Tullow to report 28% decline in full-year revenue

Irish-founded oil and gas explorer Tullow Oil is expecting to report revenues of $1.6 billion(€1.47m) for 2015, down 28 per cent on the $2.2 billion reported for the same period a year earlier.

In a trading update on Wednesday the group said it will likely post gross profit of $600 million when it publishes full-year results next month, down from $1.1 billion for fiscal 2014.

Tullow reported its first ever pre-tax loss of $2 billion in 2014 due to significant write-offs, impairments charges and a 16 per cent decline in revenues.

The company, which had net debt of $4 billion at the end of last year, said it expected to report a pre-tax operating cash flow of $1 billion next month.

Tullow, whose share price has fallen by more than 60 per cent in the past year, was the best performer on the 23-company Stoxx 600 Oil and Gas index in early trading on Wednesday.

Its share price rose the most in two months in London after saying its hedging programme would help bouy results. Shares climbed as much as 14 per cent, the biggest intraday jump since November 9th, and were up 9.8 per cent at 135.2 pence by 11am.

Tullow has hedged about 64 per cent of its oil production at $75 a barrel on a post-tax basis, it said.

"Tullow has a mark-to-market hedge value of over $600 million and financial headroom of $1.9 billion. Accordingly, we have a diversified balance sheet which supports our planned activities for the year ahead," said chief executive Aidan Heavey.

He said the company was continuing to focus on driving down costs and capital expenditure.

“In 2015, Tullow not only reset its business to deal with very difficult market conditions but also delivered on its key operational goals. Strong West African oil production supported by a significant hedge programme delivered pre-tax operating cash flow of $1 billion,” he said.

Tullow, which is listed on the London, Irish and Ghanaian stock exchanges, has interests in over 125 exploration and production licences across 22 countries.

West Africa working interest oil production for 2015 was within guidance averaging 66,600 bopd (barrels of oil per day). In 2016, West Africa average working interest oil production guidance is expected to be in the range of 73,000 to 80,000 bopd, Tullow said. This includes production from the TEN development which remains on track for first oil between July and August 2016.

In Europe, working interest gas production in 2015 was within guidance averaging 6,800 bopd. In 2016, Europe average working interest gas production guidance is expected to be in the range of 5,000 to 7,000 bopd.

In a note to investors, Davy said Tullow’s headline numbers were in line with market expectations.

“Liquidity entering 2016 is $200 million better than anticipated after capital expenditure in 2015 was squeezed. Guidance for investment in 2016 is largely unchanged. However, similarly to 2015, management hopes to beat capital expenditure guidance by up to $200 million as we move through the year,” said analyst Caren Crowley.

Merrion analyst Darren McKinley said despite the postiive tone of the trading statement Tullow’s shares remain under considerable pressure due to the weakness in spot crude prices.

Additional reporting: Bloomberg