Tullow set to enter FTSE 100 on back of oil well finds

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Tullow Oil continued its relentless march into the FTSE 100 yesterday, saying that either of its Ghanaian or Ugandan oil discoveries could double the size of its business.

The company, named after a town in the Republic of Ireland, raised its guidance on the Ghana discovery, saying it may contain recoverable reserve in excess of 1.3 billion barrels. Last month it announced a successful well at its Uganda licence in the Lake Albert Rift basin, bringing to seven the number of wells drilled and found to hold oil.

The upbeat news on the company's successful finds eclipsed a steep fall in first-half pre-tax profits, which came in at just £66.5m from £153.1m during the first six months of last year. Sales eased back to £284.9m from £310.7m, and the interim dividend was merely held at 2p. The company's North Sea earnings were hit by lower UK gas prices.

Group production is also likely to be flat next year as the company ploughs its resources into "high impact" fields such as Ghana, with the aim of getting the oil flowing by 2010 rather than 2012 as had been previously suggested.

Analysts hailed the upgrade of Tullow's guidance. ABN Amro said: "With the prospect of significant drilling news in store over the balance of the year, Tullow remains one of our top picks in the sector."

Chief executive Aidan Heavey said: "The first half of 2007 has been a period of exciting progress for Tullow. Our exploration programme in Ghana not only yielded a major discovery, but also de-risked the group's extensive acreage position in the region.

"Simultaneously, ongoing success in Uganda continues to confirm the discovery of a new basin with billion-barrel oil potential. Each of these projects has the ability to more than double Tullow's reserve base over the coming year."

The company's finds have taken it well beyond the UK stock market's rough and ready group of natural resource exploration minnows, transforming it into a company worth more than £4bn. The shares, which stood at less than £1 at the start of 2004, closed yesterday at 547p, up 34p.

Tullow is now around the 80th biggest company in Britain, making it a near certainty for FTSE 100 entry at the next quarterly review later this month. Companies need to be in at least 95th place in terms of market value to guarantee a place in Britain's index of blue-chip businesses.

FTSE 100 entry offers benefits such as enhanced visibility, coverage from analysts and the ability to raise money more cheaply.

Tullow was reporting on the same day as rival Soco International, another fast-growing exploration company and member of the FTSE 250 index of mid-sized companies, which said it was on track to start pumping oil from Vietnam in the first half of next year. The company also said pre-tax profits rose to $28.9m from $25.1m on revenue of $50.4m from $38.7m.

Soco also said it would test the Te Giac Den-1X well in the next few months to quantify the size and nature of the discovery, which could be its largest yet. Soco is also expanding production in Yemen. The company pays no interim dividend.

The shares finished up 48p at £21.65.