Guyana oil-quality concern made Tullow worst fall on record
Tullow says heavy oil was found in wells, assessing commercial
Shares drop 27% as discovery is shown to be sulfurous
Company and partners assessing commercial viability of finds
By Paul Burkhardt / Bloomberg
Petroleumworld 11 14 2019
Tullow Oil Plc fell the most in the company's history after saying it's reassessing the commercial viability of discoveries in Guyana.
The stock sank 27% on the news that crude from two wells in the South American country was found to be heavy, with a high sulfur content. That's disappointing to shareholders as the Guyanese discoveries earlier this year had countered concerns over troubled ventures elsewhere.
“We expect investors to worry about the projects' value,” Al Stanton, an analyst at at RBC Europe Ltd., said in a note. Heavier oil is harder to produce and requires more energy to extract and transport.
Tullow struck oil twice off Guyana this year in a drilling campaign that's been closely watched following earlier finds in the area by Exxon Mobil Corp. Hess Corp., which is partnered with Exxon, saw its shares fall as much as 4.8% Wednesday in New York, though Barclays analyst Jeanine Wai said she didn't think the Tullow news has “direct read-through” to the Exxon and Hess discoveries.
Tullow's success in Guyana helped to offset concerns over its operations in Africa, where technical difficulties have hampered output in Ghana and projects in Uganda and Kenya have faced delays.
“The commerciality of both discoveries is still being assessed and our options are being reviewed,” Tullow spokesman George Cazenove said Wednesday. “The quality of the reservoir and the significant over-pressure are positive, and while oil of this type is sold in global markets, we need to do more work on the various parameters.”
Tullow also reduced its 2019 oil-output forecast on Wednesday, citing the problems in Ghana. It now expects to pump an average of about 87,000 barrels a day this year, down from previous guidance of as much as 93,000 a day.
The stock settled 56.25 pence lower at 149.65 pence in London, wiping about 790 million pounds ($1 billion) off its market value. It was the worst performer on the Stoxx Europe 600 Oil & Gas index. Eco Atlantic Oil & Gas Ltd., a partner in one of the Guyanese blocks, tumbled 48%, also a record.
“Tullow remains confident of the potential across the multiple prospects” in the country's Orinduik and Kanuku blocks, the London-based company said in a statement . Results from the next well in the drilling campaign -- Carapa -- are expected by the end of the year.
The company forecast full-year capital spending at about $540 million, free cash flow at about $350 million and net debt at around $2.8 billion.
— With assistance by Rachel Adams-Heard
Story by Paul Burkhardt from Bloomberg.
bloomberg.com / 11 13 2019
We invite you to join us as a sponsor.
Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.
Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.
Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.
Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.
Write to email@example.com
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions,
please write to: firstname.lastname@example.org
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels