Tullow Cuts Loss, Grows Stronger
Africa-focused Tullow slashed two thirds off its losses last year, losing $189mn post-tax compared with $593mn in 2016, it reported February 7. Its operating profit was also up, at $22mn compared with a loss of $755mn in 2016.
Revenue of $1.7bn was up from the $1.27bn lost last year; it also received insurance proceeds of $162mn. Free cash flow of $543mn compares with a negative $792mn in 2016.
It estimates a big increase this year in capital expenditure, spending $460mn, compared with $225mn last year. This year's figure excludes the Uganda expenditure of $110mn which will be repaid following completion of the farm-down, it said.
CEO Paul McDade said: "Strong production and disciplined cost management has allowed us to continue to both reduce debt and invest in our high-return production assets in Ghana. The assessment of the results from our appraisal campaign in Kenya also fully supports progress towards a major development of the South Lokichar Basin. As we continue to retain a keen focus on the financial discipline that has served us so well, we are now also looking to grow the value of our business both through exploration, following a full re-set of the portfolio, and through other opportunities that the recovery in the sector will present." Tullow's interests in Uganda and Kenya are upstream oil.
West Africa 2017 net working interest oil production, including production-equivalent insurance payments in respect of Ghana, averaged 89,100 b/d; 2018 production is expected to average between 82,000 and 90,000 b/d. An incremental drilling programme is due to start in February 2018; this additional well capacity combined with current strong production from both Jubilee and TEN fields offshore Ghana would maximise and sustain production in the coming years, the company said.
Tullow began a scheduled shutdown February 1 of the Jubilee oil field offshore Ghana for essential upgrading work that is expected to last for weeks and which has also stopped associated gas flows to shore that are used in power generation.
CFO Les Wood said: "Tullow's balance sheet is considerably stronger at the start of 2018 following the $0.75bn rights issue, strong free cash flow generation of $543mn and delivery of key objectives, including the successful $2.5bn refinancing. Our gearing is approaching our target level of below 2.5x Net Debt/EBITDAX providing the financial and operational flexibility we need to invest in our business. We have also driven down both our corporate and asset costs and have embedded financial discipline across the Group. Tullow is well placed to build on this strong financial platform in 2018."