Tullow Oil expects to report revenue of $1.7bn for 2017
Irish oil and gas explorer exceeds forecasts through cost efficiencies and rising oil prices
The Kingfisher well, Block 3A, jointly owned by Tullow Oil and Heritage Oil, sits at the Lake Albert Rift Basin, in Uganda.
Irish oil and gas explorer Tullow Oil expects to report revenue of $1.7 billion and gross profit of $800 million for 2017, the company said on Wednesday.
In a trading statement to the Irish Stock Exchange, Tullow said it also expects to have generated $500 million of free cash flow, significantly exceeding the forecast at the start of the year.
The company said the increase in respect of the financial year to December 31st, 2017, was primarily due to “strong production performance, rigorous cost discipline and a rising oil price”.
“This free cash flow has enabled ongoing debt reduction and the group expects year-end net debt to be $3.5 billion, a reduction of over $1.3 billion over the course of the year,” it said.
Tullow’s 2018 capital expenditure associated with operating activities is expected to total approximately $460 million. This total excludes $110 million of forecasted expenditure in Uganda.
This will be repaid from deferred consideration following the completion of the Uganda farm-down, which is expected in the first half of the year.
Tullow chief executive Paul McDade said the firm delivered “strong operational and financial performance in 2017 against the backdrop of continued industry volatility”.
“The business is expected to generate free cash flow of $500 million, above expectations, due to high levels of operated production and further progress on cost and capital efficiency,” he said.
“There was also material improvement in the group’s balance sheet, with significantly reduced gearing and an overall reduction in net debt of $1.3 billion. Over 2018 we expect to continue this positive momentum.
“With our diverse low-cost assets and high-graded exploration portfolio, enhanced by recent licence additions in Côte d’Ivoire and Peru, we have a strong foundation to grow the business and further reduce our debt.”
As of year-end 2017, Tullow had total headroom including free cash of $1 billion with no material near-term debt maturities.
In a note, analysts Davy said a “strong production performance” in the second half “rounds off a better overall year”, with Tullow exiting 2017 on a “much-improved footing”.
“A material improvement in debt metrics and strong free cash flow are two outcomes from continued control on costs, asset management and a better price environment,” said the analyst.
The company will publish its annual results in February.