Tullow Oil announced that the Paon-2A appraisal well in the CI-103 licence offshore Côte d’Ivoire encountered Upper Cretaceous reservoir sandstones which were water bearing at this location and will be plugged and abandoned. The well was drilled about 15km south west and 370m down dip from the Autruche light oil discovery made by the Paon-1X well. However, although no oil was found at this location, pressure data from the Autruche age reservoirs intersected in Paon-2A indicate that the Autruche oil accumulation between this well and Paon-1X has a hydrocarbon column of at least 230 metres. The company estimates that including the Paon1X updip potential, the total column could be 700metres.
The discovery of water bearing sands somewhat reduces the volume potential of the field from the pre-drill estimate of 287mmbls to c. 100mmbls. Tullow stated that it will be reviewing the resource range and monetisation options for the field. Given the size of the discovery, it is unlikely to be a standalone development.
We included Paon2A at 7.3p per share in Tullow’s risked NAV. Including the Paon-1X discovery, the Autruche field added 30p per share to NAV. The discovery of the water column at Paon2A takes further out the monetisation options for the discovery and increases the risk that it may not be a commercial discovery. It will have no effect on our core NAV valuation of 970p per share valuation for Tullow Oil. However, the increased risking and reduced volumes for Paon reduces our total risked NAV from 1410p per share to 1395p per share.
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