Tullow Oil delays key decision on Kenya asset

Performance for first half of year in line with analyst expectations

A Tullow Oil drilling block in Kenya, where progress is ‘taking longer than originally forecast’. Photograph: Getty Images

A Tullow Oil drilling block in Kenya, where progress is ‘taking longer than originally forecast’. Photograph: Getty Images

 

Tullow Oil has pushed back the date it expects to extract oil from a key asset in Kenya as a result of delays to land acquisition and environmental impact submissions, the company said in a trading update on Wednesday.

Irish-founded Tullow said it reviewed the most likely timeline for its Kenya project and expects the final investment decision to come in 2020, three years after which oil could be extracted.

It flagged that the Government of Kenya has made “good progress” in acquiring the necessary land and securing water rights, but that progress is “taking longer than originally forecast”.

Elsewhere, the company said it is considering all options in the sale of its interests in Uganda having been unable to finalise an agreement with the Government of Uganda.

Tullow’s performance so far this year was judged as being in line with expectations after it reported that production will be about 89,000 barrels of oil per day (bopd). This will bring an expected $900 million in revenue and gross profit of $500 million. The vast majority of its production comes from Ghana while it also forecasts 17,000 bopd from its Gabon operation, 5,800 bopd from Equatorial Guinea and 2,800 bopd from Côte d’Ivoire.

‘Steady progress’

“Tullow has made steady progress overall across the business in the first half of the year,” said chief executive Paul McDade, adding that the company’s balance sheet remains strong.

“I am particularly pleased with the significant progress we have made in Kenya and the agreement with the Government over a number of key commercial principles will greatly assist us in driving the project to FID. Our exciting and potentially material drilling campaign in Guyana will get under way later this month with the spud of the first of three wells planned for 2019.”

Tullow has interests in 85 licences across 17 countries. The company noted in its update that it is continuing to seek to access new opportunities in both Africa and South America having recently won licences off the coast of Argentina and in Peru.

Tullow left its capital expenditure forecast for the year unchanged at $570 million while net debt for the period was $3 billion, leaving debt at 1.9 times adjusted earnings.