Tullow Oil Plc (UK) (OTCMKTS:TUWOY) Slides 7% On Drilling Suspension News

The share price of Tullow Oil Plc (UK)(OTCMKTS:TUWOY) declined more than 7% to close at $2.43 as the company said Ghana could be instructed to suspend drilling in an offshore region where it runs it TEN project. The Ivory Coast disputes sea boundaries with Ghana and has demanded from arbitration panel to instruct Ghana to stop drilling at TEN. The news comes as a shock as it is prepared to produce its first oil in FY2016.

The details

The suspension of drilling in an offshore region will have a negative impact on Tullow Oil’s plans. The decision on the Ivory Coast request is expected to come before May. A full verdict on suspension matter is expected to come by in 2017. If arbitration panel gives verdict in favor of Ivory Coast, It will impact the TEN Project. The probability is it can become a part of Joint Development Zone between Ghana and Ivory Coast, potentially affecting the fiscal system.

Strong case

Tullow Oil Plc (UK)(OTCMKTS:TUWOY), an energy explorer firm in Africa, declined to a one-month law after the news. The TEN Project is better known as ‘Tweneboa-Enyenra-Ntomme’ project. The legal advisers of the company said that Ghana has a strong case. The expectation is that the current boundary region will be upheld. The dispute is presented before a Special Arbitration team of the “International Tribunal of the Law of the Sea” in Hamburg.

Analysts view

James Hosie, who is an analyst at Barclays Plc, stated in the research note that a decision on suspension matter that will come in April would provide clarity on the matter. It is after the provisional decision the market can assess the risk associated with Tullow’s key development project. The research firm values Tullow’s stake in the key project at 157 pence per share, and its tangible NAV of 527 pence per share. It is applicable when the current boundary is upheld, and there is no drilling suspension of ongoing activity.

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