Tullow Oil PLC said on Monday it has made a large oil discovery in Guyana, sending its share price soaring on expectations that it will develop a productive field in the South American country’s nascent oil industry.
Shares London-based Tullow jumped 20 per cent by 1430 GMT and were the top gainer in the FTSE 250 mid-cap index.
The discovery at the closely watched Jethro-1 well in the Orinduik block in Guyana follows a number of recent exploration successes by Exxon Mobil Corp. in the neighbouring Stabroek block, with discovered oil reserves of more than 5 billion barrels.
Tullow Chief Executive Paul McDade said Jethro-1 is expected to hold more than 100 million recoverable barrels of oil, in excess of expectations. The company will start drilling a second well, Joe-1, this month.
“It looks like we have something we would develop. It looks like we have a long-term business in Guyana,” McDade told Reuters.
Guyana has no oil output as yet, though Exxon is expected to start producing next year, an event likely to transform the South American country’s small economy.
Mark Bynoe, the director of the Guyanese government’s Department of Energy, said the discovery proved there was strong potential for commercial reserves of oil at deeper levels of the country’s offshore subsoil.
“This is a major development for the Co-operative Republic of Guyana as it adds to the further de-risking of the deep and ultra-deep zone,” Bynoe said in a statement. “The Department of Energy is encouraged by the prolific rate of discovery.”
The results from the two wells, as well a third prospect in the nearby Kanuku block, will be appraised next year with the aim of moving to quick development, McDade said.
Tullow operates the Orinduik block with a 60 per cent stake, while France’s Total SA and Toronto-listed Eco Atlantic Oil & Gas Ltd. each own 15 per cent, with state-owned Qatar Petroleum holding the remaining 10 per cent.
“This is a revolutionary moment for Eco,” Chief Executive Gil Holzman told Reuters. Eco’s share price soared more than 60 per cent.
Eco sold part of its stake to Total last year and the French oil giant in turn sold 40 per cent of its stake to Qatar Petroleum last month.
The discovery gives Tullow a boost after operational issues at its flagship field in Ghana and delays to projects in East Africa.
“This is a strategy-shifting opportunity for Tullow and a company-making opportunity for junior partner Eco,” said RBC Capital Markets analyst Al Stanton.