Tullow Oil latest discovery derisks Kenyan acreage
Nov 26, 2012 (Menafn - M2 PRESSWIRE via COMTEX) --The bigger an oil company gets, the more difficult it becomes to excite the market.
Tullow Oil (lon:TLW) knows this only too well. However, its success today in Kenya, where its second well has found over 30 metres of net pay oil, has ramifications for all of the companies looking to make their fortune from this new frontier.
The Twiga South 1 well was drilled to a depth of 3,250 metres and three reservoir zones with moveable oil were encountered.
Additionally the well hit a thick section of tight fractured rock which had extensive hydrocarbon shows. Tullow says this is a new play-type for the region and it will need further evaluation.
Oriel Securities analyst Richard Griffith highlights that Twiga South was a 90 million barrel target, but there were no pre-drill estimates for the tight rock.
The discovery follows Tullow's earlier discovery in the Ngamia well this year.
Today's comments from Tullow's exploration director, Angus McCoss, will have heartened all those following the unfolding story.
"This immediate follow-on discovery reaffirms the considerable prospectivity of the Lokichar Basin," he said.
"Having significantly expanded our plans in Kenya and Ethiopia, there is much to look forward to as the exploration campaign and testing programme move ahead."
Simon Hawkins, analyst at N1 Singer, says while it was not a surprise the result is good news that further de-risks the Kenyan assets.
In a note to clients Hawkins highlights that the success is largely priced in already following local press speculation.
He reckons the Twiga South result will help Tullow define the significant potential of its acreage in the Kenyan rift basin.
Tullow now expects results from two further wells within the East African Rift basin - the Paipai well in Block 10a in Kenya, and the Sabisa 1 well in the South Omo block in Ethiopia.
The outcome of the Paipai well is due before the end of the year, and by then it is expected that drilling will have begun on Sabisa.
Tullow shares dropped 1.7% today trading at GBP13.69 each.
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