Tullow Oil chief expects substantially higher profits

EXPLORATION COMPANY Tullow Oil has said it had an exceptional first half in 2008 and it expects substantially higher profits for the period.

In a trading statement in advance of the group's interim results next month, chief executive Aidan Heavey said Tullow was never in a better position to enhance shareholder value.

"Tullow has performed exceptionally well over the first half of 2008," he said. "We have had solid production performance, outstanding appraisal results in Ghana, continued exploration success in Uganda and announced almost $1 billion worth of non-core disposals to enhance our financial and operational flexibility. These factors, combined with the unprecedented strength in oil and gas pricing and our ongoing exploration programmes, mean that Tullow has never been in a better position to enhance shareholder value."

Tullow chief financial officer Tom Hickey said the company was benefiting from oil and gas pricing which was now 30-40 per cent higher than this time last year. Average prices realised during the first half of 2008 continued to be exceptionally strong, the company said.

Tullow's oil production sold at an average discount of approximately 3 per cent to Brent during the first half of 2008 and this level of discount is expected to continue for the remainder of 2008.

Brent crude was at $137.36 a barrel yesterday evening, having risen 93 cents after Iran tested a missile that could target Israel.

Disposals netted an overall profit after tax of approximately £400 million (€504 million) in 2008, of which approximately £15 million will be reflected in the first-half results, the company said. Capital expenditure for the first half of 2008 amounted to £170 million and anticipated capital expenditure for 2008 is now forecast to be £480 million, it said.

The increase in full-year planned expenditure is principally due to the acceleration of development activities on the Jubilee field in Ghana.

Investment will be split 45 per cent on production and development and the remainder on exploration and appraisal.

Tullow said 75 per cent of this year's capital outlay would be in Africa, principally Ghana and Uganda. Mr Hickey said the Jubilee field had a potential 1.8 billion barrels of oil and that production would start in 2010, enabling Tullow to produce three times what it is producing today.

Production averaged 70,550 barrels of oil equivalent per day (boepd), 1 per cent higher than the 2007 average.

Sales volumes for the first half of 2008 averaged 60,000 boepd.