Tullow confident on cashflow despite delays in Uganda
TULLOW Oil chief executive Aidan Heavey has brushed aside suggestions that a delay in the development of operations in Uganda could interrupt the group's cashflow projections and force it to seek additional financing from lenders.
Speaking to the Irish Independent after the FTSE-listed oil and gas company reported a robust set of first-half figures, Mr Heavey said he expected the delay in the Ugandan government granting Tullow approval to secure full ownership of exploration blocks in the Lake Albert region to last no more than a couple of weeks.
Earlier this year, Tullow agreed to pay $1.45bn (€1.14bn) to Canada-based Heritage Oil for its 50pc share of two exploration blocks in the Lake Albert Rift Basin, to secure full ownership of the blocks. Tullow has signed agreements with French oil firm Total and China National Offshore Oil Company to sell them a two-thirds stake in the blocks and had pencilled in proceeds from that farm-out to be received by the end of this year.
But while Heritage's stake has already been effectively transferred to Tullow, the final sign off has been hampered by Heritage's insistence that it's not liable for any of a $404m capital gains tax assessment by the Ugandan government.
Some analysts yesterday predicted that, at worst, the dispute could stretch out until much later in the year. But Mr Heavey said he expects it to be resolved shortly and stressed that Tullow does not agree with Heritage's position. "We've been working in Africa for over 20 years. We're in no rush and we're quite happy to wait a few weeks," said Mr Heavey.
Shares in Tullow slumped 4.4pc in London yesterday to £12.40, having earlier declined almost 6pc. That was despite the company having reported an 11pc rise in revenue to $486m (€384m) for the first half of the year and a 152pc jump in pre-tax profits to $131m (€103.5m). Overall average daily production declined 6pc in the first six months of the year, but the first oil from Tullow's Jubilee project in Ghana is expected before the end of 2010 and will result in "significant production growth and increased cash flow from 2011", according to the company.
Tullow expects wells in the Lake Albert basin in Uganda to be pumping more than 200,000 barrels of oil a day by 2014 or 2015. The company has boosted its estimate of discovered resources in Uganda to one billion barrels of oil.