Tullow reports positive findings in Ghana drilling

Exploration company Tullow Oil said this morning its Mahogany-3 well off Ghana had found “light oil columns” confirming a “significant” extension of the Jubilee field to the southeast.

Tullow and partners drilled the 4,028 meter (13,000 foot) well to further appraise the Jubilee field and to explore a deeper target beneath the reservoir.

Shares rose as much as 9 per cent in London on the news, before falling back.

"In this section, the well encountered 17 meters of good quality oil bearing reservoir sandstones at levels significantly deeper than the oil water contacts previously intersected on the Jubilee field," Tullow said in a statement.

"This success opens up further potential in the region and is the subject of ongoing evaluation."

In a note to investors Davy Stockbrokers said the drilling results were likely to lead to a higher resource expectation for Jubilee, possibly up to 20 per cent higher.

"The well result confirms the Ghana play to have world-class characteristics with substantial production expectations backed by considerable exploration upside."

The company plans to invest about €2.3 billion to develop the Jubilee field and produce the first oil there by 2010.

Aidan Heavey, Tullow's chief executive said: "Successfully proving up a significant south-eastern extension of the Jubilee field and discovering an additional light oil accumulation beneath is another excellent result from our Ghanaian exploration and appraisal programme.

"Hyedua-2 and, in particular, Mahogany-3 were bold step-outs from the core of the field and while the combined impact is currently being evaluated, it is clear that they have confirmed our view of the substantial upside potential of the Jubilee field and increased our expectations of the extent of the core of the field."

The company is targeting about 4 billion barrels of oil and gas resources in the Gulf of Guinea off Ghana and Ivory Coast. It intends to supply the first gas from Jubilee to Ghana in 2011.

Tullow shares rose were up 38 pence to 748 pence in London trading at 9.30am but were 7 cent lower at €8 in Dublin.

Tullow has a 22.9 per cent in the West Cape Three Points license, where Jubilee is located.

Additional reporting Bloomberg