Tullow Oil draws blank at Lupus

Tullow Oil, desperately in need of a lift following a string of setbacks, failed to turn up anything during its first stab at drilling licence PL507 in the Norwegian North Sea.

The oil explorer, which has 60% of the production licence, says the Lupus exploration well - located 35 clicks south east of the Oseberg Sør Field and 110 km west of the island of Sotra in the North Sea - will be plugged and abandoned.

In May, Credit Suisse put the chances of success at 34%.

"A dry hole is never good news," says Jamal Orazbayeva, an analyst at Westhouse Securities. "The well was valued in the published EMV [expected monetary value] at 11.5p per share risked and 57.4p per share unrisked."

"A more persistent problem, however, is the company's lack of exploration success over recent years," adds Orazbayeva. "This has proved particularly disappointing as a run of big finds had meant Tullow previously enjoyed a reputation for striking it lucky."

Thankfully, a second $650 million (£381 million) bond issue in April eased short-term funding concerns, and Tullow's share price, which has halved since early 2012, is entering oversold territory. There could be some technical support near current levels, too.

It has already told the City to expect half-year revenue and gross profit of about $1.3 billion and $650 billion respectively, in line with expectations.

Of course, Ithaca Energy also has exposure to PL507 after swapping non-operated interests in a pair of licences in the Norwegian sector of the Barents Sea for a 10% stake.

Still, second quarter production was in line with expectations, and Ithaca's list of potential catalysts looks interesting.

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