Tullow shares fall as write-offs on exploration jump to $299m
TULLOW Oil more than doubled write-offs in 2012 on unsuccessful wells in Guyana, Suriname and Ghana. The company will write off $299m (€224m) from exploration, up from $121m in 2011, according to a statement.
The company's shares fell the most in a month in London trading.
Including asset-value reductions, Tullow recorded total charges of about $670m for 2012. It will spend $900m to drill 40 wells this year, targeting about a billion barrels of resources, with the majority of these to be drilled in east Africa.
"2013 will be our biggest exploration year," said chief financial officer Ian Springett in a phone interview. "There are some important, potentially basin-opening wells."
Tullow, which is based in London, has secured exploration projects in Uruguay, Mozambique, Greenland and Guinea as it expands into new frontiers.
In December, it agreed to buy Spring Energy AS in order to boost its exploration portfolio in Norway. Tullow also decided to exit the UK and Netherlands by selling its southern North Sea gas-production assets.
The stock fell to £11.43 (€13.80) in London, the lowest since December 12. Tullow and Africa Oil Corp have started tests at the TwigaSouth-1 exploration well in Kenya, the latest discovery in the east African nation.
"Test flow rates are not expected to exceed 500 barrels of oil per day interval due to the limits of the test equipment, reservoir energy and the reservoir quality," Tullow said.
The company plans to produce 86,000 to 92,000 barrels of oil equivalent a day this year, up from 79,200 last year. In November, Tullow had forecast average daily output for 2012 of at least 80,000 barrels.
Current output is in the region of about 90,000 a day, Mr Springett said, adding: "Production for the year came in lower than guidance."
In Ghana, the total well-extraction capacity at the Jubilee field is now in excess of 120,000 barrels of oil a day, allowing tests of pumping equipment capacity in the next few weeks.
The company expects floating production-vessel capacity to increase to about 130,000 barrels a day by October after improving gas handling operations, Mr Springett said.
Chief executive officer Aidan Heavey said: "Jubilee production issues were successfully and cost-effectively resolved and gross production from the field is now around 110,000 barrels of oil a day."
Tullow plans to invest about $2bn in projects this year. The company, which is developing fields in Uganda with Total SA and Cnooc Ltd, said in December that production there was being held up by government discussions over plans to build a refinery and export pipeline.
The delays prompted some analysts to suggest that the company may sell its Ugandan assets.
But Mr Springett said: "We are not planning to exit Uganda. We will continue to manage our portfolio, but right now our focus in Uganda is getting the final investment decision and then we will see where we go after that." (Bloomberg)