Shares in Tullow surge 12% on continued lender support

Shares in Irish-founded oil and gas explorer Tullow Oil were up 12 per cent in early trading in London on Thursday after the company said it retains the support of its lenders.

Tullow said in a statement that its credit lines remain unchanged at $3.7 billion (€3.3bn) following routine redetermination talks with lenders last month.

Shares in the company rose by 12 per cent to 188.7 pence, the biggest gain in six months following the announcement.

“Today’s announcement demonstrates the robustness of Tullow’s debt-capital structure and emphasizes the strong support that we are receiving from our relationship banks,” said Ian Springett, the group’s chief financial officer.

Tullow said it had cash and undrawn credit facilities amounting to $2.1 billion at the end of September, as against $2.3 billion at the end of June.

The group said it is fully funded to meet all of its existing commitments including the ongoing investment in the TEN development in Ghana, which remains on schedule to deliver first oil and additional cash flow in mid-2016.

“The extension of the lending is “clearly welcome and a relief in the context of market concern over explorers’ and producers’ debt capacity,” Gerry Hennigan, an analyst at Goodbody Stockbrokers.”

Shares in Tullow Oil fell more than 50 per cent in the third quarter, the steepest quarterly loss on record, as oil slumped to a six-year low and fears about the strength of the global economy wiped almost $11 trillion off global equity markets.

The company’s net debt stood at $3.6 billion in the first half, equivalent to 94 per cent of its total equity.

Other analysts also welcomed the latest update.

“The fact that the capacity has been maintained shows the banks have more comfort around the strength of the resource base,” said Alex Topouzoglou, an analyst at Exane BNP Paribas. “This is positive” because there is a risk in the current market that banks will reduce lending capacity as they take a more cautious view on the oil price.”

Tullow reported a 35 per cent decline in revenue to $820 million for the first half of 2015, compared to $1.2 billion during the same period last year.

First-half operating profit climbed 169 per cent to $97 million, due to a lower exploration write-off. This led to a reduced loss after tax of $68 million. Basic earnings per share amounted to a loss of 7.5 cents.

Additional reporting: Bloomberg