Tullow Oil targets South American drilling round

Tullow Oil is to turn its focus towards South America later this year, aiming to start drilling offshore Suriname by October at an area close to where super-major ExxonMobil this week made a significant discovery off the coast of Guyana.

Tullow — which remains chiefly focused on Africa — said, yesterday, that drilling at the Araku-1 well, of which it owns 30%, should begin in the fourth quarter at a cost of around $14m (€12m).

The Irish-founded exploration company has also announced the farming out of 20% of another block it owns in Suriname to Israeli explorer Ratio Exploration.

Tullow is also expecting drilling at its key TEN field, off the coast of Ghana, to recommence later this year once a maritime boundary dispute between that country and the Ivory Coast nears settlement in the autumn.

Also, the first $100m tranche of a total $900m from the sale of two-thirds of its share of Uganda’s first ever oil development should be realised by the end of the year.

The company is also planning a three-well drilling round in Kenya before the end of the year and to get its interests there to development stage by the end of 2018.

Tullow yesterday reported a 46% year-on-year increase in first half revenue to $788m, with gross profit ahead by 66% at $303m.

However, previously reported impairment charges of $642m, associated with the impact of lower oil prices, pushed after-tax losses for the first half to $309m.

Net debt has fallen by $1bn, to $3.8bn in the last 12 months — helped by lowering capital expenditure and a $750m cash injection from investors via a recent much-criticised rights issue.

Speaking yesterday, chief executive Paul McDade said Tullow has the flexibility to continue lowering its debt and gradually reduce gearing to 2.5 times EBITDAX (earnings before interest, tax, depreciation, amortisation and exploration costs); having fallen from 5 times to 3.3 times in the past year.

Tullow has also upped its three-year cost savings target from $500m to $650m, with Mr McDade insisting it will be met.

Tullow’s shares — down nearly 38% this year — were up by over 5% yesterday.

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