Tullow shares up 25% on oil find off Ghana

SHARES IN exploration group Tullow surged by 25 per cent to an all-time high yesterday as the company announced that it has discovered new oil reserves off the coast of Ghana.

Tullow holds a combined 37 per cent interest in two fields off the African country's coast, Mahogany 1 and Hyedua 1.

Recent drilling indicates that these are connected and that together they could contain up to one billion barrels of crude oil. This is double what the company had originally expected its Ghanaian wells to contain.

The Irish company's stake in the fields effectively means that it has reserves of 370 million barrels, if its assessment of the wells' reserves are correct.

Investors responded to the news yesterday by plunging for Tullow shares. The stock gained almost 20 per cent in Dublin and more than 23 per cent in London as buyers responded to the news.

The company's stock hit an all-time high on both markets, trading at more than £9.40 in London and at €12.10 in Dublin, a gain of 25 per cent.

Tullow's outgoing finance director, Tom Hickey, told The Irish Timesthat the discovery of the connection between the wells and the extra reserves, would be "transformative" for Tullow.

"At the end of last year, we had 200 million barrels in commercial reserves, this could leave us with 370 million, so this is an effective doubling of the company," he said.

The estimate of the wells' reserves is the company's own. Mr Hickey said that this would be subject to independent verification, which he expected to be completed by the end of the year.

If Tullow's own estimates are verified, the company can then put a value on the reserves and put it on its balance sheet.

The announcement came as oil prices hit a record $122 a barrel high in New York yesterday. Attacks on facilities in Nigeria, Africa's biggest oil producer, and growing consumption in Asia, fuelled the price rise.

Mr Hickey said high oil prices were not unambiguously positive for Tullow.

"It can mean governments looking for more money or a bigger share. It can also mean new money coming into the industry and new competition for acquisitions. All we can do is to keep finding as much of the stuff as possible."

However, he said that it was possible that oil could reach $150 a barrel over the next few years.

He added that the discovery could mean that there were further untapped oil reserves in the region around its interests. "We're currently testing around the edges of it to see how far it goes," he said.

Tullow hopes that it can bring the field to commercial production by 2010. It has already located the rig and undersea equipment it needs and is in the process of getting a production and storage vessel.

Tullow's partners in Ghana are Kosmos Energy, Anadarko Petroleum, EO Group and the state-controlled Ghana National Petroleum Corporation.

The company is listed on both the Dublin and London stock markets and has interests in the North Sea, Portugal, Africa and Asia.