Tullow's shares surge after firm says Uganda oil deal nearly done
SHARES in Tullow Oil surged yesterday after the Dublin and London-listed explorer said it expected to conclude a long-awaited deal in Uganda next month, posted soaring first-half profits and doubled its dividend.
Tullow, which is the largest company with a listing on the Dublin stock exchange, has been waiting since last year to finalise a deal to bring in new partners French oil major Total and Chinese group CNOOC to start a $10bn (€7bn) oil development project in Uganda.
"While delays to the farm-down to CNOOC and Total have been frustrating, we now expect completion in September," chief executive Aidan Heavey said as the company reported its first-half results. Negotiations are now complete and the matter is in the hands of the Ugandan government which disputes the amount of tax owed, he added.
Tullow, which has assets across Africa and in the North Sea, is transforming itself from an oil and gas exploration company into an oil producer, or what Dublin-born Heavey calls a "super independent", as oil fields come on stream.
The company's share price has underperformed on the FTSE oil and gas index this year as investors worry about this transformation and the prospects for the deal with Total and CNOOC.
Tullow posted pre-tax profits of $540m in the six months to June 30, a 312pc jump from the year-earlier period and above a consensus forecast of $509m. Profits were boosted by higher oil prices and from the company's ramp-up in production at its Jubilee oilfield in Ghana.
The company said it planned to double the interim dividend to four pence per share to reflect the fundamental change in its finances brought about by bringing Jubilee onstream. Royal Bank of Scotland analyst Phil Corbett called Tullow's update "broadly positive".
With the Uganda deal close to finalisation, investor focus has switched to the company's two wells in French Guiana and Liberia.
"Tullow's exploration push over the next 12 months looks unparalleled. The scale and diversity of the campaign offers materiality and transformational potential for Tullow," said Bank of America Merrill Lynch analyst Alejandro Demichelis.
Tullow will receive proceeds of $2.9bn from Total and CNOOC shortly after the completion of the Uganda deal, giving it the firepower to carry out accelerated exploration and appraisal in French Guiana and Liberia should the wells be successful, finance director Ian Spingett added.