Home Stock & Shares Tullow Oil Share Price Rockets On ‘High Value’ New Oil Discovery

Tullow Oil Share Price Rockets On ‘High Value’ New Oil Discovery

by Paul

The Tullow Oil share price has rocketed to a gain of over 17% in early London trading today after the company announced the ‘potentially transformational’ discovery of a new offshore oil field in Guyana. The find could yield up to 100 million barrels and is a welcome shot in the arm for an oil and gas company whose market capitalisation has dropped by almost 90% since its 2012 peak.

The company has not made any official statement on the extent of the discovery’s potential yield but previous guidance released to investors suggested it could be as much as 150 million barrels. The Financial Times reports that one of Tullow’s partners in the “Jethro-1” exploration has said the find could even potentially reach 200 million barrels. At the high end of that range, the new field could be worth up to 30p per share for Tullow investors.

The find is located in the Guyana exploration block that Tullow holds a 60% share of. The rest is split between Total, with the French oil and gas ‘supermajor’ holding 25% and the remaining 15% belonging to Canada’s Eco Atlantic. The latter’s chief executive, Gil Holzman, has described the discovery as a potentially “revolutionary moment” for his company.

Guyana is a relatively new oil exploration zone, with systematic exploration a little over ten years old. However, bullish estimates believe the region could hold between 13 and 15 million barrels of high quality ‘light sweet’ crude oil. Other analysts are more conservative but still estimate a rich resource. Morgan Stanley recently released a research paper that put the recoverable oil at 6 million barrels with ‘considerable upside’ potential. The investment bank believes there is a high likelihood their estimate will be revised up within 12 months. The Tullow Oil discovery could already impact those figures positively.

U.S. oil giant ExxonMobil is the most active explorer in the region, holding a 45% interest in the Stabroek Block. It has already announced 13 discoveries and is investing $6 billion in the second phase of its Guyana offshore development project. The company expects to be producing 750,000 barrels a day by 2025.

Tullow chief executive Paul McDade described the discovery as an “excellent start to our drilling campaign in the highly prolific Guyana oil province”.

Tullow Oil is Monday’s best performing stock in the Stoxx Europe 600 index.

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