Tullow Oil, the Irish-founded oil explorer, has cut its full-year forecast for production amid lower than expected output at its Ghana field. But the company said ongoing political instability in Gabon following a recent coup has not affected its operations there.
In half-year results on Wednesday, the London-listed company said adjusted earnings before interest, tax, depreciation, amortisation and exploration expenses stood at $1.17 billion (€1.08 billion), down from $1.28 billion (€1.19 billion) a year earlier.
Tullow also trimmed the upper end of its production outlook for this year to 58,000-60,000 barrels per day (bpd) from 58,000-64,000 bpd. The cut was driven by first-half performance at its Jubilee field in Ghana which was slightly below expectations and the “timing of the Jubilee South East start up in the second half of the year”.
However, the group reiterated its full-year, $400 million capital expenditure guidance and its guidance on full-year free cash flow of $100 million at an oil price of $80 a barrel.
Tullow said production at its Gabon fields remains “unaffected by the ongoing political activity in the country”, where an August coup brought the almost six-decade rule of the Bongo family to an end. The group said it is working closely with the operators of its fields to ensure the safe continuation of operations.
“We are at an important inflection point in the evolution of our business plan,” Tullow chief executive Rahul Dhir said in a statement. “For the last 2½ years we have relentlessly focused on capital discipline, operational performance and appropriate investment in our assets. This has resulted in a much-improved business, material debt reduction and, most recently, the delivery of Jubilee South East which has substantially increased production.
“We now switch to harvesting mode as our business is set to generate $800 million of free cash flow between 2023 and 2025, whilst we will continue to run our business with the same discipline. This will enable us to further reduce our debt, put in place a sustainable capital structure and grow our business to create value for our investors, host nations and employees.”
Shares in the company, which have lost as much as 29 per cent of their value in the past 12 months, slid more than 6 per cent in early trading following the announcement.
In a broker note, analysts at Davy Stockbrokers said there was “material upside” to Tullow’s cash flow guidance based on the current spot price of Brent crude, which is forecast to rise over the winter months. – Additional reporting: Reuters