Tullow Oil declares Uganda oil find as significant

Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, said tests at a well in Uganda indicate the possibility of a “significant discovery” as it reported a first-half loss on falling production and prices.

Full results from the Ngassa-2 well are expected within two weeks, Exploration Director Angus McCoss said in a telephone interview today. The Ngassa prospect could contain as much as 600 million barrels of oil in the best-case scenario, he said.

“It is important not to get carried away ahead of sampling and logging analysis, but this is encouraging news nonetheless,” Phil Corbett, an analyst at RBS Hoare Govett Ltd., wrote in a note to clients today. RBS is the house broker for Tullow.

Tullow is developing fields in Uganda and Ghana to counter a decline in production in Britain, where setbacks in North Sea operations have curbed output. Total discoveries in Uganda, excluding Ngassa, are estimated to exceed 700 million barrels of oil, the company said in a statement today.

London-based Tullow will spend 750 million pounds ($1.2 billion) on projects this year, mainly in Uganda and Ghana, up from a previous target of 700 million pounds, Chief Financial Officer Ian Springett said.

Tullow has drilled 27 wells in the Lake Albert Rift Basin in Uganda since January 2006, of which 26 found oil and gas, McCoss said. It’s investing about $3.1 billion with partners to start crude extraction at the Ghanaian Jubilee deposit in the second half of 2010.

Licenses

Ghana will become one of the world’s top 50 oil producers after the government approved a plan to pump crude from the Jubilee field, Tullow said in July. The company has 86 production and exploration licenses in 22 countries, according to its Web site.

Tullow plans to hold talks with potential partners to help develop projects in the Lake Albert region of Uganda in coming months.

“We have been approached by all the major oil companies,” Chief Executive Officer Aidan Heavey said. “It’s a project that will require some refining and a major pipeline. We need to bring a partner in that has that expertise.”

Tullow gained stakes in five fields in Liberia and Sierra Leone through an asset swap with U.S. natural gas explorer Anadarko Petroleum Corp. earlier this year. Drilling at the Venus-B field, located off the coast of Sierra Leone, began in August and will take 45 days.

First Half

“If a petroleum system is proved in Venus, it would de- risk numerous similar prospects,” McCoss said. Tullow is exploring east and west of its Jubilee field to see how far the field extends. Drilling at its Teak and Tweneboa-2 wells off the coast of Ghana will begin in the first half of 2010.

First-half profit slumped 83 percent to 21.6 million pounds, or 2.71 pence a share, from 124 million pounds, or 16.98 pence, a year earlier, Tullow said today. Sales declined 23 percent to 291.3 million pounds.

The company’s oil and gas output fell 16 percent during the period to an average of 59,265 barrels of oil equivalent a day. The realized price of oil declined 34 percent to $53 a barrel from $80.10 a year earlier.

Tullow dropped 43 pence, or 3.9 percent, to 1,053 pence in London. The stock has jumped 60 percent this year, valuing the company at 8.45 billion pounds.

Source: Bloomberg