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FM
Former Member

Tullow Oil PLC

Analysts expect investors to now be 'increasingly cautious' on Tullow stock
Analysts expect investors to now be 'increasingly cautious' on Tullow stock © Reuters

 

Shares in Tullow Oil plunged to a two-year low on Wednesday after the London-listed explorer warned that two significant discoveries in waters off Guyana contained heavy oil, prompting warnings that the projects would be difficult to commercialise.

The company’s shares fell 23 per cent to 159.3p — the lowest since September 2017 — by mid-morning after it announced the results of an analysis into the oil quality at the Jethro and Joe discoveries off the coast of the South American country. 

Oils recovered from both wells were heavy crudes with a high sulphur content, Tullow said. Such varieties are generally more expensive to extract and transport. Refiners prize light, sweet crudes and the heavy variety also tends to trade at a discount.

The FTSE 250 company said on Wednesday that it and its partners were assessing “the commercial viability of these discoveries” in light of the analysis.

Its partners include France’s Total, which has a 25 per cent stake in the Guyana discoveries, and Eco Atlantic, whose shares are listed in both the UK and Canada and which owns 15 per cent. The remaining 60 per cent is held by Tullow.

London-listed shares in Eco Atlantic were down 51 per cent at 65p by mid-morning, even though it sought to strike a more optimistic tone, saying the quality of the oils in Guyana were “not dissimilar” to similar heavy crudes produced commercially in other regions such as the North Sea and the Gulf of Mexico.

It said the partners had sought the advice of third-party consultants with expertise in the development of such oil varieties.

“The company remains optimistic in considering the development scenarios and as the project progresses will define further information on plans and timing,” Eco Atlantic added in a statement.

Analysts at JPMorgan Cazenove said in a note that the oil quality “risks the commerciality of both prospects despite excellent reservoir quality”.

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Al Stanton, analyst at RBC Capital Markets, said he expected investors to now be “increasingly cautious” on Tullow stock, which had received a significant boost in August when the first Guyana discovery had been announced.

Tullow recently suffered another setback when a $900m deal to sell a sizeable stake in an undeveloped project in Uganda fell apart after a tax dispute with the government of the east African country.

The company also on Wednesday revised down for the third time its forecast for full-year production. It expects production to average out at 87,000 barrels of oil a day, down from previous revised guidance of 89,000-93,000 b/d, due to lower than expected output from Ghana, where it has two key projects, the Jubilee and Ten fields. 
https://www.google.ca/amp/s/am...ea-a984-fbbacad9e7dd

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Tullow Falls Most on Record on Guyana Oil-Quality Concern

  • Shares drop 27% as discovery is shown to be sulfurous

  • Company and partners assessing commercial viability of finds

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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 sinks on disappointing news from Guyana

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.

FM

Tullow is starting to bark.  The oil is heavy and difficult to extract from the ground.  Exxon say the first oil has too many impurities so dem take all.  Meanwhile, no response on this morbid news from the coalition government while they are busy trying to push Ramjattan into the hole of the PNC archives.

Bibi Haniffa
Bibi Haniffa posted:

Tullow is starting to bark.  The oil is heavy and difficult to extract from the ground.  Exxon say the first oil has too many impurities so dem take all.  Meanwhile, no response on this morbid news from the coalition government while they are busy trying to push Ramjattan into the hole of the PNC archives.

Sorry D2. There is a saying in Guyana. Dem(Granger and dem boys) ah think like buckman. Guyana gone fuh channa. Ask Uncle Nehru.

FM
Bibi Haniffa posted:

Tullow is starting to bark.  The oil is heavy and difficult to extract from the ground.  Exxon say the first oil has too many impurities so dem take all.  Meanwhile, no response on this morbid news from the coalition government while they are busy trying to push Ramjattan into the hole of the PNC archives.

Na, dem PNC at Congress Place a try to push he in an oil well. 

Hey hey hey

FM
Last edited by Former Member

The GOG should conduct independent tests of the crude!  It’s in the interest of the oil companies to play up impurities to help in negotiating!  In any case it’s not good news for Guyana! Caution will overtake euphoria!  The investment risk factor has increased!

Baseman

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