Tullow Oil back in profit as it seeks to raise production

Irish-founded oil and gas explorer Tullow Oil has announced a first-half pretax profit of $24 million (€ 21.8 million) and said it intends to raise production by more than 50 per cent and begin deleveraging the company.

Tullow returned to profit after recording a $10 million loss a year earlier, and despite sales revenue falling 34 per cent to $541 million, from $840 million.

Operating profit was down 72 per cent while operating cash flow before working capital halved to $256 million.

Net debt at the end of June totalled $4.7 billion with facility headroom and free cash of $1 billion. The explorer gained additional headroom of $300 million added through a successful convertible bond issue earlier this month.

In the first half, Tullow’s West Africa working interest oil production averaged 51,800 barrels of oil per day (bopd), lower than initially expected following the extended shutdown at the Jubilee field in late March and April.

First-half 2016 gross Jubilee production averaged 62,900 bopd in total.

Tullow said taking into account short periods of reduced production, gross average production from the Jubilee field in the second half of 2016 is expected to be about 85,000 bopd, giving a total average gross production for the Jubilee field this year of about 74,000 bopd.

As a consequence of Jubilee production outages and planned reductions in capital investment in the West Africa non-operated portfolio, Tullow’s 2016 West Africa oil production guidance range was revised in June to between 62,000 and 68,000 bopd net.

The group reaffirmed it has a package of insurances in place to cover further loss of production and revenue from Jubilee.

Tullow said its TEN project remains on schedule with first oil due early next month.

“The start of production from the TEN field in early August will be transformational for the group allowing us to significantly increase our net production and begin the process of deleveraging our balance sheet. This project has remained on schedule and on budget since the day the plan of development was signed and demonstrates our ability to deliver complex projects of this nature, said chief executive Aidan Heavey.

TEN is expected to increase Tullow’s group net production by about 60 per cent when it reaches facility capacity around the end of 2016, putting the company in a position to deleverage organically.

“Tullow is well placed to move forward with a restructured and more efficient business that can deliver growth from its portfolio of high-quality, low-cost producing, development and exploration assets,” said Mr Heavey.