Yesterday Ghana, a country currently dependent on cocoa, joined an elite club: the roster of West African nations with significant oil wealth.

That promotion came through the auspices of the Dallas-based Kosmos Energy, which, in a two-page statement, announced that its Mahogany-1 offshore exploration well on the West Cape Three Points block had struck oil.

Kosmos is privately owned, so it was left to Tullow Oil, which has a 22.9 per cent stake in the block, to register the excitement of the London stock market. Its shares rose nearly 13 per cent to a record high in response to what is the largest offshore discovery in the company’s 22-year history. That find also confirmed Tullow’s status as Britain’s biggest oil and gas independent, underlined by a swelling of its stockmarket value to £3.3 billion, a cool £1 billion bigger than Cairn Energy, the title’s previous holder. At that level, Tullow is a sure-fire contender for the FTSE 100.

But was yesterday’s advance an overreaction? Followers of Tullow have previously focused on the exploration potential of its onshore oil and offshore gas activities in Uganda and Namibia respectively, so success from this unforeseen quarter might have been expected to be well received.

In fact, the 51p put on the shares was only slightly more than the 45p a share that, at yesterday’s first estimate of 300 million barrels, Mahogany1 has added to Tullow’s net asset value. That increase might seem conservative given that further drilling could easily push the find towards 600 million barrels. Perhaps more important, Tullow has a 49 per cent stake in an adjacent block in Ghana’s Tano basin, where it is also the operator. Promisingly, the geology of offshore Ghana is very similar to that of the Ivory Coast, where Tullow is also drilling.

The deepwater nature of the Ghana find means it will be five years before it becomes meaningful to its owners as a producing field. And at 460½p, half of Tullow’s stockmarket value is now pegged on exploration, which leaves little room for disappointment. But movements in its sector’s share prices are driven more by the frequency with which a company can update the stockmarket than a hard assessment of asset values. With Tullow drilling an unprecedented 40 wells over the next 12 months, half of which may be deemed major, sentiment is likely to remain behind it. Hold on.

Pearson

Shares in Pearson dipped by just over 1 per cent yesterday after it emerged that the owner of the Financial Times was casting around for a bid partner to support a counter move for Dow Jones, The Wall Street Journal publisher, which is being stalked by News Corporation, parent company of The Times. An increase would have been better, but the modest retreat suggests that the City is willing to give Pearson a chance.

Observers such as Citigroup suggest that Pearson could ease a takeover’s cost (News Corp’s offer is pitched at 16.7 times underlying earnings) by instead agreeing to inject the FT and related assets into Dow Jones, mirroring what it once did with its television operations. And there is the potential for cost cuts, although the FT won’t want to abandon America. Aside from reducing the competition for printed newspaper news, a deal has other attractions, not least potentially monetising the FT’s value, something that Pearson has been urged to do for years. The risk of Pearson losing is that, under a new owner, a reinvigorated WSJ could pose tougher competition for the FT.

However, Pearson ought to be exploring a deal; it may be more attractive to Dow Jones’s Bancroft family. Even if it will be challenging to outbid News Corp, there may be a way through. At 17 times 2008 earnings, and with online financial information promising long-term growth, albeit cyclical, Pearson is worth holding.

Cattles

The clampdown on unsecured personal lending by high street banks appears to have played straight into the hands of Cattles, the finance house, which lends small amounts to low-income borrowers.

Yesterday’s first-half trading update showed that new business volumes in its core consumer credit division were up 51 per cent over the past five months, a sharp acceleration from last year’s 14 per cent gain. The company preferred to put a different complexion on that growth, placing greater emphasis on last year’s overhaul of its customer selection systems, which has resulted in more business being referred its way by brokers and introducers.

Whatever the explanation, the rise was welcomed by the stock market. Consumer credit accounts for 90 per cent of profits, so revised expectations of a 23 per cent rise in Cattle’s loan book this year – against less than 20 per cent previously – prompted profit forecasts to be nudged higher. Analysts also took comfort that such growth has been achieved without a big increase in loan size, up from £3,800 to £4,100. Similarly, repayment arrears held steady at 7.4 per cent, against a long-term average of between 8 per cent and 10 per cent.

However, fears of an increase in bad debts amid expectations of further rises in British interest rates have kept a lid on the shares. At 403p, they trade at 11 times 2008 forecast earnings, which seems too low, given profit growth of 15 per cent this year and 12 per cent over the next three years, and a 5.6 per cent dividend yield. Keep buying.

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