Circle Oil, the Middle East and African focused group, has jumped by a quarter following a positive update on its drilling off Tunisia.
The company said the EMD-1 well, which began drilling in June, had confirmed the existence of a working petroleum system in the area, although deteriorating conditions ultimately led to a suspension of the well. It said the most likely recoverable resources discovered from the well were approximately 100m barrels of oil. Chief executive Chris Green said:
We are extremely pleased to add this potential large discovery to our portfolio in Tunisia. It is unfortunate that the hole conditions became untenable so quickly and we were unable to conduct a full log evaluation of the hydrocarbon column in the well. Nevertheless we intend to take our appraisal effort forward on the Mahdia permit as quickly as possible.
The company has been given a six month extension to the permit to January 2015.
The news has lifted Circle's shares by 25%, up 4.5p to 22.25p, and analyst Brian Gallagher at Investec said:
After a longer than anticipated drill, Circle has announced that the EMD-1 located offshore Tunisia has encountered hydrocarbons shows. Pending appraisal, this result is a significant step forward for Circle.
A discovery of this size...would potentially attract new partners to the basin and de-risks the five existing prospects already mapped on the block. We increase our risked exploration net asset value by 20p and now set our price target at 70p [from 50p].
