The company behind basin-opening discoveries in Uganda, Gabon and Ghana is planning to ramp up exploration spending amid improved market conditions starting in September with a “high-impact” exploration campaign in Namibia.
Tullow Oil, an Africa-focused independent E&P, plans to spend up to $150 million on exploration in 2019. This is up from $90 million budgeted for this year.
“We are only drilling one well this year but we’re looking to drill three to five next year as we kind of restock the portfolio,” Tullow CFO Les Wood said during a meeting with analysts July 25. “We’re at the point now where we want to drill and generate growth.”
Following a period that saw exploration coffers gutted, improved market conditions characterized by higher oil prices, sustained cost deflation and demand have given oil and gas companies the confidence needed to move forward with exploration plans. This includes activity in less explored areas with unrisked prospectivity and near areas where there has been success.
Tullow plans to tackle both while pursuing growth potential in its discovered assets such as offshore Ghana, home to the Jubilee and TEN fields, where the company says it has 244 million barrels (MMbbl) of 2C discovered resources to be developed plus 570 MMbbl of discovered upside potential with “significant near-field tieback opportunities.”
“Our intention is to get back to drilling high-impact wells. As Les says ‘If you’re going to play the exploration game you need to play it as a portfolio,’” Tullow CEO Paul McDade said.
Tullow plans to drill between three and five exploration wells for 2019 and again in 2020 and beyond, according to McDade. Although he said the company hadn’t drilled many wells recently, Tullow’s exploration team has been assessing acreage, gathering seismic data and ranking prospect inventory.
Targeting multiple Cretaceous turbidite fans, Tullow will spud its first 2018 high-impact exploration well in September at the Cormorant prospect offshore Namibia. The prospect has more than 100 MMbbl of potential but there is significant follow-on potential, McDade said.
Angus McCoss, the company’s exploration director, said Cormorant-1 sits in the middle of a half-dozen prospects in that area. “If it comes in as a success then it will substantially de-risk the prospects to the north and south of it,” he said.
The well will cost about $40 million, and well complexity is considered low as drilling will take place in only 540 m of water, far from the more costly ultradeepwater drilling domain. McCoss explained that the company is targeting 125 MMbbl, but the minimum commercial field size is less than 100 MMbbl.
“The size of the prize is the cluster of six prospects so that basin that play view is about 950 MMbbl gross or 320 MMbbl net to Tullow,” which has a 35% operated interest, he said. “The really big prospects are coming up in 2019 with Guyana.”
Offshore Guyana, Tullow is chasing multiple prospects adjacent to Exxon Mobil Corp.’s Liza oil discoveries on the Stabroek Block and offshore nearby Suriname. Exxon Mobil this week upped the estimated recoverable resources offshore Guyana by 25% to more than 4 billion barrels of oil equivalent. Exxon Mobil’s partners are Hess Corp. and China’s CNOOC Ltd.
Having completed a 3-D seismic program offshore Guyana, Tullow said multiple high-quality, shallow water prospects are being matured and ranked for potential drilling in 2019 offshore Guyana.
Offshore Suriname, the company has identified the Goliathberg prospect in Block 47 as a candidate for drilling next year. Tullow failed to hit oil with the Araku-1 wildcat well offshore Suriname in 2017 but was encouraged by the recovery of gas condensate.
Tullow’s exploration program also includes drilling and seismic plans for Peru, Côte d’Ivoire and offshore Mauritania. “As we look at our program that we’re selecting from there are about 3 billion barrels of unrisked prospectivity there that we will be selecting,” McDade said.
Future exploration plans were shared as the company reported a half-year 2018 profit of $55 million, up from a loss of $348 million a year ago. Revenue also rose to $905 million, up from $788 million.
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