Tullow Oil said it will plug and abandon its Marina-1 well in offshore Peru after drilling reached maximum depth without finding oil, in another sign of trouble for the British oil and gas explorer that sent its shares 8% lower.
The company’s shares, which have lost nearly 80% of their value since November, have been pressured by weak output in Ghana, delays in East Africa and lower-than-hoped-for oil quality in Guyana.
Tullow, which has operations in more than 15 countries, counts its operations in the South American nation as one of its new ventures. The Marina well is located in 350 meters of water and was the first well to target deep water plays in the Tumbes Basin.
“The well tested the La Cruz and Mal Pelo formations, where minor gas shows were encountered,” Tullow said in a statement.
“However there were no indications of hydrocarbons in the primary targets in the Tumbes formation.”
Shares of company recovered slightly by 0900 GMT to trade about 5% lower at 43.3 pence after falling more than 8% immediately after Monday’s announcement.
“Tullow is building an extensive exploration position in Peru and, while this result is not what we had hoped for, we remain positive about Peru’s wider offshore exploration potential,” Tullow’s Chief Operating Officer Mark MacFarlane said.
Analysts at Peel Hunt said the Marina-1 well was a relatively important well for Tullow, as it accounted for one-third of the company’s exploration budget and half of its wildcat drilling program.
“There is significant work to be done if a successful well is to be drilled in Peru,” Peel Hunt added.
The London-listed company holds a 35% interest in the well, while Australia’s Karoon Energy holds a 40% operating equity interest through a subsidiary and Pitkin Petroleum owns the remaining 25%.
Shares of Karoon Energy dropped by as much as 6.7% to A$1.045.
In January, Tullow said it would take a $1.5 billion writedown after cutting its long-term oil price assumptions, downgrading reserves in Ghana and disappointing exploration wells.
A source earlier this month told Reuters Tullow plans to cut a third of its staff to save about $20 million. Industry sources have also said the Africa-focused firm aimed to sell its Kenya projects, once vaunted as an engine for growth.
Tullow has yet to announce a new chief executive after CEO Paul McDade resigned in December.
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