Tullow Oil to step up exploration projects
TULLOW Oil plans to step up exploration and will consider ventures with big oil companies to share risks and costs. The intensification of the company's strategy comes despite a 93pc tumble in profits last year.
London-based Tullow will spend about $700m a year on exploration projects, managing its portfolio and buying assets over the next few years, Exploration Director Angus McCoss said yesterday. It plans to drill 30 exploration wells this year and maintain that number in the future, Mr McCoss said.
Tullow's objective "is to maintain the relative scale of importance of exploration" for value growth, Mr McCoss added.
"Increasingly, we've been approached by majors to consider joining them in ventures around the world, but we are looking selectively at these opportunities."
Tullow is good at finding oil but it needs the expertise of major oil companies to build pipelines and other equipment to get the oil into tankers and ship it to consumers.
The plans were announced as the Dublin and London-listed explorer said pre-tax profit fell a less-than-expected 93pc to £20m (e21.9m) in 2009 due to lower oil and gas prices and output.
As Tullow's assets are mainly undeveloped oil fields and exploration acreage, investors focus on new oil finds and reserves upgrades rather than day-to-day profitability.
Tullow confirmed yesterday that it had agreed a framework deal with China's CNOOC and French oil major Total that would see the companies become equal partners in three Ugandan oil blocks.
Tullow added that it had upgraded its estimate of reserves at its Tweneboa field in Ghana by 60pc and said yesterday the field could prove to be much bigger yet, while total resources in its Ghana interests could be as much as 4.5 billion barrels.
Tullow previously said it was talking to CNOOC and Total about partnering in Uganda, where Tullow owns half of two blocks and 100pc of a third, on the shore of Lake Albert.
"We believe this unified structure, if delivered, will be beneficial in exploiting the discovered resource base," said Phil Corbett, an oil analyst at Royal Bank of Scotland.
A level below 33pc may have been too small to attract the interest of such large international players, oil executives said.
Shares in Tullow slid 35c, or 2.4pc, to €13.95. The shares have doubled in the past 12 months, helping to make Tullow the second largest company on the exchange. (Additional reporting Bloomberg)