Tullow Oil's 2004 pretax profits rise 143% to €84.9m

The purchase of Energy Africa, allied to strong oil and gas prices, helped lift pretax profits at Tullow Oil by 143 per cent to £58 million (€84.9 million) last year.

The independent oil and gas group said it had enjoyed record levels of production, turnover, operating profitability, cashflow and net profit last year.

However, shares in the company slipped by 3.7 per cent in London to 183p. In Dublin, they lost nearly 4 per cent to €2.68 amid profit-taking following steady gains in the share price over the past week.

Turnover rose by 74 per cent to £225.3 million, boosted by the inclusion of Energy Africa for seven months of the year. Had it been included for the full year, turnover would have been around £310 million, Tullow said.

Meanwhile, operating profit before exploration activities was up by 88 per cent to £83.2 million.

The company announced a 75 per cent increase in its dividend to 1.75p per share.

Tullow also said that, since year-end, it had sold two non-core assets for £97 million. Its Alba/Caledonia North Sea oil fields have been sold to Japan's third-biggest trading house, Itochu Corp, for £58 million, while the group's offshore Congo assets have been sold to Total for £39 million.

The proceeds from these sales have left the company "conservatively funded and well placed to continue to pursue its growth strategy", Tullow said.

Despite spending more than €1 billion on acquisitions last year, the company remains on the lookout for deals in its three core areas, the North Sea, Africa and south Asia. Tullow chief executive Aidan Heavey said it would be in the frame for any bolt-on acquisitions that came up in the North Sea, a sector where high prices for UK gas should continue to support Tullow's performance.

Meanwhile, the company has decided to stick with its interests in south Asia, which currently account for just 1 per cent of turnover and 2 per cent of production.

Mr Heavey said Tullow hoped to build as successful an operation there as in Africa or Europe by establishing a larger exploration portfolio, targeting high-impact prospects.

Production last year totalled 40,600 barrels of oil equivalent per day (boepd), 64 per cent ahead of 2003 levels. The company's European operations accounted for 52 per cent of this, Africa for 47 per cent and Asia for 1 per cent. Oil accounted for 56 per cent of total production and gas for 44 per cent.

This year, production is expected to increase to more than 56,000 boepd, with Africa producing around 30,000 of this.

Last year, the group appointed consultants ERC to review its oil and gas reserves. It attributed 173 million barrels of oil equivalent (mmboe) of commercial, proven and probable reserves to Tullow, along with a further 153 mmboe in contingent reserves, ahead of expectations.

Tullow plans to participate in up to 15 wells in 2005 and has approved an exploration budget of around £40 million. It also plans to participate in development activities in Britain, Gabon, Congo, Equatorial Guinea, Côte d'Ivoire, Namibia and Pakistan, with planned expenditure of around £100 million.

Last year, the group wrote off £18 million in costs incurred in relation to nine unsuccessful wells.