Tullow Oil rig cancel costs jump by $50m

By Geoff Percival

Tullow Oil is set to take a substantial earnings hit this year after seeing its final bill to cover a terminated rig contract in Ghana increase by nearly $51m (€44m) to over $190m.

Earlier this month, the English Commercial Court ruled that the Ghanaian arm of international rig contractor Seadrill was owed around $248m from Tullow and partner companies over the termination.

Tullow said it would consider appealing the decision, defending its termination decision on force majeure grounds.

It had noted a suspension of drilling at its Tweneboa Enyenra Ntomme (TEN) field offshore Ghana, industrial problems, and a dispute between Ghana and the Ivory Coast among its reasons, classing them as unforeseen circumstances.

The Irish-founded exploration company had been liable for $140m and had set aside $128m to cover any such costs. However, it has since been ordered to pay the near $51m originally deemed liable to partner company Kosmos Energy, having lost a separate arbitration hearing against that company.

Tullow has elected not to appeal the decisions and the $248m has been paid to Seadrill Ghana Operations; with Tullow set for a fresh hit of over $60m after its liabilities from the case have jumped from $140m to $190m.

Tullow had not previously made any provision for the extra costs related to the Kosmos liability.

Tullow’s shares were unmoved despite the announcement.

One analyst said, last month, that Tullow would likely pay a modest dividend to shareholders — its first since 2014 — based on its 2018 performance, thanks to improved production levels, a stronger balance sheet and less debt repayment requirements, and follow up with a meatier dividend the following year.

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