A significant new oil discovery off the Nigerian coast underlines the value that is still available in the oil producing nation.
Shares in Afren (LON:AFR) and newly listed LekOil (LON:LEK) advanced on Wednesday, with the AIM firm rising almost 30% at one point, as the results of the Ogo-1 well, on the OPL 310 licence, revealed a significant light oil discovery.
Before Ogo-1 was drilled, the prospect was estimated at 78mln barrels, but Afren says, based on the evidence to date, the oil find is likely to be significantly larger than that.
Indeed, City broker Morgan Stanley says the new oil discovery has substantially exceeded expectations.
Analyst Jamie Maddock also says the success of the Ogo-1 well has extended the prolific 'West African Transform Margin' eastwards, and this has thrown up more opportunities for drilling in the area.
LekOil joined London’s AIM market in May, raising £32mln placing 80mln shares at 40p per share, with its stake (30% economic interest) in the exploration venture its primary asset.
It has since moved quickly, however, striking a deal last week to obtain an interest in the OML 113 area, which is adjacent to the OPL 310 licence.
The Ogo discovery comes after ‘super majors’ Shell and Total separately announced plans, last Friday, to spend US$19bn offshore Nigeria in the coming years.
According to Westhouse Securities this is a sign that Nigeria is still ‘hot’.
Westhouse analyst Dragan Trajkov says the announcements are positive for the Nigerian oil sector generally, and the potential ‘trickle down’ would benefit the smaller players.
Trajkov also claims the decisions, and significantly the timing, are a good indication that the Nigerian oil industry won’t be stalled by the country’s Petroleum Industry Bill, which has been ‘in the works’ for over four years.