Oriel maintains 'add' for Tullow despite well disappointment

21st Jul 2014 11:34

Oriel Securities has estimated that the risked value of Tullow Oil's failed exploration well on its PL 507 project in the North Sea offshore Norway was worth around $150m to the oil explorer.Tullow Oil Norge's Lupus well (31/10-1) failed to encounter hydrocarbons and will now be plugged and abandoned, the company said on Monday. The wildcat well is 35km south-east of the Oseberg Sør Field and 110km west of the island of Sotra in the North Sea."While we don't advocate valuing companies on well by well basis, nevertheless, we suspect an impact on the shares this morning in the 2% range," Oriel said."This was the second largest well targeted in Norway this year for the company."The broker explained that Lupus-1 was targeting 167m barrels of oil equivalent net to Tullow. Analysts had estimated a risk value for the well of around $150m net to Tullow, using a 30% chance of success.However, Oriel still maintained its 'add' recommendation for the stock, which was trading 0.1% lower at 770p by 11:32.BC