MOL, the Hungarian petroleum group, has announced a "promising" oil discovery in Iraqi Kurdistan, spurring its share price to a two-month high. Analysts have quickly weighed in with enthusiastic endorsements, setting the stage for the stock to rise further. On Wednesday, MOL's shares jumped 4.2 per cent in Budapest to 19,700 forints (Dh369.75).
MOL is primarily a petroleum refiner, but is seeking to expand its upstream business. In 2005 it set a target of tripling oil and gas reserves to 900 million barrels of oil equivalent (boe) and production to 300,000 boe per day (boepd), but has since made little progress towards those goals. Now it is within striking distance of at least the former. Lajos Meszaros, a Budapest-based analyst at KBC Securities, estimates the Akri-Bijeel exploration block, where MOL made its recent discovery, may hold more than 1 billion barrels of oil. The Hungarian company holds 80 per cent of the block, while the Bermuda-registered oil junior Gulf Keystone holds 20 per cent.
MOL also has a 20 per cent stake in the adjacent Shaikan oilfield, of which Gulf Keystone and Etamic, a private investment fund, are the majority owners. Gulf Keystone reckons Shaikan may hold 3 billion barrels of crude. Hootan Yazhari, a London-based analyst with Bank of America Merrill Lynch, has a "buy" recommendation on MOL's stock. "We believe there is significant news flow ahead," he said on Wednesday.
MOL's exploration well yielded 3,200 boepd of oil and gas from a pay-zone, or oil-bearing layer, more than 200 metres thick. Providing less cause for optimism is the deadlock over Kurdish oil exports between the semi-autonomous regional government and Baghdad. Early shipments from Kurdistan were halted last autumn because the companies pumping the crude were not paid. The dispute cannot be settled until Iraq forms a new government after last Sunday's national election.