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Tullow Oil (TLW) – Finals PTP: £114.2m (£263.3m) Divi: 5.5p (5p)

In isolation the numbers suggest a pretty lousy year with profits down by more than half, but 2007 also saw the company make a world-class discovery in Ghana and ascend to the FTSE 100.

CEO Aidan Heavey describes it as a ‘transformational year’ attributing it to the exploration success in West Africa. He says: ‘We have generated record production, sales revenue, operating cashflow and growth in reserves and resources.’

Profits, though, were hit by exploration costs and falling UK gas prices, but these have begun to pick up. And the disposal of an interest in the M’boundi field in the Congo will address a rapid rise in debt levels after the acquisition of Hardman Resources. The Chinguetti project in Mauritania, acquired in the Hardman deal saw a significant reserves downgrade.

Most of the excitement is focused on the assets in Ghana and Uganda, and Heavey underlined this is where most investment and activity would be centred. The jewel in the crown being the massive Jubilee field, which could contain between 500 million barrels and 1.3 billion barrels and is now expected to deliver first oil in 2010.

In response to the update house broker Davy reiterated a buy recommendation and hiked its price target to 775p, which offers considerable upside to the current price of 629p. It also pointed to the new targets offshore Ghana, Teak and Tweneboa, which have upside of half a billion barrels each.

Shares says: Worth holding on for the promise of more excitement in West Africa.

by: Tom Sieber