UK-based Tullow Oil Plc (TLW) has seen its stock plunge to a new low as it is forced to delay drilling a new well that would represent the first crude production in landlocked Ethiopia.
On 29 April, Tullow stocks fell to a 19-month low in London trading, dropped 5.4% to 1,097 pence.
Originally planning to drill the Sabisa well in Ethiopia’s South Omo Block last month, Tullow announced yesterday that the project would be delayed until late May due to the necessity of drilling a secondary well bore for hole stability.
Tullow isn’t the only one to see its share price plummet over this: Partner Africa Oil Corp. (AOI) lost nearly 10% on the Toronto stock exchange over the past two weeks on skepticism over the Ethiopia drilling plans.
This is an interesting play, delays aside. Marathon Oil Corp. (MRO) is also drilling in Sabisa with Tullow and Africa Oil, and they’ve reached a depth of over 1,800 meters so far, with strong evidence of hydrocarbons.
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Ethiopia is a bit of a setback for Tullow and Africa Oil, which have been riding high for some time on their massive Kenya finds and moves towards commercial viability there.
There have already been some gas discoveries in eastern Ethiopia, but the target here is potential oil in the country’s west—as part of the same oil system found in Kenya.
Ethiopia may be landlocked, having lost its sea access to Eritrea after a 30-year war, but where Tullow’s South Omo Block is considered an extension of its Kenya concessions, which is all part of East Africa’s Tertiary Rift. If they find oil in this well it would be the first discovery in Ethiopia, and Tullow says Sabisa is targeting some 140 million barrels of oil.
By. Charles Kennedy of Oilprice.com