Failed drilling works sees Tullow Oil write off $150m of exploration costs
In a trading update, ahead of the publication of its first-half results at the end of this month, the firm yesterday noted a total net exploration write-off of $415m — $305m on a post-tax basis — for the first-half.
The bulk of the write off, relates to relinquished licences from the past two years. A $115m loss on disposals — largely relating to its Ugandan asset farm- down — will also feature in the first-half figures.
The element of the write-down relating to this year, follows mixed drilling results in Mauritania, Ethiopia, and Norway.
The company said its interims should still show strong revenues and gross profits, in line with expectations, of around $1.3bn and $650m respectively.
Production guidance, for 2014 is also unchanged at between 79,000 and 85,000 barrels of oil equivalent per day.
The negatives of the write-off were also put in context by the fact that Tullow’s capital expenditure is set to increase from $1bn to $2.1bn this year.
“Tullow’s balance sheet is extremely well-funded and the group has unutilised debt capacity of approximately $2.3bn,” the company said.
CEO Aidan Heavey added: “Exploration and appraisal success in Kenya has further de-risked the 600m barrels of oil discovered resources.
“We are also making good progress towards developing the oil that our exploration team has found in Ghana, Kenya and Uganda, and in assessing the significant upside potential in each of these areas,” he said; adding that the company is making “steady progress” on the remaining elements of its asset disposal programme.
“With potential basin- opening wells across the portfolio coming up in the second half of the year and strong revenue and cash flow, Tullow is in a strong position for the remainder of this year and into 2015,” Mr Heavey added.
Stockbrokers Davy said Tullow remains attractive “for those prepared to take a longer view”.
