| 3.1°C Dublin

Markets wipe over €1bn from Tullow after production delays

MORE than €1bn was wiped off Tullow Oil's market value at one point yesterday as the Dublin-based explorer shocked investors with news of more production delays in Ghana and no concrete news on the sale of fields in Uganda.

Shares in Tullow Oil sank as much as 8.4pc during trading in London but eventually closed down just 4.2pc at £13.94 (€16.74), making the company yesterday's worst performer in the FTSE 100. The plunge was the biggest drop in Tullow's share price since August 2010.

The shares tumbled as the company downgraded daily production targets for this year to between 78,000 and 86,000 barrels of oil or equivalents.

Production in Ghana was well below target because oil pipes are continually becoming clogged with clay. Analysts had expected output of 91,000 while Citigroup had forecast 96,000. Production last year also came in below target.


Tullow and partners Anadarko and Kosmos will need to invest about $400m (€312m) to fix mechanical issues related to well designs at the company's Jubilee oil field off the coast of Ghana, Tullow added. The partners have already invested $3.4bn to develop the field.

"The key drag on production appears to be the Jubilee field, where well-decline rates have been much higher than expected due to a well-completion design issue," Numis Securities analyst Sanjeev Bahl said yesterday.

Tullow has no concrete news of a simmering dispute between the company and the government in Uganda, which has prevented it from finalising a deal to sell a one-third stake in its Ugandan oil discoveries to French oil company Total and China's Cnooc for $2.9bn.

Tullow and the Ugandan government are "all working hard to get things finalised before the end of January," chief financial officer Ian Springett told analysts. Previous dates for a proposed resolution have come and gone.

The company announced a partnership with Royal Dutch Shell to explore for oil and gas fields in the Atlantic. Tullow plans to increase investment in projects by 43pc to about $2bn this year from last year.

Analysts welcomed the tie-up, noting that Tullow has significant geological expertise while Shell has deepwater experience and capital.

Indo Business