The release of drilling results by Tullow Oil on Thursday from its Carapa-1 well offshore Guyana saw the company’s shares tumbling on what analysts are saying is unlikely to be a commercial discovery.
The oil and gas group’s share price fell as much as 20 per cent shortly after the open in London after Tullow said the amount of oil discovered at its Carapa-1 well, off Guyana, was less than it had anticipated. The losses narrowed to a 7 per cent decline, the Financial Times reported.
The independent oil producer’s first discovery of the new year comes after a calamitous 2019 in which its stock declined 64% and the chief executive officer and exploration chief stepped down. The commercial viability of Tullow’s previous offshore discoveries in Guyana remains in doubt after the reservoirs were found to contain heavy oil, Bloomberg said in a report.
“Expectations were high going into this,” said David Round, an analyst at BMO Capital Markets. “There will be a level of disappointment about the size.”
Tullow shares were 4.5% lower at 61.14 pence as of 9:55 a.m. in London trading. That’s down about 95% from the company’s 2012 peak.
Rig site testing indicated that the oil is 27 degrees API with a sulfur content of less than 1%, according to Tullow. The well will be plugged and abandoned, and a detailed laboratory analysis of the oil quality will follow. Tullow has a 37.5% stake in the Kanuku block. Repsol SA is the operator with 37.5% and Total SA has 25%.
Tullow emphasised that the results suggested the Cretaceous rock formation, which is one of the most promising areas for exploration, extended into its licensing area. The region, which contains ExxonMobil’s major Stabroek block of wells, is similar to the oil-rich area off west Africa, which was connected to South America until roughly the early Cretaceous period about 130m years ago. However, net pay — the thickness of the oil reservoir and one of the key factors in determining whether a well is likely to be commercialised — was below Tullow’s pre-drill forecasts.