Tullow falls on Kenya delay

Shares in Tullow Oil fell by over 2% after the Irish-founded exploration company slightly downgraded its production expectations for this year and said progress on highly-anticipated project work in Kenya could be delayed.

Investors unanimously approved Tullow’s planned return to dividend payments after a five-year break, at the company’s AGM in London.

However, they were also told that the company now expects to produce between 90,000 and 98,000 barrels of oil per day this year, as opposed to a previous estimate of between 93,000 and 101,000 barrels.

“The 3% reduction in 2019 net production guidance provides a headline, but should not concern investors in our view,” Barclays said in a note.

“This 2018 final dividend and our new dividend policy, which is expected to deliver at least $100m per year to shareholders, reflect the financial and operational progress that Tullow has made over the past few years,” said chief executive Paul McDade.

In February, Tullow reported its first annual net profit in five years and said it would pay a 4.8c per share dividend to investors this year and increase spending in Ghana and set its sights on eastern African projects.

However, Tullow said that plans for a final investment decision at highly-anticipated projects in Kenya by the end of this year now seems like “an ambitious target”.

With much focus on Tullow’s three-well drilling programme offshore Guyana, this year is also crunch time for Tullow’s East African projects.

The shipment of a first cargo of Kenyan oil to test the market, which was originally planned in the first half as well, is expected to sail in the third quarter, Tullow said.

In Uganda, a $208m (€186m) payment after selling a stake in its onshore fields to Total in a so-called farm-down deal was delayed last year because the country asked for more tax on the deal than expected.

These discussions are expected to conclude shortly and will enable completion of the farm-down,” Tullow said.

Tullow has reduced its debt from $3.1bn at the end of 2018 to $3bn at the end of March.

It has hedged 56,000 barrels per day this year at a floor price of $56.40 per barrel and 31,000 bpd at $58.68 a barrel for 2020.

- Additional reporting Reuters

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