Tullow makes major oil discovery in Guyana

Key Points
  • Jethro-1 wells holds more than 100 million barrels, CEO says.
  • Partners now likely to develop field.
  • Partners are Total, Eco Atlantic and Qatar Petroleum.
  • Tullow shares surge 12%.
The Tullow Oil Plc Prof. John Evans Atta Mills Floating Production Storage and Offloading vessel sits docked in Singapore on Jan. 21, 2016.
Nicky Loh | Bloomberg | Getty Images

Tullow Oil announced on Monday a major oil discovery in the Orinduik block in Guyana, raising expectations it will move to develop a field in the oil-rich South American country.

Tullow shares surged more than 12% in early trade in London.

The discovery in the closely watched Jethro-1 well follows a number of exploration successes by Exxon Mobil in the neighbouring Stabroek block in recent years where over 5 billion barrels of oil were discovered.

Tullow Chief Executive Paul McDade said the well is expected to hold over 100 million barrels of oil, in excess of expectations. The company will start drilling a second well, Joe-1, later 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 in an interview. 

"We're hopeful this is not an isolated result, that there will be more discoveries."

Tullow operates the Orinduik block with a 60% stake, while Total and Eco Atlantic each holds a 15% stake and Qatar Petroleum the remaining 10%.

The discovery gives the London-based oil and gas explorer 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. A new wave of exploration success could also provide a shot-in-the-arm for larger partners Total and Qatar Petroleum," RBC Capital Markets analyst Al Stanton said.

Tullow said the drilling at the Jethro-1 well at a depth of 4,400m metres in approximately 1,350 metres of water revealed high quality oil bearing sandstone reservoirs of Lower Tertiary age. The well encountered 55 metres of net oil pay.