Shares in Tullow Oil jumped more than 19 per cent after the company said it had made a "substantial and high value oil discovery" off the coast of Guyana.
In a statement, the London-listed Irish explorer said that its Jethro-1 exploration well, drilled on the Orinduik licence offshore Guyana, was found to comprise “high quality oil bearing sandstone reservoirs”, which it said is likely to contain more recoverable oil than previously forecast.
Tullow’s shares were 19 per cent higher at 213 pence by late afternoon on Monday, making it the biggest riser on the FTSE All-Share index.
“This substantial and high value oil discovery in Guyana is an outcome of the significant technical and commercial focus which has underpinned the reset of our exploration portfolio,” Tullow chief executive Paul McDade said.
“ It is an excellent start to our drilling campaign in the highly prolific Guyana oil province. We look forward to drilling both the Joe and Carapa prospects in our 2019 drilling campaign and the material follow-up exploration potential in both the Orinduik and Kanuku licences.”
Tullow said that the discovery “significantly de-risks” other tertiary age prospects on the Orinduik licence, with drilling commencing later this month on other areas.
Tullow did not specify the estimated size of the discovery but said the drilling results suggested the number of barrels that could potentially be recovered exceeded an earlier forecast of more than 100 million. One of Tullow’s partners in the project has been more bullish, estimating that as many as 200 million barrels could be recovered.
Al Stanton, an analyst at RBC Capital Markets, said the latter could be worth 30p to Tullow’s share price. Another analyst, James Hosie at Barclays, described the find as “potentially transformational” for Tullow.
The company said it would “now evaluate the data from the Jethro discovery and determine appropriate appraisal activity”. Its current assets are largely focused in west Africa, where it produced 88,700 barrels a day in the first six months of the year.
Tullow will shortly drill a second well in the same area in Guyana as the Jethro well, the results of which are expected towards the end of next month. It is also planning further exploration work.
It owns a 60 per cent stake in the licence that covers Jethro, with France’s Total holding 25 per cent and Eco Atlantic, which is listed in both the UK and Canada, the remaining 15 per cent.
Tullow also owns a minority stake of 37.5 per cent in an adjacent licence - Kanuku - which is operated by Spain’s Repsol. Across both of these two licences, it believes there could be up to 4 billion barrels of recoverable resources in total.
Guyana has been seen as an exciting prospect in the oil industry since US major ExxonMobil made a number of discoveries - 13 in total since 2015.
Gil Holzman, chief executive of Eco Atlantic, described the results from Guyana as a “revolutionary moment” for the company. Its shares on Aim, London’s junior market, were up 101 per cent at lunchtime at 137 pence. As well as Guyana, Eco Atlantic also has projects in Namibia.
“This is a transformational event for the company, and we now need to strategically plan for an even brighter future,” Mr Holzman added.
Additional reporting by The Financial Times Limited