Tullow shares fall as production figures disappoint

Shares in Tullow Oil (LON:TLW) fell by more than 6 per cent in a busy early session as the group’s production undershot its own, already conservative guidance for 2011.

The main drag on output has been the stuttering performance of the Jubilee Field off the coast of Ghana, the company’s main producing asset.

Clay clogging the pipes has been a major problem and has meant the group as produced just 66,000 barrels from Jubilee, making total output 78,200. This was marginally below the 79-81,000 barrel a day range forecast in November.

Unsurprisingly, the City was dissatisfied with the performance, and the shares fell 95 pence to 1,360 pence by 10.20 am.

“The almost seamless flow of positive updates that has characterised Tullow's activities over the last few years has been interrupted by production issues at Jubilee,” said analyst Job Langbroek of Davy Research. 

“While these look to be resolvable, there will be a short-term impact on performance metrics.”

Separately, it was announced explorer has agreed a partnership with Shell (LON:RDSA) that will focus on making major discoveries in “frontier basins”.

On Shell’s part it marks the recognition that independent explorers have led the way in opening up new oil provinces in Africa and South America.

Shell's plan to tie up with Tullow could provide a shortcut to its effort to boost discoveries, by tapping into Tullow's expertise and a culture that encourages exploration risk-taking.

The venture builds on Shell's entry into Tullow's exploration licence in French Guiana in 2009, where the partners announced a significant discovery last year.

That JV has implications for two of the market’s smaller explorers – Wessex Exploration (LON:WSX) and Northern Petroleum (LON:NOP) – which together have a 2.5 per cent stake in the Guyane Maritime Block.

A comprehensive follow-up exploration programme is being planned for the potentially world class oil basin off the coast of French Guiana.

 Tullow was instrumental in establishing the block as an extension of Ghana’s Jubilee field on the other side of the Atlantic following the drilling of the Zaedyus exploration well.

Highly encouraging results from Zaedyus revealed in September were followed up with what Tullow described as “extensive data gathering”. 

The well, which has been suspended for future re-entry, was sidetracked in order to cut a core. A liner was also run over the main oil-bearing reservoir.

“Core studies are currently underway and the initial phase will be completed in early-2012,” Tullow said in a statement today.

The partners on the Guyane block are discussing a comprehensive follow-up exploration and appraisal programme, it added. 

This will include 3D seismic acquisition and a drilling programme, scheduled to commence in mid-2012.

Last month Wessex raised £12 million, a good proportion of which will be used to finance this year’s exploration commitment.

Wessex and Northern own a combined 2.5 per cent of this potentially major new oil area.