It is hard to pinpoint just how different things have been for Tullow Oil PLC (LON:TLW) and AIM-quoted exploration partner Eco Atlantic Oil & Gas Plc (LON:ECO) had they taken a different tack about a year ago.
Tullow last February inked the rig contract for a two well programme and shortly thereafter it selected two candidates for drilling.
Evidently, this turned out to be something of a ‘sliding doors’ moment.
READ: Eco Atlantic Oil & Gas pushes for at least one new well
Last year’s Guyana well drilling campaign ended up delivering a pair of crude discoveries there were essentially both curate’s eggs – high volumes of sub-optimal crude was found, and commerciality is unclear at this point.
It is perhaps fanciful to suggest Tullow’s now ex-executive team may have staved off boardroom challenges had things turned out differently – certainly, there were bigger gripes over production performances in West Africa.
But, maybe a big exploration success might’ve kept shareholder’s debt concerns down to a murmur.
Management may’ve avoided at least one straw that landed on the camel’s back.
Certainly, in terms of the Guyana exploration project, sentiments may alos today be much different for Tullow and also Eco.
2020 hindsight
Tullow as operator last year opted to drill two exploration wells in the Orinduik block.
These wells, Jethro-Lobe and Joe, both tested Tertiary age exploration prospects and initially both saw exciting successes before disappointing upon further analysis.
In and of itself, such pitfalls are somewhat standard and come bundled into frontier exploration projects such as this.
Twelve months later, however, hindsight perhaps points to what could’ve been.
Today, Eco – a minority stakeholder in the project with 15% - is pushing for partners Tullow and Total to drill at least one new exploration well as soon as practicably possible.
Specifically, Eco wants the next well to target Cretaceous age exploration prospects.
To understand why that’s significant, perhaps it is important to understand what is happening just beyond Orinduik’s licence boundaries.
Closeology and Exxon’ Cretaceous success
From the very second that Eco emerged as a story of interest for London’s oil and gas investors this has always been something of a ‘closeology’ play because right next door, in the Stabroek block, ExxonMobil has been enjoying prolific success.
At Stabroek, Exxon has drilled sixteen consecutive new oil discoveries.
Latest estimates identify in excess of 8bn barrels of crude resources and Exxon has just added a fifth drillship to its fleet in Guyana waters.
It started with the Liza field, a major discovery in the Upper Cretaceous, and, that remains Exxon’s most advanced asset among the sixteen discoveries.
For context, production initially began at Liza in December 2019 and the field is presently being ramped up to 120,000 barrels of oil per day with Exxon expecting to reach this rate in a matter of months.
A second floating production facility is slated to come online at Liza by mid-2022 to take the operation to 220,000 bopd, before a third development (adding the Paraya field) could potentially scale up the project again as soon as early 2023.
Stabroek spans a vast 26,800 square kilometre area compared to the adjacent Orinduik which covers 1,800 square kilometres.
Liza is only 11 kilometres away from the Orinduik boundary, and, Hammerhead is the closest of Exxon’s Stabroek discoveries to Orinduik – indeed, future evaluation may confirm that the reservoir overlaps into the neighbouring block.
The idea that Orinduik could copycat Exxon’s successes even partially has been a primary driver of investor interest in the project, and especially in Eco which is close to being a ‘pure-play’ on the Guyana story.
Orinduik is not Tullow’s only asset in the Guyana frontier, and, just last month the Repsol operated Carapa-1 well added a further de-risking Cretaceous discovery.
Tullow owns 37.5% of the Kanuka licence which hosts the new Carapa discovery which was quickly confirmed to comprise ‘light sweet’ crude, albeit in the initial location the reservoir section was described as being ‘thin’ at just 4 metres.
The Carapa well was the first to be drilled in the Kanuka licence block, which is larger than Orinduik, located to the south east and also shares a boundary directly with Strabroek.
When will the next Orinduik well come?
Hindsight begs the question, why didn’t Tullow and its partners zero-in on a Cretaceous exploration target in the first place?
Ultimately those that weren’t party to the discussions last year will never know why the partners didn’t try to lock-in supposedly de-risked resources in its own acreage.
Whether it was high ambition, hubris or perhaps a purely geological decision we don’t know why Tullow took a different approach.
Investors in Eco will now hope that Tullow’s new management, strategy and capital budget will allow enough wiggle room, and a Cretaceous well will be drilled sooner not later.
Total chief executive Patrick Pouyanne earlier this month, in quotes published by Reuters, said he expected two or three new wells will be drilled offshore Guyana this year.
In the same breath, he also dismissed rumours that the French major may launch a takeover for Tullow – the two firm’s interests also overlap in growth projects in Uganda and Kenya too.
It came after speculation that Total may take out Tullow at a potential ‘bargain’ discount price.
When asked about the rumour, Pouyanne told the Reuters reporter: “Stop dreaming... No”.
Eco, in its financial results statement on Wednesday, told investors it is fully funded and it is pushing for its joint venture partners to commit to at least one new cretaceous exploration well as soon as practically possible.
Multiple cretaceous exploration targets are presently being reviewed and ‘high graded’ for consideration to the next phase of drilling at Orinduik, Eco added.
Comments from chief executive Gil Holzman, however, cautioned that the actual drill programme might slip into 2021.
"While it is Eco's intention, and there remains the potential, to conduct a drilling program later this year, the need to integrate the new data learned from recent discoveries in the region into our understanding of the Block's geology may result in further drilling and appraisal activity taking place in H1 2021,” Holzman said.
“However, a final decision on further drilling activity and the overall budget will be made in the coming months.”