LONDON, (Reuters) – British oil explorer Heritage Oil said on Wednesday it has discovered up to 4.2 billion barrels of oil in the Kurdish autonomous region of Iraq, sending its shares soaring 18 percent, despite doubts about the legality of Kurdish oil contracts.
Heritage said in a statement that its Miran West field could be producing 10,000 to 15,000 barrels of oil per day by the end of the year, with plans to truck out the oil until a connection to Iraq’s export pipelines can be built.
Analysts roundly applauded the find and lifted their price targets for Heritage’s shares.
“Today’s news is transformational for Heritage,” Richard Griffith, oil analyst at Evolution Securities said.
Evolution raised its target price for the shares to 800 pence from 500 pence.
The shares were up 21 percent at 486 pence at 0812 GMT.
Analysts at Credit Suisse reiterated their view that Heritage would be a logical acquisition for one of the Chinese state oil companies, which in recent years have been snapping up energy assets across the globe, to fuel China’s economy.
However, the Iraqi government has described the contracts the Kurdish regional government signed with western companies as illegal.
Disputes between the regional government and Baghdad over revenue sharing have stalled oil projects in Kurdistan.
Kurdish oil must pass through the rest of Iraq to make its way to export markets. Kurdish demand is only a few thousand barrels a day and this is well satisfied by existing wells.
Heritage’s chief financial officer, Paul Atherton, told Reuters in a telephone interview that he was confident a deal would be struck soon such that companies like Heritage could receive licences to move their crude out of the region and to connect up to the main export pipelines.
Atherton said Heritage would be able to fund the development of its Kurdish fields out of cash on its balance sheet and from cash flow from early production from the fields.