Wessex Exploration’s (LON:WSX) stake in Tullow Oil’s (LON:TLW) new Zaedyus oil discovery is worth at least US$60 million, according to analysts at WH Ireland.
Friday‘s news that Tullow Oil had discovered oil in the Zaedyus exploration well lit the blue touch paper under two AIM-quoted shares, Wessex Exploration and Northern Petroleum (LON:NOP) with each stock rising over 30 per cent.
The two partners are sharing a 2.5 per cent stake, each holding 1.25 per cent, in the Guyane Maritime license, which hosts the Zaedyus exploration well. Although these are fairly small stakes, the license is believed by analysts to have ‘billion-barrel’ potential therefore Zaedyus could prove to be very significant for these small-cap players.
“The prospects, as they stand, are likely to have a gross P10 estimate of over 4.15 billion barrels recoverable and statistical resource numbers are in the fullness of time likely to prove wide of commercial reality,” WH Ireland analyst Tom Elder said in a note to clients today.
He added: “Given the experience at Jubilee, it is our view that the Zaedyus prospect is likely to ultimately be larger than Tullow’s previously indicated (P10 estimate) of 700 million barrels suggests.”
Even without drilling another well the analyst reckons Tullow could increase its resource estimates for the discovery. And this would in turn make the Wessex interest more valuable.
“Our $60m assessment of the Guyane assets is, in our view, the base case as it cannot capture, at this juncture, the possible fruits of the re-interpretation program that will likely follow completion of Zaedyus,” Elder adds.
“This valuation also does not include value from other Wessex assets including Wytch Farm and the Mozambique Channel.”
The exploration well encountered 72 metres of net oil pay in two turbidite fans, Tullow revealed. The company said that it has found good quality reservoir sands that are ‘on prognosis’ with pre-drill expectations – based on results of drilling, wireline logs and samples.
With this well Tullow aimed to replicate the success of the Jubilee discovery in Ghana, but this time off the coast of South America.
The Zaedyus target is said to ‘mirror’ the large Jubilee oilfield, which came on stream last year. "The discovery at Zaedyus has proved the extension of the Jubilee-play across the Atlantic and made an important new discovery in French Guiana,” said Tullow’s exploration director Angus McCross.
According to Tullow, Zaedyus opens up a whole new hydrocarbon basin, in which it has already mapped several neighbouring prospects, and the result reduces the exploration risk associated with Tullow's prospect inventory offshore French Guiana, Suriname and Guyana.
An appraisal programme and extensive follow-up exploration activities will now be considered.
Meanwhile drilling will continue on the Zaedyus well. The deep-water well, which is in water depths of around 2,000 metres, has currently been drilled to a depth of 5,711 metres. It will now be deepened, to over 6,000 metres, so that Tullow can calibrate the deeper geology and it is likely to be sidetracked so that cores can be obtained over the reservoir sections.