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Tullow Oil Discovers Crude; Shares Jump to Record (Update5)

By Mathew Carr and Stephen Voss

June 18 (Bloomberg) -- Shares of Tullow Oil Plc, an oil an gas explorer on three continents, jumped 12 percent to a record after the company found oil at an exploration well off Ghana.

The Mahogany-1 well, drilled in water 1,320 meters (4,331 feet) deep, found an oil column of 270 meters, Tullow said in a statement today. The discovery holds 250 million to 600 million barrels, Tullow Exploration Director Angus McCoss said on a conference call with analysts and reporters.

Oil explorers in West Africa are benefiting from rising oil prices, which over the past 12 months were about a third higher than they were two years earlier.

``The discovery of oil in the Mahogany well represents a major event for the Republic of Ghana and for Tullow,'' Aidan Heavey, Tullow's chief executive officer, said in the statement. ``Ultimate reserves are likely to be materially in excess of previous estimates.''

The well was drilled to 3,683 meters and will be drilled to 4,200 meters to test further prospects. Tullow's previous reserves estimate for Mahogany, based on a 50 percent probability, was 250 million barrels, McCoss said.

Tullow shares jumped as much as 49.25 pence, or 12 percent, to 458.25 pence, a record according to Bloomberg data. They were at 458 pence at 1:34 p.m. in London. They had climbed 3.5 percent on June 15 and 3.8 percent on June 14 on speculation of an African discovery.

Size Estimates

Merrill Lynch & Co. analyst Andrew Knott said in a note to clients today that Tullow and its partners have probably discovered 300 million barrels of oil and potentially a further 300 million, subject to additional tests.

Merrill Lynch is a shareholder in asset manager BlackRock Inc., which is one of Tullow's biggest investors. BlackRock owns more than 16 percent of Tullow, according to a June 15 filing.

The Mahogany prospect straddles two exploration licenses in Ghana, West Cape Three Points and Deepwater Tano, in which London- based Tullow owns 22.9 percent and 49.95 percent, respectively.

Tullow is the operator of Deepwater Tano. Privately held Kosmos Energy LLC is the operator and 30.875 percent owner of the other license. Other shareholders include Anadarko Petroleum Corp., with a 30.875 percent share in West Cape Three Points, Sabre Oil and Gas Ltd., Ghana-based E.O. Group and state-run Ghana National Petroleum Corp.

Tullow and its partners will evaluate well data over the next two weeks. Further appraisal wells are planned for 2008, McCoss said. The Belford Dolphin rig used to drill the Mahogany-1 well will be moved to Benin, a nearby African country, to drill another offshore well, Dallas-based Kosmos said in another statement today.

Tullow will provide more information on Mahogany and other pojects in a trading update on July 11. The company has exploration and production operations in several African nations, the U.K.'s North Sea and Bangladesh and plans to start South American exploration work in Suriname later this year.

To contact the reporters on this story: Mathew Carr in London at [email protected] Stephen Voss in London at [email protected]

Last Updated: June 18, 2007 09:07 EDT