Tullow Oil shares plunge 17% on €1.1bn first-half loss

Tullow Oil CEO Rahul Dhir is reviewing the group's assets

Tullow Oil shares plummeted by as much as 17% after the Irish-founded exploration company posted a $1.3bn (€1.1bn) after-tax loss for the first half of this year, versus a $103m profit for the same period last year.

The company’s new boss has ordered a review of its assets and growth prospects with the results from that due later in the year.

Revenue for the first six months of the year amounted to $731m, down 16% year-on-year. 

The losses were driven by exploration value write-offs and impairments of $1.4bn.

Tullow said it had seen a strong performance from assets in Ghana, one of its key countries. 

Nevertheless, the group has narrowed its full-year production guidance to 73,000-77,000 barrels of oil per day, partly due to Opec quotas.

During the first half, Tullow received shareholder approval for the $575m sale of its Uganda-based assets; $500m of which is expected to be delivered by the end of this year.

Tullow’s new chief executive Rahul Dhir – who joined the company in July – has commissioned a “comprehensive” review of Tullow’s asset portfolio, growth prospects and capital structure as part of the company’s ongoing restructuring programme.

The asset review is likely to largely focus on Tullow's undeveloped assets offshore Ghana.

He said the results of the review and his plans for Tullow’s future direction will be laid out at a capital markets day before the end of the year.

“The quality of Tullow’s assets remains robust,” Mr Dhir said.

“Since my arrival as CEO, we have been developing new plans for our business, with the support of our joint venture partners and expert advisors. These plans will deliver enhanced value from our assets to benefit all our stakeholders including our host countries and investors," he said.

“Despite the very tough conditions in the first half of this year, we have successfully delivered reliable production and major, sustainable reductions to our cost base," Mr Dhir said.

Earlier this year, Tullow embarked on a $20m cost-cutting round as part of a restructuring of its business operations. 

That followed it scrapping dividend payments and parting company with former CEO Paul McDade after announcing that oil production and associated revenues would be lower than forecast in 2020 and beyond.

Tullow is in the midst of an overall $1bn asset disposal programme, which is also likely to see the sale of Kenyan assets. Exploration activity is also likely to be curtailed, given current market conditions.

"While the group has done well to stabilise its operational performance, the necessity to restructure in order to deal with current oil markets to reduce financial risk brings debt and liquidity issues to the fore in the next six months," said Davy analyst Job Langbroek.

"To this end, the successful delivery of the Uganda sale...is a particularly important event. At the same time, operational restructuring will bring in excess of $350m over three years with savings of $125m expected in 2021," he said.

Tullow's net debt increased marginally, to $3bn, in the first half. The group has also appointed industry veteran Mitchell Ingram to its board as a non-executive director.