Tullow hits water bearing reservoirs in Ethiopia

Tullow Oil fell 1.4% on Friday to 840p after announcing that the Shimela-1 well, onshore Ethiopia, had encountered water bearing reservoirs and only traces of thermogenic gas shows were recorded after drilling to a final depth of 1,940 metres.

This well, situated in the South Omo basin, near Chew Bahir and named after a common bird in the area, was considered particularly significant for the company's prospects.

As recently as April a report identified the Shimela prospect as the first well in the area, adding that a second well location was also being considered for 2014. Previously, Tullow drilled the Sabisa-1 and Tuletule-1 in the South Omo Block, but while oil and gas shows were recorded in the first well, the second well was abandoned as a dry hole.

Tullow has suffered a string of disappointing exploration results, announcing in April that the Mauritanian Tapendar-1 exploration well, in Block C-10, did not encounter hydrocarbons and has been plugged and abandoned, and in March declaring Force Majeure on its exploration licence in Guinea which delayed the drilling of the Fatala well, previously scheduled to commence in April 2014.

The Shimela-1 well rig will now be moved to drill the Gardim-1 wildcat exploration well in a completely separate sub-basin, in the south-eastern corner of the Chew Bahir basin.

Tullow operates the South Omo block with a 50% equity interest with Africa Oil taking a 30% stake and Marathon Oil another 20%.

"The prospectivity at the Gardim-1 well, which is targeting an independent petroleum system in a separate south-eastern sub-basin, is not affected by this result," said Angus McCoss, exploration director at Tullow Oil.

The stock enjoys a lot of support at 750p, highlighted 'Guesstimate' on the Interactive Investor discussion board.

The shares were as high as 1,130p last July.