tullow scores again in kenya, page-15

And yet another writ-up....



Resources major Tullow Oil (TLW) pledged to sink 12 more wells in northern Kenya over the next 12 months as it was vindicated by its fourth consecutive oil discovery in the area over the past year.

The FTSE 100-listed firm struck black gold in the Ekales-1 wildcat, located in Block 13T in the region.

Tullow said results of the drilling, wireline logs and samples of reservoir fluid indicate a potential net oil pay in the Auwerwer and Upper Lokone sandstone reservoirs of between 60 and 100 metres.

It will conduct flow testing to confirm productivity from these zones.

The successful operation followed hot on the heels of an oil find in the North Sea earlier this month, which Tullow termed a "breakthrough".

Angus McCoss, exploration director at Tullow Oil, said: "This success at the Ekales-1 wildcat is further evidence of the exceptional oil potential of our East African Rift Basin acreage. Having opened the first basin with the Ngamia-1 well last year, we are now increasing the pace of exploration in Kenya aiming for 12 wells over the next 12 months."

The Ekales-1 wildcat is located between the Ngamia-1 and Twiga South-1 oil discoveries and the reservoir properties seem similar to those already encountered, Tullow said.

Once it has completed operations at Ekales-1 it plans to move the rig to drill exploration prospect Amosing-1, south of Ngamia-1.

Investor view

Tullow's share price was up by 12p in morning trading on Thursday, a modest increase on its 1,053p opening price, which Interactive Investor user 'kkwfromoz' was perturbed by.

Over on the Interactive Investor discussion boards, the poster said: "What does it take to move Tullow's share price? Improvement in the success rate as in three Kenyan wells in a row, more reserve as in Ekales, new frontiers as in Norway? It may be the market needs time to digest the news."

Analyst view

Meanwhile, house broker Barclays quantified the scale of the company's record in the region so far: "Tullow has now delivered four consecutive oil discoveries in the South Lokichar basin, highlighting once again the exploration potential of this area. With over 400 million barrels of discovered resources now unlocked in this basin on our numbers, the company is in a position to commence development studies for its four discoveries just 18 months from the initial results of the Ngamia-1 well.

"As the company intends to drill 12 exploration wells over the next 12 months, three of which are targeting new potential multi-billion barrel oil basins, we continue to believe Tullow has the potential to unlock significant further value in east Africa," the analyst note said.

Barclays reiterated its 'overweight' recommendation and viewed the shares as well-placed to benefit from investors looking to increase their exposure to exploration and production stocks with an attractive balance between exploration upside and near-term production and cash flow.

It has also increased its price target from 1,490p to 1,500p, putting its potential upside at 41%.