UPDATE 1-Premier Oil shares leap on Mexican oil discovery

(Adds details, analysts' comments)

July 12 (Reuters) - Premier Oil has discovered oil off the coast of Mexico at its Zama-1 exploration well in Block 7, it said on Wednesday, sending its shares rocketing as much as 38 percent higher.

Premier, which holds a 25 percent interest in the block, said estimates for the Zama-1 well were in excess of 1 billion barrels, which could extend into a neighbouring block.

Chief Executive Tony Durrant said the discovery "adds materially" to Premier's portfolio of assets.

"(The) Zama-1 discovery announcement appears about as material as we could possibly imagine at this early stage," Jefferies analysts wrote in a note.

Zama-1 well is the first offshore exploration well drilled by the private sector in Mexico.

The project is jointly owned with Talos Energy, which acts as operator and has a 35 percent stake, and Sierra Oil and Gas which holds the remaining 40 percent.

"The Zama discovery by Talos is the most important achievement so far of the Mexico's Energy Reform. According to our data, Zama is one of the 20 largest shallow-water fields discovered globally in the past 20 years," Pablo Medina, analyst at industry consultancy Wood Mackenzie said.

Talos Energy is currently setting a liner to protect the discovered reservoirs, before drilling deeper to a total vertical depth of about 4,200 metres, Premier said.

At 0720 GMT, Premier shares were up 26 percent at 58.5 pence. (Reporting by Arathy S Nair in Bengaluru; Editing by Susan Fenton and Mark Potter)