Tullow Oil shares surge on return to first-half profitability

Tullow Oil chief executive Rahul Dhir.

Shares in Irish-founded exploration company Tullow Oil shot up, by around 5%, on the back of it reporting a return to profit in the first half of this year.

Africa-focused Tullow said post-tax profit, for the six months to the end of June, amounted to $93m (€79m), compared to a loss of $1.33bn (€1.13bn) for the first half of last year, an outcome which was heavily impacted by impairment charges.

First-half revenue came in at $727m (€615m), marginally down on the $731m ( €618m) reported at the corresponding period last year. Last year, Tullow posted annual losses of $1.2bn ((€1.02bn) — albeit down from $1.7bn (€1.44bn) a year previously — and revenues of $1.4bn (€1.18bn).

Tullow — which has been operating in Africa since 1986 — also announced that its finance chief Les Wood will step down by the end of March.

The process to find a new chief financial officer is expected to conclude in the first quarter of 2022, Tullow said.

The company, which refinanced its $2.3bn (€1.95bn) debt pile earlier this year, has raised the lower end of its 2021 production target to reflect increased output from its Simba field in Central Africa while it deferred the planned maintenance shutdown of the Jubilee plant in Ghana into 2022.

Production

It now expects 2021 output between 58,000-61,000 barrels of oil equivalent per day (boepd) compared with its previous forecast of 55,000-61,000 boepd.

Production for the first half fell by 21%, in line with Tullow's expectations, largely due to natural declines in its Jubilee and TEN fields and reflected the recent disposals of its Equatorial Guinea assets and the Dussafu Marin permit.

"Strong operational performance in the first half of the year and a transformational debt refinancing have put Tullow on a firm footing to deliver our business plan," 

the company’s chief executive Rahul Dhir said.

Tullow said the company and its joint venture partners have completed the redesign of the Kenya development project, adding the total gross capital expenditure for the project is expected to be about $3.4bn (€2.88bn), higher than the previous outlook.

Tullow Oil, which entered Kenya in 2010, now expects gross oil recovery from the project of 585 million barrels of oil over the full life of the field, which JP Morgan analysts said in a research note was at least 14% higher than their estimate.

"Our West Africa production assets have performed well, and we are narrowing production guidance for 2021 to the upper end of the range. In Kenya, the revised development plan creates a robust project that has the potential to deliver material value to the Government of Kenya and other stakeholders," Mr Dhir said.

Tullow Oil's net debt stood at just under $2.3bn (€1.95bn) as of the end of June; down from a figure just above the $3bn (€2.54bn) mark at the halfway point of last year.

-additional reporting Reuters