Business Irish

Sunday 21 September 2014

Tullow confident despite first half loss

Ron Bousso 
and Colm Kelpie

Published 31/07/2014 | 02:30

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Workers are seen at an oil exploration site in Bulisa district approximately 244km (152 miles) North-West of Kampala

Oil and gas producer Tullow Oil drifted into the red in the first half of the year after writing off more than $400m (€299m) in exploration costs.

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But the Africa-focused explorer remained confident that its strategy will pay off.

Analysts claimed the results were in line with expectations, with guidance for the full year remaining unchanged.

A disappointing run of oil well exploration in Mauritania, Ethiopia and Norway over the past six months translated into a half-year net loss of $95m because of $402m in write-offs.

London-headquartered Tullow is counting on drilling projects in Kenya and Ethiopia this year and next to improve its exploration performance.

Chief executive Aidan Heavey told the Irish Independent the results were largely the result of asset sales.

"We've had very big expiration success over the last few years .. . and as a result of that we started a process last year of selling some of our mature fields. When you look at the revenue figures and the profit figures, part of that is the disposal of some of those older fields as we concentrate on the newer fields," he said.

Tullow has had 14 successful well results and eight dry holes so far this year, mostly in East Africa, exploration director Angus McCoss said.

In Kenya, Tullow has made oil discoveries in nine of 11 wells in the Lokichar basin where it has raised discovered resources to 600 million barrels of oil. It plans to drill wells in three new onshore basins in the East African country.

"Kenya has a dozen basins and we've only really explored one of them intensively so there is a lot of scope to repeat the success that we've had in the South Lokichar Basin," Mr McCoss said.

Oil discoveries in Uganda and Kenya and gas deposits found off Tanzania and Mozambique have turned east Africa into a hot spot for hydrocarbon exploration.

The governments of Kenya, Uganda and Rwanda signed a Memorandum of Understanding in February on the construction of an oil pipeline from Uganda through Kenya

Tullow reported a net loss of $95m for the six months ended June 30 compared with a net profit of $313m a year earlier. Revenues fell 6pc to $1.265bn.

It said production fell 12pc in the first half to 78,400 barrels of oil equivalent per day (boepd), short of its full-year production guidance of 79,000-85,000.

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