Tullow Oil has started working on plans to develop oil discoveries in northern Kenya in the belief that the area will become a significant oil-producing region, it said on Wednesday. Discovered resources in the area have risen to 600 million barrels, Tullow said, adding that it is working with the government to start developing the finds within three years.

The Africa-focused explorer made its name over the past decade with huge discoveries in Ghana and Uganda, but after a string of disappointing drilling results it lost a quarter of its value in 2013 and was the worst-performing stock in the FTSE 100 outside the mining sector. The area it is drilling in northern Kenya, however, has the potential for as much as a billion barrels, the company said.

"The results to date are extremely positive for achieving a commercial development from the discoveries made in this basin," Chief Operating Officer Paul McDade said in a statement.

The company said it has agreed with the government and its partner, Africa Oil, to start initial studies on plans to develop facilities to extract the oil and build an export pipeline with the aim of giving a development project the green light in 2015/16. In a separate trading statement on Wednesday, Tullow said that annual revenues would come in at $2.6 billion, with gross profits of $1.4 billion. It will announce full-year results on Feb. 12.

The company posted annual production of 84,200 barrels of oil equivalent per day (boepd), at the lower end of the 84,000 to 88,000 boepd it forecast. Taking into account the disposal of some fields in Bangladesh, output next year would be between 79,000 and 85,000 boped, it said. Tullow's shares, which quadrupled in value between 2007 and their peak in early 2012, rose 1.6 pct to 870p in early trade on Wednesday