Tullow Oil has confirmed its intention to resume paying dividends to shareholders after a five-year hiatus.
The Irish-founded exploration company said, at a capital markets day, that it will start a regular capital returns policy based on its 2019 financial year.
However, it said it will also “review the potential” for a one-off ordinary dividend based on its current year performance.
It is also expected that the ordinary dividend, in any year, will be no less than a combined $100m and will be paid through interim and final payments.
“Tullow has made excellent operational and financial progress over the past 18 months,” said chief executive Paul McDade.
“Having reached our target of being a balanced self-funding exploration and production business and having embedded cost discipline across the group, this is the right time to reinstate a dividend and focus on our plans for growth,” he said.
Earlier this year, Tullow said the prospect of paying a first dividend since 2014 was “back on the table” as an option for dealing with additional cash flow.
Those prospects strengthened earlier this month when the company forecast free cash flow, for 2018, at a better-than-expected rate of approximately $700m (€615m). The company previously expected to realise free cash flow of $600m this year.
The improved cash generation forecast largely depends on the long-awaited completion of the farm-down of Tullow assets in Uganda to French oil major Total and China’s Cnooc. That deal is due to close by the end of the year, generating proceeds of $200m for Tullow.
Tullow has narrowed its 2018 production guidance but expects net debt to fall from $3.5bn to around $2.8bn by the end of this year.
Oil prices reversed course and rose yesterday, after industry sources said Russia had accepted the need to cut production, together with Opec.
However, the price is still set for its biggest one-month fall in November since the depths of the financial crisis in 2008, having lost more than 22% so far.
A seemingly relentless rise in US crude supply, together with Saudi Arabia’s insistence that it will not cut output on its own to stabilise the market, earlier sent Brent crude to another 2018 low below $58 a barrel.
Brent crude was up 51c on the day at $59.27 a barrel, off an earlier session low of $57.50, while US crude futures rose 68c to $50.97.
Investors in commodity markets are looking ahead to the G20 leaders meeting, starting today, with the US-China trade war a key focus.
additional reporting Reuters