Tullow Oil revenues to fall 40%

Tullow Oil’s first half revenues are likely to tumble by nearly 40%, year-on-year. However, the Irish-founded explorer is also anticipating a significant rise in production levels for 2015.

In a trading update, Tullow yesterday said that overall 2015 production should come in at 72,000 to 78,000 barrels of oil per day. That is up from its previous guidance of 69,000 to 77,000 barrels of oil per day and driven by activity in western Africa.

The company is still in discussion with the government in Gabon regarding ownership of production from the Onal fields and the full-year guidance range includes production from these assets.

It recently reached a $250m (€225m) settlement in a long-running tax dispute in key region Uganda.

An additional 3,000 barrels from the flagship Jubilee oil field off the coast of Ghana, of which Tullow owns 35.5%, should also deliver $20m operating cashflow net to Tullow, assuming oil prices remain around $60 per barrel at least.

Tullow saw marked declines in annual profits and revenue last year and has already moved to adapt its business model to the current market conditions, streamlining its operations and significantly slashing exploration spend.

For the first half of this year, Tullow said total revenue will amount to around $800m; down from $1.3bn for the first six months of 2014.

Gross profit, meanwhile, should come in at around $300m for the first half, down from $700m a year ago.

Nonetheless, Tullow’s share price was boosted in early trading yesterday by the production upgrade and the company’s management remains positive.

“We have taken a number of important steps to ensure that Tullow remains on a firm financial footing,” said Tullow CEO Aidan Heavey.

“This approach is paying off, with good progress across the business in the first half of 2015. Our major oil-producing assets in west Africa have performed strongly and we have upgraded our 2015 full-year production forecast accordingly.”

Mr Heavey said that the company’s Ten oil project in Ghana remains on course for first flow by the middle of next year.

Caren Crowley of Davy Stockbrokers said: “Increased production should deliver cost efficiencies. Guided first half 2015 headline numbers are in line with if not slightly ahead of consensus numbers. The solid update and good execution should help rebuild conviction in the Tullow story.”

However, while welcoming Tullow’s expected rise in production and lowering of net debt, Goodbody’s Gerry Hennigan said “specific drivers for the share price remain limited in our view”.


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