After an initial burst of excitement about its oil discoveries here, UK explorer Tullow is writing down its finds here and does not expect to drill other exploratory wells in Guyana’s waters this year.
According to Bnamericas, Tullow does not expect to drill exploratory wells in Guyana in 2020 as the junior oil explorer further reviews results of exploration wells spud across its Kanuku and Orinduik offshore licences here.
“In terms of further Guyana drilling this year, we really do need to integrate that real world data that we got from our three wells into our various models, so it is unlikely we will be drilling any Guyana wells this year,” according to chief operating officer Mark MacFarlane.
The executive made the comment during a conference call on Tuesday following the release of a trading statement and operational update.
“We need to let that technical work to run its course before we decide what will be our next well and when would be that next well,” he said.
Tullow is to take a US$1.5 billion (1.15 billion pounds) writedown after cutting its long-term oil price assumptions by US$10 to US$65 a barrel, a downgrade to reserves in Ghana and disappointing exploration wells, the company said yesterday.
Reuters said that the writedown at Africa-focused Tullow comes after the exit of CEO Paul McDade in December and the scrapping of the group’s dividend after the group failed to meet production targets due to a weak performance at its assets in Ghana.
Tullow’s shares collapsed 70% in the fourth quarter of 2019. After an initial slump yesterday, the shares were up around 4% at 61.60 pence by 0900 GMT, Reuters said.
Tullow said the write-offs included Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica licence costs due to the levels of planned future activity or licence exits.
“Tullow expects to report pretax impairments and exploration writeoffs of (around) US$1.5 billion (c. $1.3 billion post tax),” the company said.
Tullow, a partner of French oil group Total in several projects, has forecast that its 2020 output will shrink to a maximum of 80,000 bpd and fall again to around 70,000 bpd in 2021-2023, Reuters said.
Full-year results have been pushed back to March 12 and will include updates on the review of its assets and management structure. Executive Chair Dorothy Thompson told Reuters the announcement of a new CEO might come after that date.
Tullow said after repeated delays to its East African projects, its plan to truck oil from its Kenyan inland fields to the coast had been suspended due to damaged roads and that there was no breakthrough in Uganda, where it is looking to reduce its stake in its oilfields.
A final investment decision for Kenya is still pencilled in for the end of this year, but that target is “challenging”, MacFarlane said.
To shield against oil price fluctuations, Reuters said that Tullow has hedged 45,000 barrels per day (bpd) of its 2020 output with an average floor price of $57.28 a barrel. For next year, it hedged 22,000 bpd at an average floor price of $52.80 a barrel.
In the fourth quarter Tullow’s shares were hit by production downgrades in Ghana, the oil quality found in a well in the Orinduik block offshore Guyana and the disappointing size of a well in its Guyanese Kanuku block.
Thompson in her operation update noted that Tullow recently announced the results of the Carapa-1 exploration well offshore Guyana, which proved the extension of the Cretaceous oil play into the Group’s Guyana acreage. Next steps, she said, will include the integration of the Carapa result into geological and geophysical models and high-grading of the Cretaceous portfolio across both the Kanuku and Orinduik blocks.
On November 13 last year, Tullow said that the oil found in two offshore wells here was heavy crude and the company and its partners would have to assess the commercial viability of the project.
Tullow announced two oil discoveries here at the Jethro-1 well and the Joe-1 well in the Tullow-operated Orinduik licence in August and September respectively. The Jethro-1 well found 55 metres of net pay in high-quality sandstone reservoir in the Lower Tertiary and Joe-1 encountered 14 metres of net pay, opening a new play in the Upper Tertiary.
“Following the completion of well operations, oil samples were sent for laboratory analysis and results indicate that the oils recovered from both Jethro-1 and Joe-1 are heavy crudes, with high sulphur content. Tullow and the Joint Venture Partners are assessing the commercial viability of these discoveries considering the quality of the oil, alongside the high-quality reservoir sands and strong overpressure”, Tullow said in a release.
On January 2nd this year Tullow announced that the Carapa-1 exploration well, drilled on the Repsol-operated Kanuku licence offshore Guyana, had encountered approximately four metres of net oil pay based on preliminary interpretation but that this was below pre-drill estimates.
