Tullow Oil stung by another failed oil project

Tullow Oil has been forced to abandon an ambitious oil project off the coast of Suriname in South America after the explorer failed to make an economic discovery.

The London-listed group took a 5pc hit to its share price after admitting that the 1.6-mile deep Araku-1 well is being plugged and abandoned because it does not hold oil that could prove to be commercial.

It is the second major disappointment for the Africa-focused explorer, which was forced to take a $650m (£498m) writedown on its TEN oil field in Ghana earlier this year.

This led to a deeper than expected $400m first-half loss, which overshadowed the group’s success in lowering costs and growing cash flows. By the end of June Tullow had cut its net debt by about $1bn from the end of 2016 to $3.8bn but fresh projects are needed to help erode the debt pile further.

The FTSE 250 company’s share price has fallen to under 173p, almost half its value at the start of the year, when it traded at around 325p.

Angus McCoss, exploration director for Tullow, assured investors that the company had drilled the well efficiently and at a low cost.

He added that the company was still “encouraged” by the discovery of gas condensate from the Araku-1 well and remained committed to exploration in Suriname and Guyana alongside its joint venture partners, which include Norwegian oil giant Statoil and Noble Energy.