GOODBODY NOTE ON TULLOW DATED 21st FEB

Tullow (Buy, Closing Price £3.90)
Woodside FY06 release.
Analyst: Gerry HenniganAustralian-based Woodside Petroleum, the operator of the Chinguetti field offshore Mauritania in which Tullow has a 19% stake, released FY06 results this morning. The relevant details from a Tullow perspective were: (i) production is currently averaging 20 -22 kbopd; (ii) initial production from infill well Chinguetti-18 is to commence by the end of Q1 at a rate of 6 - 10 kbopd; (iii) ongoing workover to optimise production at Chinguetti-14; and (iv) new seismic on Tiof and Chinguetti is to start in March. While the current rate of production continues to drift lower (average rate of 23.4 kbopd in Q4'06), the rate of decline has slowed and the Chinguetti-18 infill well, which had a net pay of 35m, should reverse the trend once production commences at the end of March. We are forecasting net production to Tullow of 4.1 kbopd out over the forecast period on the assumption that production will at best stabilise. Chinguetti-18 may provide some upside to that, albeit that the long term implications of efforts to boost production remain at an early stage. On reserves, Woodside recorded a 27% increase year-on-year, though within that there was a significant cut in Chinguetti reserves to 11.7 mbo down from a pre-production level of 123 mbo.