Taipan Resources and Tower Resources suffer as Kenyan wildcat hits dust

By Amy McLellan

Frontier wildcatting is always high risk – and it doesn’t come much more frontier than the Badada-1 well in the little-known Anza Basin of Kenya. Unfortunately for backers of TSX-Venture-listed Taipan Resources, the risk didn’t pay off this time, with the wildcat in Block 2B hitting dust, sending shares in the company down by 65 per cent in morning trading to C$0.035.

Taipan drilled the US$26 million well to a TD of 3,500 metres but it is now being P&A as a dry hole. Taipan has a 30 per cent stake but much of its costs were carried by farm-in partners, London-listed Premier Oil, which has 55 per cent, and AIM’s Tower Resources with 15 per cent.

Badada-1 was designed to drill to a total depth of between 3,000 and 4,000 metres to test primary targets in Tertiary age reservoirs with gross unrisked recoverable resources of 251 million barrels of oil equivalent and possibly also a secondary objective in upper Cretaceous age reservoirs.

Success would have derisked other prospects on the block for follow-up in 2016/17, opening up the little known Anza Basin. Those hopes will now be on the backburner while the partners analyse the results from this first well.

Encouragingly, however, the frontier well has confirmed the pre-drill geological model for the Anza Basin, encountering a thick and previously untested Neogene age succession of similar age to that encountered in the Lokichar and Albertine Basins, which have proved so prolific for Tullow Oil in Kenya and Uganda respectively.

Indeed, the partners had hoped this well, close to the basin-bounding faults, might have been analogous to Tullow’s play-opening Ngamia discovery in the South Lokichar basin. Badada-1, however, found only minor gas shows and traces of heavier gas molecules that indicate the presence of a thermogenic source rock in this previously untested basin.

Taipan’s CEO Max Birley said “clearly the results of the Badada well were not what management and the shareholders of Taipan had hoped for” but took care to point out that this was a first well in an “extremely large” block, which stretches for almost 5,500 sq km.

This is not Taipan’s only exposure to Kenya; it also has a 20 per cent stake in Block 1, where it has initiated arbitration proceedings against its JV partner, troubled Afren plc, alleging breaches under the Joint Operating Agreement and seeking damages of “not less than US$10 million”.

Shares in farm-in partner Tower Resources were also hit hard by the duster, shedding more than 40 per cent to 0.24 pence. Tower’s CEO Graeme Thomson said it seemed the Tertiary section at this location was “sandier than had been expected and the development of sealing claystones is less than had been hoped”.

“This was always the principal risk for the play,” said Thomson. “We shall be evaluating the results of the well to assess the remaining prospectivity in this very large area.”