Delays may cause Tullow Oil to cut production guidance

TULLOW Oil, the Irish Stock Exchange-quoted explorer with the most licenses in Africa, may cut production guidance for this year after delays at projects including Jubilee, its largest field.

The Tullow-led $3.4 billion (€2.37bn) Jubilee oil field off Ghana will reach its output plateau by the end of the year, about four months later than the original target, Kosmos Energy, its partner in the venture, said last week.

Tullow has also faced drilling delays in Kenya, Ghana and French Guiana.

Tullow is likely to reduce full-year extraction guidance to below 90,000 barrels a day, the low end of a range announced on July 5, according to Dragan Trajkov, an oil and gas analyst at Renaissance Capital in London.

While the delay at Jubilee is unexpected, more serious to Tullow would be any impact on the field’s estimated resources arising from the later target, he said.

George Cazenove, a London-based spokesman at Tullow, declined to comment, saying the company will provide an update to the situation when it publishes its first-half results on August 24.

Royal Bank of Scotland has already lowered its forecast for Tullow’s production to 88,000 barrels of oil equivalent a day, down from an earlier estimate of 94,000 barrels, according to Phil Corbett, an analyst at the bank, which is Tullow’s in-house broker.

The Jubilee delay “is a concern because as you move forward, a higher proportion of Tullow’s production base is due to arrive” from it, Gerry Hennigan, an analyst with Goodbody Stockbrokers in Dublin, said yesterday.

Some exploration issues are beyond Tullow’s control, he said.

Jubilee, Ghana’s largest oil field, was due to reach a plateau rate of 120,000 barrels a day in late August, Paul McDade, Tullow’s chief operating officer, said earlier this summer.

In July, the company raised its full-year output target.