Shareholders will be hoping this represents a return to form for the £9.6 billion cap whose usual sure touch with the drill-bit has deserted it so far in 2013, helping to depress sentiment and undermine a share price which, notwithstanding today's rise, is down 16.6% year-to-date.
In late July, broker Investec noted 13 of the 15 key wells drilled up until that point had failed to deliver commercial finds, this compares with an historic success rate of more like 70%. Today's relatively modest rise probably reflects Tullow's limited, though still material, 20% stake in the Wisting Central well. This is being described as a 'play-opening' find because it is the first time oil has been discovered in the Hoop-Maud basin and, as such, should have follow-up potential.
Broker Davy, which has an 'outperform' recommendation on the stock, estimates discovered volumes for Wisting Central of 60 to 120 million barrels of oil equivalent (mmboe) but says the targeted reservoir could contain between 200 and 500 mmboe across the wider licence. Analyst Caren Crowley says the news 'may lead to a greater appreciation of Tullow’s $372 million acquisition of niche Norwegian independent, Spring Energy, and the strength of its team'.
VSA Capital's Dougie Youngson is more cautious and says 'further work needs to be done to prove the basin’s potential' adding that the key driver for the shares is news on a farm-out of its TEN project in Ghana.
The takeover of Spring, announced last December, was a catalyst behind our decision to make Tullow a Shares Tip for 2013 – faith which up until now has gone unrewarded.