Shares soar 12pc as markets bet Tullow can ride out oil crisis
Shares in Tullow Oil shot up almost 12pc and hit a nine-month high yesterday, after management said it will slash spending by $100m (€88m) to cope with low oil prices.
The Irish-founded, Africa-focused oil explorer also said that its lenders had agreed to extend a revolving loan facility by a year and increase flexibility on another loan, showing banks were willing to support it during the oil market downturn.
Roscommon-born Aidan Heavy's Tullow told shareholders at an annual general meeting in London that it has cut its annual capital expenditure plans by $100m to $1bn and may reduce spending further as it adjusts its balance sheet to current oil prices.
Tullow said that as of the end of April, its net debt stands at about $4.5bn and that it has unused debt facilities and free cash of roughly $1.3bn.
Cutting costs has been the main defence of oil firms against a 60pc drop in oil prices since mid-2014 with billions of dollars worth of projects being delayed or cancelled.
Tullow reported lower than expected output in the first quarter as a technical issue at its flagship Jubilee oil field in Ghana has interrupted production there.
The company's West African production averaged 59,200 barrels per day (bpd) and, as previously stated, Tullow said it would have to reissue full-year production forecasts once the Jubilee issue had been resolved.
"I would like to think next week we can restart production," Tullow chief operating officer Paul McDade told Reuters, adding that the resumption was subject to a new operating procedure running smoothly.
Tullow, which is venturing into oil and gas production in East Africa, said its appraisal programme in Kenya showed fields there could hold as much as 1 billion barrels, if more exploration is carried out.
"Today's announcement adds further value through the Kenya news and partially mitigates some of the risk associated with the balance sheet," said analysts at Macquarie.
Shares in Tullow Oil closed up 11.98pc at £281.40 in London yesterday, implying a market capitalisation of £2.3bn.
(Additional reporting Reuters)