Tullow 2011 - drilling program and results

Heres a link to Davys comment this morning:-

https://www.davy.ie/resprivate/content/articles/tullow20110110.pdf

fuiseog (not currently a holder)

Couple of comments from Davy today on these two.
http://www.davy.ie/Generic?page=MorningNews8

The well was a very significant step out, drilled 12km southeast from the first discovery well. The P90/P50/P10 resource numbers for the Greater Tweneboa complex are 100/500/1400m barrels respectively. This well gives comfort that these numbers are a reasonable estimate of the area's volumetrics.
The outcome provides further evidence of the very rich hydrocarbon endowment in the Tweneboa complex. Our risked assessment of the area is 272p per share, and we are comfortable with that number for now. Our group NAV is 1501p per share.

http://www.davy.ie/Generic?page=MorningNews9

We value Pelican gas at 21p per share risked (with commercialisation now the key challenge). We have no value for the Cormoran or deeper Turonian targets as of yet, awaiting the final analysis from the well data, but note that the trend now looks to be established in an arc from Mauritania down to Ghana.

In reply to fuiseog, post #1

Got there before me!

http://www.investegate.co.uk/article.aspx?id=201101270700181578A&fe=1

TRADING STATEMENT AND OPERATIONAL UPDATE -

Jubilee First Oil achieved within 40 months of discovery
83% E&A success ratio in 2010; high-impact drilling programme for 2011
Continued progress towards Uganda farm-down

Extensive Trading Update issued yesterday, full of news on production, exploration, finances. 

HIGHLIGHTS

Production and Development activities

·      Jubilee field has produced over 10 million barrels gross; production currently around 80,000 bopd with ramp up to 120,000 bopd expected to be reached in August.

·      Tweneboa and Enyenra development progressing towards Government approval in first half of 2012; successful appraisal programme continues with Tweneboa-2 oil zone tested at 6,500 bopd.

·      In Uganda, MoU signed with the Government; Sale and Purchase Agreements signed for the farm down to CNOOC and Total for $2.9 billion; completion conditions currently being finalised.

·      Working interest production averaged 75,350 boepd in 1H 2011; 2011 full year production guidance now 90,000 to 94,000 boepd.

Exploration and Appraisal activities

·      79% exploration and appraisal success ratio year-to-date in 2011; 15 successful wells out of 19.

·      West Cape Three Points drill-out continues with successes at Teak-1 and Teak-2.

·      Seven successful E&A wells in Uganda year-to-date including the material Jobi-2 and Gunya-A wells.

·      Zaedyus well in French Guiana commenced drilling in March; result expected in August.

·      High-impact wells to commence drilling in 2H 2011 in Guyana, Liberia, Sierra Leone and Kenya.

Group operations and financials

·      €300m acquisition of Nuon E&P completed; $305m acquisition of EO assets awaiting approval; pre-emption in Sierra Leone increases stake by 10% to 20%.

·      Tullow to list on the Ghana Stock Exchange during July; 4 million share offer closed yesterday.

·      First half capital expenditure of $675 million with forecast 2011 expenditure remaining at $1.5 billion.

·      Record 1H 2011 revenue of $1.05 billion. Net debt at 30 June 2011 was approximately $2.6 billion.

A useful note from Davy listing and describing the next 6 months drilling activities. Well worth a read IMO.

https://www.davy.ie/resprivate/content/articles/tullcr20110720.pdf

Also mentioning its acquisition capability, with the proceeds of the Uganda deal to add to it's undrawn borrowing facility. For a company with such a good track record of making a success of acquisition it's a good time to have plenty of dosh.

Production possibility increasing over the next several years to 250000 boepd.

An NPV of 1519p (unrisked 2963p), leaving the current SP at a 16% discount.

I had been out of TLW for a while and am pleased I started buying back in on weakness through the spring.

fuiseog

There was some recent broker comment on the upcoming Zaedyus well .

http://www.proactiveinvestors.co.uk/companies/news/30710/tullow-oils-next-big-drill-result-could-have-major-implications-for-wessex-and-northern-petroluem--30710.html

Tullow highlighted five prospects which would be de-risked if Zaedyus is successful.

While management refrained from hinting at prospect sizes, the aerial extent of these prospects suggests they are larger than the 230-700 million barrels of oil Zaedyus prospect.

BarCap in a recent research note was very bullish on Tullow’s the prospects in the area. “If successful, this could open up a new play, which we estimate could be worth £9 a share unrisked,” said analyst Alessandro Pozzi.

Earlier in the year Blomberg ran a rather good piece on the area  

http://www.bloomberg.com/news/2011-02-25/tullow-geologist-gambles-on-70-billion-oil-find-by-chasing-atlantic-drift.html

It looks like Uitkijk #11 & #12 have been drilled in May 2011 and the 5 well drilling program in the Coronie block is underway.

http://www.staatsolie.com/pdf/nieuws_juli_final.pdf

Evaluation Phase Uitkijk Block-North

Paradise Oil Company (POC), a Staatsolie subsidiary, has
recently continued its operations in the Uitkijk Block.

Two evaluation wells were drilled in May in the northern part of the area.

The evaluation wells have depths greater than 370 meters.
Drilling, observations and surveys are jointly conducted with Tullow Oil, the British-Irish firm which signed a Joint Operations Agreement in 2007.

The two wells will be closely monitored for six months.

Tests must reveal whether this area has the same type of oil as the Tambaredjo field. Aspects as ground pressure, viscosity and water content of the well will also be evaluated.

?If this field has recoverable resources we will know what
developmental strategies we can apply,? says POC Operations
Manager Patrick Brunings. The oil traces have remarkably been located in a very thin layer. The Uitkijk Block is situated close to the Tambaredjo field. Further exploration of the Uitkijk Block is based on data collected by the Canadian Company Koch, which explored the area, some ten years ago.

Interpretation
In 2007, POC and Tullow Oil restarted further exploration of the Uitkijk Block. Between 2007 and 2009 ten wells have been drilled. Data collected during the exploration revealed that the area has oil deposits, roughly estimated between four and six million barrels. This field would have a production span between ten and fifteen years. The next phase must reveal not only whether these estimates are realistic but whether recovering the oil would be profitable. A thorough evaluation of both wells must yield this data.

The output per well will be decisive. The evaluation phase will also address the production behavior issue. It regards the water, oil and gas ratio found in certain quantities and how this ratio changes in time. Brunings reiterates that ?whether Uitkijk North will see further development depends on interpretation of the data.? Tests must reveal if producing the oil will be profitable.

?Every well requires an exact survey to get a better insight of the area.? In order to determine how far the field stretches eastward a third well is drilled to the east of the two evaluation wells. An economic model is drafted to test run the several scenarios and to decide which possibilities there are to recover the oil. If the area proves to be indeed commercially profitable, it will take three to four years before production could be launched.

Uitkijk Block-South
POC has also laid eyes on the southern part of the Uitkijk
Block and is already planning exploration drillings for that area. Geological data for that area, however, is scarce. An analysis of the data gathered from the Uitkijk Block North will present a better picture of the area with prospective locations and depths of oil deposits in Uitkijk South.

Preparations for drilling exploration wells have already been made, including environment and social studies. The prospected well locations are mainly situated in residential areas and on land owned by third parties. Contact with the local community is therefore very important. Soon several consultation sessions with the community will be kicked off to inform them of the coming operations. Five possible locations have been projected for the three proposed wells. Geological data will be decisive for selecting the locations of the three wells, which lie quite far apart. This drilling program will commence, according to plan, in the final quarter of 2011.

In reply to fuiseog, post #6

Davy comment on this weeks update .

Currently trading at Davys estimate of its commercial/undeveloped reserves price I see.

Arguably one to keep an eye on for the long term at todays prices if the Ugandan cash comes through as promised - amongst many others of course!.

http://www.davy.ie/LR?id=1574

Full year production guidance is now for 82,000-84,000 boepd, with the reduction largely due to the Jubilee ramp-up delay but also some delays on infill drilling across other group assets. Progress continued in moving the Enyenra and Tweneboa discoveries towards development with project sanction expected in 2012.

In Uganda, the group has guided strongly that the farm-out will complete in September following which $2.9bn will be paid over to Tullow, completely de-gearing the group. On the exploration/appraisal front, three well results were announced. Offshore Ghana, the Akasa (formerly Dahoma up-dip) hit a good package of light oil bearing sands; in the UK sector, the Bunter sands in the Foxtrot structure were found to be water wet only and the huge step out on Jobi-East was also water wet.

DAVY VIEW: The results demonstrate the strengthening of the group's production profile, and the doubled dividend is probably meant to signal Tullow's confidence in its ability to continue production and cash flow growth.

September will be a huge month for the group with results from the high impact Zaedyus and Montserrado wells due as well as the receipt of the $2.9bn due from the Uganda farm-out. We value the group at 1519p per share with commercial and undeveloped reserves making up 971p of this amount.

What happened with the Uitkijk block in Suriname? Wells have been drilled and Tullow Oil has handed back their interest to Paradise Oil (the state owned exploration company)?

TLW retain no interest in Uitkijk. So did they get anything in return for their stake in Uitkijk? Estimates put the oil discoveries at somewhere between 4m & 7m barrels.

Success at Zaedyus. Hugely significant for the new basin. Still drilling & a conference call at 8am.

A conference call dedicated to a single well, together with Angus's comments highlights the significance IMO

http://www.investegate.co.uk/Article.aspx?id=201109090700089280N

Angus McCoss, Tullow's Exploration Director, commented today:

"The discovery at Zaedyus has proved the extension of the Jubilee-play across the Atlantic and made an important new discovery in French Guiana. Tullow has built a commanding and unique acreage position in South America and this result marks the start of a significant and potentially transformational long-term exploration and appraisal campaign in the region."

http://online.wsj.com/article/BT-CO-20110909-702807.html

"This shows we are sitting at the top table of exploration," said Angus McCoss, Tullow's exploration director, in an interview with Dow Jones Newswires.

"This proves the Jubilee play is mirrored on the South American side of the Atlantic," said McCoss. "This result marks the start of a significant and potentially transformational long-term exploration and appraisal campaign in the region."

The discovery is a "major step" because the geological system offshore Latin America is bigger than that of offshore Ghana, said McCoss. "There are at least half a dozen more of these Zaedyus type traps adjacent," and the chance of finding oil in them has increased, he said.

Tullow Oil has hit a home run with this discovery, said Bank of America Merrill Lynch in a research note. The bank initially gave Tullow a 10% chance of finding 700 million barrels of oil, but the nature of the discovery means the total resources could grow beyond this, it said.

The discovery means Tullow and its partners can now drill with a greater chance of success in licenses they hold offshore Sierra Leone, Liberia, Cote d'Ivoire, Suriname and Guyana, said McCoss.

These areas all have very similar geology because, "if you turn the clock back 100 million years, the Atlantic was just a narrow sea," said McCoss. Plate tectonics have since dragged the continent apart, but the geological structures that trapped the oil have remained intact.

Shell is the largest stake holder, with 45% of the license offshore French Guiana where the discovery was made. Tullow, which is running the drilling operation, has a 27.5% stake. French oil company Total SA (TOT) has 25% and Northpet has 2.5%

"Certainly we've got the financial muscle and strategic mindset to move fast on this," said McCoss.

Tullow and Spain's Repsol SA (REP) will start drilling the Jaguar prospect offshore Guyana in October, he said.

Be interesting to see what happens to CGX in Canada this afternoon - they have a 25% share in that upcoming Jaguar well .

http://cgxenergy.ca/documents/CanaccordGenuity-Jun02-11.pdf

In reply to ohisay, post #12

Well Angus McCoss was certainly keen on the prospects in the conference call (as much as a dour Scots man can be) with the corresponding derisking of other fan systems out there.

Decent map of the various leads can be seen here on the Bluebird Energy (LON:BBE) site (holds 11.28% of Wessex Exploration (LON:WSX) ).

And from another site, a useful background note on the Guianas opportunity/potential:

http://tudor.na.bdvision.ipreo.com/NSightWeb_v2.00/Downloads/Files/14587.pdf

Davys take.

http://www.davy.ie/LR?id=1687

This is a very significant and positive outcome for Tullow. It bears similarities with the discovery well for Jubilee Mahogany 1. The result materially derisks a family of up to five Zaedyus lookalike fans. While each target will need to be drilled, a working petroleum up system has been shown to be present in the immediate area. Specifically, the basin is mature for hydrocarbons with a working source.

There are differences between the various Latin American plays, but the Zaedyus result will provide encouragement for the whole region. We see the Zaedyus result alone adding up to 40p per share. However, as noted, this is just one of a family of six structures and we also value on the basis of a P50 (or most likely) outcome. The upside case for Zaedyus is some four times greater. Our NAV for the group is now 1558p, and the stock is outstanding value at current levels.

In reply to ohisay, post #12

Be interesting to see what happens to CGX in Canada this afternoon - they have a 25% share in that upcoming Jaguar well .

Wow -  Up 83% as I write .

The CGX (OYL) rise bit too exciting for Toronto, they've suspended them @ CAD$0.80, a mere +64.95%.

Reason for Halt: Pending Contact With Company

http://tmx.quotemedia.com/article.php?newsid=44427357&qm_symbol=OYL:CA

I was considering a stab at them at opening but decided to keep my head down. I'll just dream on.

Davy comment including some useful numbers.

https://www.davy.ie/resprivate/content/articles/tullowcr20110912.pdf