Three significant oil and gas discoveries in the past two weeks have garnered little attention from the market as the price of Brent crude oil tumbled more than 10 per cent amid a wider sell-off in commodities.
A sharp fall in the price of gold pre-empted Brent's fall, but was quickly compounded by disappointing economic data from China, the US and Europe - further dimming the outlook for a global economic recovery and sending prices of many industrial commodities, including copper and oil, into a tailspin. Brent oil futures broke below the $100-a-barrel level for the first time since July 2012 and at the time of going to press were resting uneasily around $99 a barrel.
That served to put a damper on positive exploration results recently released by Premier Oil (PMO), Cairn Energy (CNE) and Salamander Energy (SMDR). Premier's Bonneville exploration well and an accompanying side track well successfully discovered about 30m barrels of high-quality oil in a prospect located four kilometres south of the Burgman oil discovery, part of the wider Catcher project in the UK North Sea. Cairn holds a 30 per cent interest in Catcher, for which a development decision is expected by the year-end.
Premier also made a significant gas discovery at its 42-per-cent-owned Block A Aceh licence onshore Indonesia. The Matang-1 well penetrated a gross gas column of at least 90 feet before being suspended after the well took a large gas kick. The company now plans to test the reservoir interval to ascertain potential flow rates.
Premier's share price jumped 4 per cent to 365p a share after releasing the results, but that's still well down from the 390p level at which the shares traded before the sell-off in Brent.
Meanwhile, shares in south-east Asia-focused Salamander Energy fared similarly, dipping nearly 10 per cent despite the company making a potential gas discovery at its North Kendang-1 well offshore Indonesia. The well had barely entered the primary reservoir target before encountering high-pressure gas, which led to operational challenges and ultimately meant the well was suspended. Samples point to it being a wet gas, which would be more valuable than a dry gas discovery. Salamander has since moved the rig to drill another prospect in the basin, Bedug-1, but says it is reviewing the option to return to North Kendang to try to complete the well shortly thereafter.
Exploration well results | |||||
|---|---|---|---|---|---|
| Company | Well | Location | Success or failure | Working interest | Estimated prospect size (mid-case) |
| Premier Oil | Matang-1 | Indonesia | Success | 41.67% | 40mmboe |
| Premier Oil | Bonneville | UK North Sea | Success | 50% | 30mmbbls |
| Cairn Energy | Bonneville | UK North Sea | Success | 30% | 30mmbbls |
| Salamander Energy | North Kendang-1 | Gulf of Thailand | Potential success | 100% to 75% | 708 BCF |
| Tullow Oil | Priodontes-1 | French Guiana | Failure | 27.5% | Undisclosed, but believed to be in the hundreds of millions of barrels |
| Northern Petroleum | Priodontes-1 | French Guiana | Failure | 1.25% | As above |
| Wessex Exploration | Priodontes-1 | French Guiana | Failure | 1.25% | As above |
Explorers that released unsuccessful well results nevertheless received a double hit. Shares in Tullow Oil (TLW), arguably the most successful London-listed oil explorer over the past half-decade, have tumbled nearly 20 per cent this month. The company failed to encounter any hydrocarbons in the Priodontes-1 well offshore French Guiana. Shares in joint venture partners Wessex Exploration (WSX) and Northern Petroleum (NOP) - which each hold a 1.25 per cent interest in the licence - plummeted 67 per cent and 25 per cent, respectively, on the news. The well is the second consecutive dry well drilled on the licence this year, although the joint venture partners plan to drill two additional wells there over the remainder of 2013.
