Oil find in Gulf of Mexico boosts BP by £4bn

Published on Wednesday 2 September 2009 21:05

BP HAILED a new "giant" discovery in the Gulf of Mexico yesterday, which helped add more than £4 billion to the value of the company.

Europe's second-largest oil company did not put an estimate on how much it could extract from the well, but claimed it was "material" to its overall value.

Goldman Sachs analysts said yesterday that BP's choice of words suggested that the discovery in the Tiber Prospect had at least a billion barrels of recoverable reserves.

UBS estimated that the discovery would probably add around 3 per cent to London-based BP's value, even before it gave an accurate picture of the size of the reservoirs.

"Any announcement of a discovery by a major means it's important," analysts at UBS wrote yesterday.

"Using the word 'giant' is almost unprecedented."

Shares in BP, which were down slightly when the discovery was announced, closed up 4.3 per cent at 541.65p, valuing the group at more than 101bn.

BP said the well, around 250 miles south-east of Houston, is one of the deepest ever drilled in the oil and gas industry.

Situated in more than 4,000 feet of water, the total depth of the well was just over 35,000 feet, almost 11 kilometres.

While it insisted that further appraisal was needed to determine the size and commerciality of the prospect, BP did little to play down its significance, announcing the discovery as "giant" in a statement to the London Stock Exchange.

Andy Inglis, the chief executive of BP's exploration and production business, said: "Tiber represents BP's second material discovery in the emerging lower tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery.

"These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade."

Major discoveries such as Tiber could provide a much needed boost for BP, which saw its first-half profits plunge, hit by falling crude prices and rising operating costs.

In July it revealed that its second-quarter pre-tax profits fell by 53 per cent to $4.4bn, as the price of crude more than halved from the record $147 a barrel a year ago.

Analysts have also questioned the group's production pipeline, claiming unless acquisitions are made output may not increase Currently BP produces around 4 million barrels of oil a day.

Goldman Sachs wrote that the latest discovery was positive for the group, "but it is hardly transformational and does not provide a solution to their thin pipeline of new projects in the 2010-13 period".

BP is already the largest oil producer in the Gulf of Mexico, extracting more than 400,000 barrels a day.

As well as operating the Tiber field, BP owns 62 per cent of it, with Brazilian group Petrobras holding a 20 per cent stake in the field and US giant ConocoPhillips owning the remaining 18 per cent.