Broker snap: Tullow to be transformed by big discoveries

17th Sep 2009 12:54

It's a case of 'another day, another major oil discovery' for Irish oil company Tullow Oil which has announced two important finds this week that Panmure Gordon thinks have the ability to transform the outlook for the company.Following on from Monday's announcement about the discovery on the Venus prospect in Sierrra Leone, Tullow has announced a discovery at Ngassa in Block 2 in Uganda, where it has a 100% working interest.Panmure Gordon notes the test result on the Ugandan discovery is far from conclusive but that Tullow feels it could be the largest field in the basin found thus far.'We believe that, on conservative reserve expectations, Tullow has asset backing of approximately 850p per share. However, it has embarked on a major drilling campaign that could add significant reserves and value. The Venus discovery has opened up new drilling potential over the next twelve months,' Panmure Gordon said, explaining its decision to up its price target from 1150p to 1500p. 'The wells proposed over the next 12 months could add a further 2000p to our asset value. If we assume that it achieves only a 30% success rate (which on a historic success rate is very conservative), this would result in an asset value of approximately 1500p per share,' Panmure Gordon said. The broker has reiterated its 'buy' recommendation, saying that Tullow remains one of its 'favoured independent E&P [exploration and production] companies.'