Tullow Oil took a beating yesterday, with shares falling to two-year lows despite record results.

The company dismissed reports that the retreat was due to a poor year on the drilling side - the company acknowledged that results from higher risk wells in India and Algeria were disappointing - attributing it instead to a stock overhang.

Managing director Mr Aidan Heavey said two institutions had been signalling their intention to sell and did so after the results were published yesterday morning. "We would expect the share price to recover in the coming days," he said.

Turnover in the shares yesterday was more than four times the daily average.

The figures themselves showed a 47 per cent rise in turnover to £112.6 million sterling (163 million) and a 41 per cent rise in pre-tax profit to £22.5 million, and were in line with its previously stated expectations.

The company also announced its intention to pay a dividend for the first time subject to High Court approval, which is expected to be a formality. Assuming it proceeds, shareholders will receive one cent per share.

Mr Heavey dismissed concerns about drilling results and stressed that Tullow was increasingly an oil production group rather than an explorer. Many of its new wells had been acquired through negotiation "which is a sight cheaper than drilling wells", he said.

Nonetheless, Tullow chairman Mr Pat Plunkett said the company planned exploration and development drilling in all its main geographic areas this year.

Dolmen Butler Briscoe's Mr Stuart Draper said further small-scale acquisitions, such as the £200 million North Sea purchase from BP in 2000 which had transformed Tullow's "into a profitable and cash-generative operation", would be positive for the group.