow said, but extensive further drilling in partnership with operator Total is planned for 2013.
At another important prospect in French Guiana, drilling at Priodontes-1 (GM-ES-3) adjacent to the already drilled Zaedyus prospect started at the end of December 2012, and is expected to continue for four to five months, Tullow said. Zaedyus-1 was encouraging last year but Zaedyus-2 found no commercial quantities of oil, news that hit Tullow's shares in December.
Tullow has long targeted 120,000 barrels a day of output at its Jubilee field in Ghana, and had once hoped to reach that by 2011. The company said it was now producing 110,000 barrels a day "therefore allowing the current FPSO (floating production, storage and offloading vessel) capacity to be tested over the coming weeks." Analysts said this was good news.
Last year Tullow raised $2.9 billion by selling part of its Uganda franchise to Total and China's CNOOC.
Tullow is trying to sell more assets to help finance its capital expenditure program which is expected to total $2 billion in 2013, up from $1.9 billion in 2012, but it had no firm news on disposals in its trading update.

What's happening around Saudi Arabia

RIYADH: Custodian of the Two Holy Mosques King Salman briefed the Cabinet, on Monday, about the message he sent to the Kuwaiti emir and the messages he received from the Moroccan king and the Qatari emir.The king also spoke about the outcome of his m...
RIYADH: The Eastern Mediterranean Office (EMRO) of the World Health Organization (WHO) on Monday announced that the region is considered a Zika virus-free zone.Dr. Alaa Alwan, the regional director of EMRO, said that it does not mean that Middle East...
JEDDAH: The Saudi Health Council is working to establish an electronic system to prevent manipulation of sick leave holidays.Dr. Yaqoob Al-Mazrouh, secretary-general of the council, disclosed this during a seminar on Sunday. He did not elaborate on h...
RIYADH: Specialized Clinics Arabia (SCA) treated a total of 9,220 Syrians at the Zaatari Refugee Camp in Jordan during the month of January 2016, according to Dr. Hamid Mufalana, SCA medical director.“Many of the patients were children who were given...
JEDDAH: The Jeddah police have solved the mystery surrounding the thrashing of a man by another, the video clip of which had gone viral.It was a Herculean task for the police to search for the victim, who had not bothered to lodge any complaint. The...
JEDDAH: The Cutoms Department at Yanbu’s Prince Abdul Mohsen bin Abdul Aziz Airport recently foiled an attempt to smuggle 64,165 Captagon pills found hidden in four boxes.Saad Al-Buqami, director-general of Customs at the Airport, said: “During our c...
AL-AHSA: Plans are afoot to turn the Al-Ahsa dates festival into an international event by adopting top standards in the manufacture, packaging and marketing of the product, Adel Al-Mulhim, the general supervisor of the festival, has said.Speaking du...
RIYADH: A gang comprising two women and youth has been arrested for allegedly looting cash from pharmacies and snatching women’s handbags in malls.Col. Fawaz bin Jameel Al-Maiman, police media spokesman of the Riyadh region, said the arrests were mad...
RIYADH: Riyadh Gov. Prince Faisal bin Bandar on Sunday called for conservation of water and electricity, even as the Water and Electricity minister said Saudi Arabia will need an investment of SR500 billion for power projects over the next 10 years t...
RIYADH: More than 200,000 people accused of various crimes were investigated by the Bureau of Investigation and Public Prosecution (BIPP) in the financial year of 1435-1436 A.H.Among the 218,000 who were investigated, around 30 percent or 65,000 were...
RIYADH: Thousands of Saudis have visited the German pavilion at the Janadriyah festival since it was opened by Custodian of the Two Holy Mosques King Salman last week, in the presence of German Foreign Minister Frank-Walter Steinmeier and German Amba...
DAMMAM: The cold wave in many parts of the Kingdom over the last week caused a decline of between 30 percent and 50 percent in farm production. This decline in turn drove prices of agricultural products at wholesale markets up by 30 percent.Farmers s...
RIYADH: The Ministry of Commerce and Industry warned on Monday that heating devices should have a voltage of 220 volts with a capacity not exceeding 2,500 watts.The announcement was made when MCI inspectors seized more than 3,000 substandard heating...
ALKHOBAR: Nearly 100 leading figures in the government and private institutions have completed training programs specializing in integrity and anti-corruption provided by the Saafah Foundation for Good Example in Riyadh, Jeddah and Alkhobar.The secre...
JEDDAH: Iraqi authorities executed in Baghdad on Sunday a Saudi prisoner, Abdullah Azam Al-Qahtani, 35, on charges described by his family as fabricated.Al-Qahtani had spent almost 13 years in the Iraqi prisons.Rumors about the execution of Al-Qahtan...

Stay Connected

Facebook