Tullow Oil

Tullow Oil (TLW:LSE) 2003-05-28

A small British Oil company is set to increase its production exponentially. We believe, its profits will grow exponentially too.

Tullow Oil first entered the offshore exploration and production arena in 2001, when it acquired a significant number of Southern North Sea (SNS) gas assets from BP. The acquisition comprised two main areas, CMS (the Caister Murdoch System) and Thames/Hewett. The portfolio has been expanded since, through a number of transactions and licence awards.

The SNS gas assets include significant equity in the associated infrastructure, the export pipelines, and one of the onshore receiving and processing terminals at Bacton.

Tullow has increased production and improved performance through facilities maintenance and well optimisation programmes. Tullow has secured a rig for an 18 month period to actively pursue a series of development drilling and workover opportunities on both fields.

Tullow will maintain an active exploration and acquisitions programme to continue to enhance its operating position and create additional value for shareholders in the prolific basins of the North Sea , with particular focus on the SNS.

Further afield, Tullow Oil also has exploration licenses with various partners & some of the more noteable projects include:

Tullow and partner Addax Petroleum signed an exploration licence with the Cameroon Government for the Ngosso Area in December 2002. Addax operates the licence with a 60% interest while Tullow holds the remaining 40%.

The Ngosso licence, which lies in shallow water, contains a number of existing small oil discoveries, Narendi, Odiong and Oongue in addition to numerous exploration opportunities. One of the objectives of the initial work programme is to appraise these discoveries with a view to establishing their commerciality

Tullow holds a 90% operating interest in Production Licence 001 over the Kudu gas field, offshore .
The Group is hoping to conclude a Joint Development Agreement, in 2004, for the development of the field as part of a gas-to-power project.

The project involves the offshore development of the Kudu gas field by Tullow and NAMCOR, and the piping of gas to shore for treatment and delivery to an 800MW power station to be developed and commercially operated by NamPower at Oranjemund. The produced electricity will be sold to NamPower, for resale into the Namibian marke and to Eskom for the South African market.

Tullow first became involved in oil and gas exploration activities in in 1997 when it took a majority interest in the mainly offshore Blocks 17/18, in the Bay of Bengal . In 2001 the Company signed its first onshore licence, Block 9, which lies close to Dhaka city.  Tullow coordinates its operations in from its office in Dhaka , which currently employs 25 local staff, supported by a number of expatriate staff.

Block 9 covers 6,880 sq km and was one of the most highly sought after blocks in the Second Licensing Round. Tullow (30%) operates the block which is held with partners Niko Resources (60%) and BAPEX (10%), the state exploration and development company.

A three well drilling programme carried out in 2003 resulted in two gas discoveries, Bangora-1 and Lalmai-3.  Significant progress has been made on the appraisal plan for these discoveries.  Over the next 12 months Tullow will acquire seismic and drill a minimum of two appraisal wells along the 40 km anticline connecting the discoveries, to determine the ultimate reserve potential of the structure. Tullow has also received Government approval to initiate production from Bangora under a long term test arrangement. This will supply much needed gas into the Block 9 market and provide valuable additional reservoir and geological data. First gas from Bangora is targeted for early 2006 at an initial rate of up to 50 mmscfd.

Tullow (80%) operates Blocks 17/18 which cover 13,724 sq km and lie immediately south of the Sangu gas field. Since 1997 a very extensive work programme has been carried out, including the acquisition of offshore, transition zone and onshore seismic data. Recent discoveries in adjacent acreage enhance the gas prospectivity of several sizeable structures previously identified.

These Oil and Gas projects should turn out to be very lucrative for Tullow.

This is a well managed company which has grown rapidly by canny acquisitions and partnerships. We believe it is poised to reap the rewards in the near future.

The commodity markets are just starting to move upwards. This share could follow in tandem.

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