Australia's Woodside Misses Again in Mauritania

Merou Well, Mauritania
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Australia's Woodside Petroleum Ltd. (WPL.AU) on Monday unveiled a third consecutive failure in its US$100 million-plus drilling program offshore Mauritania after the Merou-1 well failed to hit a major oil deposit.

The news prompted a sharp sell-off in Woodside's junior Mauritania partners, Hardman Resources Ltd. (HDR.AU) and ROC Oil Ltd. (ROC.AU), as investors who had expected a discovery of up to 300 million barrels of oil bailed out.

ROC said that Merou-1 intersected a number of thin hydrocarbon-bearing sands. "Initial interpretation suggests that the accumulations are not of economic size, but further analysis will be required to determine their full significance," the company said.

The oil shows are likely to be "sub-commercial accumulations" Hardman Resources said in a separate statement.

After falling as much as 10%, Hardman shares recovered to be down 5.6% at A$1.86 in early afternoon trade on the Australian Stock Exchange. ROC was down 3.6% at A$1.85, while shares in Woodside, the operator of the drilling program, were up 0.1% at A$21.05.

Woodside made no direct comment on the result.

But analysts said that Woodside may now "re-think" the targeting of the Mauritania program, which is regarded as the biggest exploration venture in the Australian company's 50-year history.

"They may have to go back and revisit the seismic to see what has changed," said Gordon Ramsay, an analyst at UBS.

"It looks like the reservoir quality at Merou is not that good. It is disappointing as I'd thought it had pretty good odds being so close to Tiof," Ramsay told Dow Jones Newswires.

Merou follows earlier failures at Dorade-1 and Capitaine-1.

A fourth well, Tevet-1, was confirmed as a new oil discovery in early October. Tevet is believed to contain between 50 million and 100 million barrels of oil and may be tied into the Chinguetti development.

"The market was looking for a more positive result than we've seen on Merou as it was one of the more hopeful of the Mauritania wells in terms of size and prospectivity," said Stuart Baker, an analyst at Morgan Stanley.

"But it is a big area with commercial projects underway. It may take years to work through what they have there," he said.

Analysts say that drilling activity over Christmas is likely to focus on development and appraisal work at the US$600 million Chinguetti project and nearby Tiof.

The latter field potentially holds several hundred million barrels of oil and may be accelerated for development if current testing proves positive.

Woodside owns 53.846% of Chinguetti. Other participants are Hardman 21.6%, BG Group 11.63%, Premier group of companies 9.231% and Roc Oil 3.693%.

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