FEW listed companies would complain too bitterly about a 25% jump in their share price in the space of a single day, but Paul Griffiths, chief executive of Island Oil & Gas, found himself reacting to precisely that news with more than a note of caution less than a fortnight ago.

“There is an awful lot of hype about the share price at the moment, but I hope it cools off quickly,” he said.

“It would be a fatal mistake to work on the basis of a eureka moment. I have always said I am building an oil and gas exploration company balanced between production, development and exploration.”

Griffiths was talking while on the way to the Island-contracted rig that has just found the first gas for 16 years in the Celtic Sea, a discovery the market lapped up at a time when energy costs are rocketing.

The broad Scottish accents suggest the inhospitable North Sea, but Island’s well is only 25km from Marathon’s production facilities at the Kinsale field, off the Co Cork coast, which significantly enhances the economics of recovery.

If Griffiths is strangely dismissive of the market reaction, he is still relieved to have banked his first find since founding the company in 2003.

Soaring energy prices have changed the economics of exploration: costs have soared and potential rewards have become exponential. The profit per barrel of oil, for example, has climbed from $5 (€3.92) in 1999 to about $70 based on this week’s price of $74 per barrel.

“Investors will always be interested in the exploration industry because overnight a discovery can change the value of a company from €50m to €1 billion — it may be high risk but there aren’t very many other businesses with that kind of upside,” he said. “The reason our share price shot up is not down to market recognition of good management or an acquisition but because we drilled a well that found gas.”

The stakes involved to get the results have also risen for would-be players in a scramble for scarce resources that has seen rig rates jump from £25,000 (about €37,000) a day five years ago to an expected £300,000 a day next year. This is not a game for undercapitalised minnows.

Griffiths, 52, a geologist and geophysicist, started his career in Libya in 1976 and came to Ireland in 1980 to work for the Gulf Oil Corporation. In 1998 he co-founded IPDL, which built up a portfolio of oil and gas assets off the Irish coast before it was sold to DNO ASA, a Norwegian company, in 2002.

He always wanted to head up an exploration company “that is not dominated by accountants”. The top number cruncher at Island is Jack McKinney, the co-founder of financing house Woodchester Investments.

“I always wanted to run a company because as a geologist I am used to managing risk,” said Griffiths. “Lots of other companies seem to be run by statisticians who rely on rubbish concepts such as risk-weighting.

“It comes down in the end to whether you make a discovery or not and a geologist will have a better gut feel for where to drill than a statistician,” he said.