Tullow shares rise sharply as Guyana oil field "exceeds" hopes
Shares in Tullow Oil made their bioggest gains in over three years after the company announced a successful update at a highly anticipated well in Guyana.
The "substantial and high-value oil discovery" in the South American country "exceeds expectations" the explorer had for the Jethro prospect, according to Tullow chief executive Paul McDade.
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"This is the first well of what could be a very large campaign," Mr McDade added.
The discovery is especially important for Tullow as both of its East Africa projects are facing delays, according to Will Hares, senior industry analyst for Bloomberg Intelligence.
The Dublin-listed group said the evaluation of logging data from its Jethro-1 well, on the Orinduik licence, comprises of high quality oil-bearing sandstone reservoirs, which it said supports a recoverable oil estimate that exceeds its pre-drill forecast.
"This was ahead of expectations and points to a recoverable resource in excess of the 100 million barrels target size originally guided," said Job Langbroek, analyst at Davy Stockbrokers.
The well is the first of three that the company plans to drill in Guyana this year, where Exxon Mobil has found an estimated 5.5 billion barrels of oil.
Tullow will now evaluate the data from the Jethro discovery and determine appropriate appraisal activity.
The group said the discovery "significantly de-risks" other prospects on the Orinduik licence, including the shallower Upper Tertiary Joe prospect, which will commence drilling later this month following the conclusion of operations at the Jethro-1 well.
The non-operated Carapa 1 well will be drilled later this year on the adjacent Kanuku licence to test the Cretaceous oil play, the company added.
Tullow Guyana is the operator of the Orinduik block, with a 60pc stake. Total E&P Guyana holds 25pc, with the remaining 15pc being held by Eco (Atlantic) Guyana.
"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 campaign and the material follow-up exploration potential in both the Orinduik and Kanuku licences," Mr McDade said.
Tullow stock rose as much as 20pc after the announcement, the biggest intraday gain since January 2016.
The news is a boost for the company, which last month revised its 2019 production guidance downward.
The group now expects to deliver 89-93,000 barrels of oil per day, a reduction from previous estimates of between 90,000 and 98,000 barrels.
The decrease is due to delays in the completion of its latest well in the Ten fields, offshore Ghana. Last year Aidan Heavey retired as chairman of Tullow Oil, a company he founded in 1986.
Additional reporting Bloomberg