Tullow Oil falls most in two months
Explorer Tullow Oil dropped the most in two months in London trading after warning of likely delays to its projects in Uganda because of a tax dispute.
Tullow paid Heritage Oil Plc $1.5bn last month for its interest in two Ugandan blocks, prior to bringing in China National Offshore Oil Corp and Total SA as partners.
Final approval has been held up until the issue of capital gains tax between the Ugandan government and Heritage is resolved.
“In the very short term, it is therefore anticipated that there may be some slow down in activity.” Tullow said in a statement today.
Tullow wants to bring in Cnooc and Total to help develop the Lake Albert basin, which may pump more than 200,000 barrels of oil a day in 2014 or 2015.
The explorer increased its estimate for discovered resources in Uganda to 1 billion barrels of oil from an earlier forecast of 800 million barrels, following results from the Mpyo-1 well.
“The situation in Uganda is a major concern,” said Dougie Youngson, an analyst at Arbuthnot Securities Ltd in London.
“The CGT issue needs to be resolved before we are likely to see any further activity and this could have a major impact on the valuation of these assets should the situation continue for a prolonged period of time.”
Tullow retreated as much as 4.9pc, the steepest intraday decline since June 29, and traded at 1,245 pence as of 8:30am local time. It was the biggest loser in the FTSE 100 index of leading UK shares.
At the same time, Tullow said first-half earnings more than doubled on higher crude and natural-gas prices.
Net income rose to $81.7m from $31.6m in the year-earlier period, the London-based company said in a statement. Revenue increased 11pc to $486m.
The Kigogole-5 and Kigogole-2 appraisal wells were drilled in July and August and encountered 14 meters and 16 meters of oil bearing reservoir respectively, Tullow said.
Kigogole-2 was drilled in an area adjacent to the Nsoga-1 discovery, “confirming a deep contact in common” with the Nsoga-1 well.
The company expects to find a further 1.5 billion barrels of resources in Uganda’s Lake Albert basin.
Tullow plans to produce the first oil from its Jubilee field in Ghana in either November or December, the company said. It’s investing about $3.35bn with partners to pump as much as 120,000 barrels a day next year.
The full-year production forecast was raised to between 57,000 and 58,000 barrels of oil equivalent a day, compared with a previous forecast of between 56,000 and 57,000 barrels.
The company reported earnings in US dollars for the first time today.