Tullow Oil (TLW) had found a bright spot this year in the offshore Jethro and Joe wells in Guyana, but has now revealed there are questions over commerciality because of the quality of the crude oil.
Tullow's shares were down 20 per cent on early trading following the announcement that both deposits contained heavy crude oil with high sulphur content. Tullow chief executive Paul McDade said the company remained confident on finding exploitable light oil blocks in the wider area, and was assessing the commercial viability of Joe and Jethro.
The disappointing Guyana exploration update was accompanied by a cut in guidance for the year’s production, from 89,000-93,000 barrels of oil per day (bopd). Tullow pointed to the Jubilee and TEN projects in Ghana for this downgrade. Jubilee had “topside issues” that constrained water injection and gas handling and TEN was hit by the suspension of the EN14-P well.
Panmure Gordon analyst Colin Smith said the guidance cut was expected but saw a greater issue in Guyana, with the project value swiftly cut due to the heavy oil news. RBC analyst Al Stanton had previously flagged the farm-out prospects of Tullow’s holding. The company owns 60 per cent of the Orinduik block, which includes Jethro, with Total (25 per cent) and Eco Atlantic (15 per cent) holding the rest.
