The first well off the coast has yielded nothing, proving to be dry. The company, with explorations in a number of African countries – Mozambique, Suriname, Kenya and Guyana, is not unused to wells that disappoint, but would have at least hoped for results from the first to offer optimism for future operations.
Although dry wells make bad headlines for oil companies, they are realistically a regular occurrence and not critical enough to warrant the market reaction we have seen so far today. After the first couple of hours trading on Tuesday Tullow Oil's shares were down over 7.5%, to about 1030p. The news comes two weeks after UBS downgraded the company to hold and SocGen increased its price target to 1150p.
Exploration companies by their very nature are prone to seeing their share price fluctuate aggressively as true value and blue sky vie for ascendency in traders’ minds. If the shares were to drift into the region of 980p a share, it is likely that we would see some support as buyers have been tempted at that level a number of times.