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Guyana has just joined the ranks of oil producing nations as ExxonMobil is already commercializing its huge oil finds offshore the South American country, but London-listed Tullow Oil continues to struggle with its acreage offshore the industry’s newest producer.
Shares in Tullow Oil started 2020 pretty much the way they had finished 2019—on the plunge. Shortly after market open on Thursday, Tullow Oil’s shares slumped by 20 percent, before recovering to a 6-percent drop at 1:25 p.m. London time.
The reason for the new sell-off in Tullow Oil shares was an announcement from the company made earlier on Thursday, which said that although Tullow had found oil in the Carapa-1 exploration well offshore Guyana, the volume is less than initially expected.
“While net pay and reservoir development at this location are below our pre-drill estimates, we are encouraged to find good quality oil which proves the extension of the prolific Cretaceous play into our acreage,” Tullow Oil’s chief operating officer Mark MacFarlane said in a statement.
Commenting on the announcement, David Round, an analyst at BMO Capital Markets, told PA:
“Expectations were high going into this. There will be a level of disappointment about the size.”
According to other analysts who spoke to Financial Times, the discovery may not be declared commercial, due to the lower volumes of oil discovered, compared to expectations.
In November 2019, Tullow Oil had raised doubts about the commercialization of two other discoveries offshore Guyana, which were found to contain heavy oil. Back then, Tullow Oil said it “remained confident in the broader light oil potential of the Orinduik and Kanuku blocks located in this prolific oil basin.”
But troubles continued piling for Tullow, and in early December, the UK firm flagged poor performance in its African assets, which led to a massive sell-off that halved Tullow Oil’s value.
While Tullow is struggling with its assets in Africa and offshore Guyana, ExxonMobil and its partner Hess Corporation launched last month oil production from the Liza field offshore Guyana ahead of schedule and less than five years after the first discovery of oil.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.