After dismal drilling results, Tullow Oil decides to abandon the well in Guyana

Tullow Oil, a company that focuses on Africa, announced Friday it would cease drilling operations at an exploratory well off Guyana. Results showed the well bore water. This sent its shares lower.

Drilling operations at the Beebei-Potaro exploration well, drilled in the Kanuku licence, offshore Guyana, have been completed. The well encountered good quality reservoir in the primary and secondary targets but both targets were water-bearing.

The 37.5% share of Kanuku’s Kanuku block, where the Beebei Potaro exploration well is, was held by the group. It said that it would work closely with its joint venture partners to determine its next steps.

Spain’s Repsol operates the Kanuku license. TOQAP, a joint venture of Total (TTEF.PA.), and Qatar Petroleum hold the remaining shares in the block.

Tullow shares fell as high as 6% to 47.38 pence in early trade. They were among the largest losers in London’s FTSE midcap Index.

Panmure Gordon analysts stated that these results are yet another disappointment for companies that drill offshore Guyana. They also said that the Exxon-operated Stabroek was the only block that had shown and delivered anything.

Tullow, based in London, stated that the well that was plugged had been drilled to 4,325m and showed a “good quality reservoir” for its primary and secondary targets. However, it was not water-bearing.

Tullow previously stated that it would limit capital exposure to Guyana, which lies in the north of South America. It may also sell a portion of its stake. It has not yet announced any plans to do this.

Panmure Gordon said that higher oil prices would help to offset… the waste capex. He also suggested that Tullow’s blocks are of low quality, as the Orinduik block has only the sub-commercial heavy crude oil discovery.

Tullow owns a 60% stake in Orinduik, Guyana’s other licensed area. Partners include Total and Eco Atlantic Oil & Gas.

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