Tullow shares soar after oil discovery off French Guiana

TULLOW Oil shares soared almost 20% after its French Guiana exploration resulted in an offshore oil discovery, raising the prospect of the opening of a major offshore oil-producing operation in South America.

The company, and others, have made big offshore discoveries in Ghana, namely the multi-billion barrel Jubilee field, and an oil strike in Sierra Leone that suggests the finds extend all along the Western African coast.

Tullow’s Zaedyus well in French Guiana, drilled in more than 2,000 metres of water and at a cost of some $200 million (€146m), was tapping rock formations laid before Africa and South America separated millions of years ago.

The company, and partners Royal Dutch Shell, with 45% and France’s Total with 25%, believed the oil-rich west African geology would be replicated in South America.

“Our Atlantic twin basin concept has proven to be valid,” Tullow’s exploration director Angus McCoss said on an investor call.

Tullow’s geological theory is not without precedent. In the past decade, fields with tens of billions of barrels of oil have been found off the coast of Brazil in reservoirs that were formed when the two continents were attached.

The high-risk nature of the venture was reflected in the terms that the companies received from the government, McCoss said, suggesting any oil produced will yield good margins.

Tullow shares traded up as much 19% on the day on the Irish Stock Exchange.

Tullow operates the Guyane Maritime licence and holds a 27.5% stake. Northpet — a company owned by Northern Petroleum and Wessex Exploration — has a 2.5% holding.

Northern Petroleum shares traded up 29.2% while Wessex soared 36.3%.

Tullow, Europe’s largest listed explorer by market capitalisation, plans to drill wells in neighbouring Guyana and Suriname next, with the French Guiana find making success there look more likely.

The well was drilled to a depth of 5,711 metres and drilling will continue beyond 6,000 metres.