The company is the biggest faller in the leading index, down 23p at £12.59 after it said the Dahoma-1 exploration well in Ghana failed to find oil, instead encountering water bearing reservoirs. But Richard Griffith of Evolution Securities left his target price unchanged at £14.50. He said:
The high risk Dahoma-1 well on the West Cape Three Points licence has encountered water. The disappointing result may see, in the short term, a disproportionate response to the share price than the 5p-10p we believe should be the likely effect of cutting 200m barrels of oil equivalent off the estimates for the Southeast Jubilee area. Importantly the result does not affect Tullow’s view on the prospectivity of the neighbouring Sapele, South East and South Central channels.
Bank of America Merrill Lynch lowered its price target by 12p to £17.43 to reflect the news, but kept its buy rating:
Although the Dahoma result may prove disappointing for some investors near term, it does not change the Tullow story at all in our view, particularly given the company’s busy exploration programme over the coming months.