--UPDATE, ADDS BROKER COMMENTS--
Tullow Oil (LON:TLW) has revealed results from the Etom-2 well, onshore Kenya in Block 13T, where it has encountered the best quality reservoir at the Lockichar project to date.
Etom-2, which was drilled down to a 1,655 metre final depth, cut 102 metres of net oil pay in two separate columns, Tullow told investors.
Oil samples, sidewall cores and wire line logging all indicate the presence of high API oil, it added.
"We are delighted with the Etom-2 well which encountered over 100 metres of net oil play in the best reservoirs in the basin so far,” said Angus McCoss, Tullow exploration director.
“Discovering this thick interval of high quality oil reservoirs further underpins our development options and resource base.”
Tullow’s large discoveries in the Lockichar basin, in the west of Kenya, have put Kenya’s emerging onshore oil sector on the map and have attracted a great deal of industry interest as highlighted by a US$850mln farm-out deal by its partner Africa Oil last month.
McCoss this morning highlighted that the planning of Etom-2 was the result of careful evaluation of 3D seismic data after the drilling of the Etom-1 discovery.
He added that there was significant potential in this underexplored part of the block, and the plan is now to shoot more 3D in the northern part of Block 13T to include the Erut and Elim prospects.
Etom-2 is the most northerly well drilled in the area.
“We will review the potential of the greater Etom area and neighbouring prospects to decide on our forward programme," McCoss added.
Tullow owns a 50% stake in the Kenya project alongside Africa Oil, which last month agreed to sell half of its 50% stake to Maersk in a deal worth up to US$850mln.
Barclays Capital, in a note, said that following today’s result it now expected Tullow’s management to speak more confidently about the possibility of Lockichar to achieve 1bn barrel potential.
“Rising resource estimates could then improve the potential for management to achieve its goal of divesting a stake in the project prior to development,” the investment bank said.
It also highlighted that Barclay’s 72p per share valuation of Tullow’s 50% stake in the project was based around 600mln barrels and as such currently excludes the impact of Etom-2.
Notably, the Tullow and Africa Oil’s successes have given encouragement to a number of other, smaller exploration group’s with acreage in Kenya such as Simba Energy (CVE:SMB) and Octant Energy (CVE:OCT).