Croesus:Tullow Oil was founded in Ireland in 1985 by its current chief executive, Aidan Heavey, and, in the early years, concentrated its activities in Africa.

In 1990, it became active in southeast Asia and, from 2001, Tullow acquired substantial gas assets in the North Sea through a number of acquisitions.

While the timing of the North Sea deals has proved to be excellent, their key benefit is that they provide the group with a core of assets that are generating strong cashflows. This has enabled the group to continue its strategy of broadening its exploration activities through acquisition.

In 2004, Tullow acquired Energy Africa for $570 million (€425 million), while it completed the acquisition of Hardman Resources in January of this year.

The estimated fair value of the Hardman portfolio is £750 million and its key exploration potential is in Uganda as well as licences in Portugal and South America.

Developments in Africa this week have catapulted Tullow into the financial news as it announced a major oil discovery off the Ghana coast on Monday.

The share price jumped 13 per cent on the day to 460p to give the company a market capitalisation of £3.3 billion. Tullow is quoted on the London and Irish stock exchanges with most of the share trading occurs in London. Ranked by market capitalisation, this week's performance puts the company ahead of Ryanair (€3.9 billion) and close to Anglo Irish Bank (€5.2 billion) and Irish Life & Permanent (€5.1 billion).

This discovery is very big news in Ghana, which at present only produces a few thousand barrels of oil per day. The Mahogeny-1 well intersected 95 metres net of stacked pay sands containing light oil.

The oil bearing structure crosses two licence blocks.

Tullow has a 22.9 per cent share in the West Cape Three Points block and 49.95 per cent share in the Deepwater Tanu block.

When taken together, Tullow's net share in the structure is 30 per cent of the initial estimate of 250 million barrels of reserves.

However, drilling has not yet finished and there is a strong possibility that the eventual estimate of reserves will be much higher.

The licence area is offshore which, in Africa, is a positive as it makes bringing the oil to market that much easier.

Nigeria, the continent's largest oil producer, has to deal with rebel activity in several of its onshore oil producing regions.

However, the Tullow discovery in Ghana is in deep offshore waters and so would require considerable resources to develop.

Brokers in London and Dublin moved their share price targets to 500p in the immediate aftermath of the announcement. Brokers estimate a value per share in the region of 50p for this discovery, which roughly equates to the initial share price rise.

Although this is a significant find, the investment case for Tullow depends on a much wider range of assets. Tullow is now a relatively large independent production and exploration company with activities across 15 different countries.

These range from Suriname in South America to extensive interests in Africa, Asia and the North Sea.

An indication of the breadth of Tullow's exploration programme is that it has 40 exploration wells planned for 2007, of which only two are in Ghana.

Valuing pure oil exploration companies is extremely difficult as so much of the value involves estimating the probability of success in discovering oil and gas reserves.

Tullow is both an exploration and production company and therefore it has substantial cashflows to provide an underpinning to its market valuation.

Sales revenues in 2006 amounted to a healthy £578.8 million and earnings per share were 24p.

Despite a planned capital expenditure programme for 2007 of £350 million, Tullow paid its shareholders a dividend of 5.5p per share in 2006. The company trades on a price/earnings ratio of 19 and a dividend yield of 1.3 per cent, although these valuation yardsticks only provide partial guidance to value as so much depends upon the success or otherwise of Tullow's exploration programme.

In addition to keeping a close watch on news from Ghana, investors will be keeping a very close eye on other news from Tullow's 2007 drilling programme. Currently, the three more promising areas include the exploration programmes in Uganda, Namibia and India.

News is expected from the Ugandan Nzizi-2 well in the near future, emphasising the likelihood that Tullow will stay in the news for much of this year.