Africa, and more specifically Uganda, seem to be the buzzwords for Tullow at the moment.
News that the company expects to start producing oil in the country in early 2009 was welcomed yesterday by analysts, who already viewed Uganda as a major part of Tullow's future.
The shares rose more than 2 per cent in both Dublin and London, to close at €5.43 and £3.59 respectively.
What was important about yesterday's announcement concerning Uganda was the fact that, as well as planning to produce oil for the domestic market, Tullow is also assessing the potential for a larger pipeline to transport oil out through Kenya and into the international market.
For this to be successful, the company needs reserves of at least 250 million barrels, according to finance director Tom Hickey. While he is reluctant to state definitively whether this is achievable, yesterday's statement says that preliminary estimates for gross recoverable reserves in the Albertine Basin (the Ugandan project the company is concerned with) are between 100 and 250 million barrels.
Still, while describing the Ugandan developments as "very significant", one analyst said investors would be looking for news of greater reserve potential in order to push the share price higher.
Sebastian Orsi at Merrion Capital expressed disappointment over the 89 per cent reserve replacement, saying that, while the level of replacement was good, he would have liked to have seen more of it coming from outside of Uganda.
Others, however, were more positive, with Goodbody analyst Gerry Hennigan highlighting the reserve replacement as one of the statement's highlights.
He also welcomed the reiteration of the 2007 production guidance - in its February trading update, Tullow forecast production will reach 85,000 bpd (barrels of oil equivalent per day) - particularly in the light of the lower guidance for the Schooner field in the UK.
"The fact that Tullow has maintained guidance and replaced 89 per cent of full-year 2006 production organically is testament to the diversity within the portfolio," Mr Hennigan said in a note. He described this as a feature that "continues to attract".
Analysts said the acknowledgement that one of the wells drilled in the Schooner field last year was not commercial was disappointing, but something that could easily be overcome by the diversity of the group's other operations. The company itself admitted it was experiencing some cost constraints in the UK and as a result intended to focus mainly on Africa and Asia in 2007.
One significant development, according to Caren Crowley, an analyst at Davy, is the news that Tullow is seeking a partner to take a stake in its Kudu gas project in Namibia. Not only will this reduce Tullow's own financial risk in this project, but also free up some resource for the company to focus on other areas.
Ms Crowley yesterday raised her price target for Tullow shares to £4.50, citing confidence that "at least one of a number of high-impact drilling programmes will deliver."
