Tullow Oil is on the slide after it cut its production targets and reported disappointing results from a well off the coast of Liberia.
It said total production for 2011 was now expected to average 79,000 to 81,000 barrels of oil equivalent per day, compared to previous estimates of 82,000 to 84,000. Tullow blamed a slower than expected ramp up of production from the Jubilee field in Ghana for the shortfall, following mechanical issues.
At the same time Tullow said the Montserrado-1 exploration well off Liberia had made a non-commercial oil discovery and would be plugged and abandoned. However the company said it had gained valuable information from the project. That was not enough to enthuse investors, and the company's shares have lost 92p to £13.44. Analysts were less negative though. Angus McPhail at Investec said:
Today's interim management statement is disappointing for two reasons: firstly, the lower production ramp up guidance from Jubilee and secondly, a dry hole on the Montserrado-1 exploration well combined with lower exploration success rates (which have fallen from 83% in 2010 to 71% now). Given the diversified nature of the drilling programme (40 wells in 15 countries), access to additional capital post the Ugandan deal, and strong cashflows from Jubilee, we maintain our buy and net asset value-based target price of 1845p.
Richard Griffith at Evolution Securities also has a buy recommendation:
The short term takeaway is slightly disappointing even though the market has been aware of the Jubilee ramp up issues for a while. More importantly the big picture for Tullow remains very strong: new developments progressing in Ghana and a new basin opening exploration success in French Guiana.
