Tullow Oil plc’s (LON:TLW) plans for a rights issue to fund projects in Africa and South America will be positive for the group’s partners, particularly Eco (Atlantic) Oil & Gas Ltd (LON:ECO,CVE:EOG), according to analysts at VSA Capital Research.
Tullow today unveiled a proposed US$790mln rights issue with the aim of paying down debt to unlock the group’s portfolio of expansion and growth projects.
It earmarked some of the proceeds for high impact, and potentially high return, drilling projects in Africa and South America.
The group will also make investments in new drilling opportunities, further exploration and appraisal programmes around the Jubilee and TEN fields offshore Ghana.
Tullow plans to invest in more exploration and appraisal activity in Kenya, to further build and prove up its resource base.
“Therefore, we view this to be particularly positive for Tullow’s partners across its licences, in particular Eco (Atlantic) Oil & Gas which has a 40% working interest in the Tullow operated Orinduik block in Guyana, adjacent to the giant Liza and Payara discoveries made by ExxonMobil,” VSA said.
Tullow and Eco are set to conduct a 3D seismic survey over the South American Orinduik block to refine targets and scope out new leads. The block is estimated to contain prospective resources of 900mln barrels of oil equivalent.
“The fact that Tullow have stated it plans to drill in the next three to five years across this portfolio is extremely positive and is ahead of our estimates,” VSA said.
“Eco is also a partner with Tullow in Namibia where Tullow is contingently carrying Eco for the costs of one well on the cooper block.”
VSA repeated a ‘buy’ rating on Eco and a target price of 25p.