Friday 19 January 2018

Slow output cuts Tullow Oil production forecast

Tullow Oil chief executive Aidan Heavey
Tullow Oil chief executive Aidan Heavey
John Mulligan

John Mulligan

Tullow Oil has trimmed its production projections for its West Africa assets after its new TEN project delivered slower than anticipated initial output.

Tullow, headed by chief executive Aidan Heavey, expects West Africa net oil production of between 64,000 and 67,000 barrels of oil a day for the year. That compared to a previous estimate of between 62,000 and 68,000 barrels.

The TEN offshore oilfields in Ghana are 47pc-owned by Tullow. The company also has a 35pc holding in the huge Jubilee oil field, which is also offshore and close to the TEN project.

In the first half of 2016, Tullow's West Africa working interest oil production averaged 51,900 barrels of oil a day. That was below previous guidance, with output at the Jubilee field having been affected by a technical issue. That forced the field to close for a month. Other repairs are continuing and will be completed next year. That will result in another 12-week closure, but insurance will help offset lost production.

The TEN fields have been expected to produce an average of about 80,000 barrels of oil a day. For 2016, average gross production is expected to be 15,000 barrels a day, according to Tullow.

Tullow said yesterday that it has cut its 2016 capital expenditure budget to $900m from $1bn.

It now expects spending during 2017 to between $300m and $500m.

"Our major capital commitments came to an end and our low cost West Africa oil production is increasing substantially," said Mr Heavey.

"As a result, we will start to generate free cash flow in this quarter and will begin the process of deleveraging our balance sheet," he added.

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