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Tullow Oil's next big drill result could have major implications for Wessex and Northern Petroluem
July 15 2011, 12:54pm
The rise in the Tullow Oil (LON:TLW) share price this morning reveals the marginal importance of today’s duster to the FTSE 100 explorer’s prospects.
Earlier Tullow revealed the Makore-1 exploration well on the West Cape Three Points Block, off the coast of Ghana, had found water rather than oil.
Tullow had a 23 per cent stake in the well, which was valued at anywhere between 6.5 pence and 11 pence a share by analysts following the company.
That’s a mere gnat’s bite from the current Tullow share price of 1,281 pence, up 12.65 pence.
Makore-1 was the first well in the south-eastern portion of the West Cape Three Points block and 25 kilomtres south-east of the world class Jubilee discovery.
This means it was always going to be a risky exploration proposition as Tullow and its partners sought to take as many discoveries as possible through to the next phase of the West Cape.
“The result at Makore-1 has no implications for the next well in the West Cape Three Points exploration programme, Akasa-1,” said Caren Crowley, an analyst at Irish broker Davy.
“Akasa-1 is targeting a separate fan system to Makore, and is moving up-dip from the Dahoma-1 well which discovered water-bearing sands with oil shows.”
For Charlie Sharp of City firm Matrix the focus now is on other high-impact programmes such as Zaedyus, now drilling in French French Guiana.
Interestingly, this particular well could have a major impact on two juniors which hold a small interest the block.
Northern Petroleum (LON:NOP) and Wessex Exploration (LON:WSX), which own a combined 2.5 per cent, could be huge beneficiaries of a major find.
Shell has 45 per cent and Total 25 per cent, while Tullow has 27.5 per cent of the exploration block – which merely serves to underline the potential of Zaedyus.
Exploration well GM-ES-1 was spudded in March, and has encountered a number of hold-ups, which have delayed the results until next month.
The target is a 700 million barrel P10 prospective resource. The well is about 50 kilometres away from the offshore boundary with Brazil.
GM-ES-1 is being drilled to about 6,500 metres subsea, to target one of several prospects in a major undrilled Late Cretaceous deep water channel fan system.
Northern’s technical director Graham Heard said when the well was spudded: "We we are very excited that drilling operations have commenced on this first exploration well on the Guyane Maritime Permit.
“This is an unusual opportunity for us as a company to participate alongside a successful explorer such as Tullow and two major oil companies, Shell and Total, in the first well targeting a new exploration area of importance.
“This basin has significant exploration potential and we keenly anticipate the results from the Zaedyus prospect which will determine future exploration activity in the area."
A meeting with management following Tullow’s prelims earlier this year devoted some time to Zaedyus and its potential impact.
Tullow highlighted five prospects which would be de-risked if Zaedyus is successful.
While management refrained from hinting at prospect sizes, the aerial extent of these prospects suggests they are larger than the 230-700 million barrels of oil Zaedyus prospect.
BarCap in a recent research note was very bullish on Tullow’s the prospects in the area. “If successful, this could open up a new play, which we estimate could be worth £9 a share unrisked,” said analyst Alessandro Pozzi.
