Tuesday 12 December 2017

Production restarts ahead of schedule at Tullow's flagship Jubilee field

Tullow Oil's flagship Jubilee Field
Tullow Oil's flagship Jubilee Field

Paul O'Donoghue

Irish-listed Tullow Oil has restarted production at its flagship asset, the Jubilee field in Ghana, ahead of schedule and says that it is confident of achieving its full-year production guidance.

However, in a trading update issued yesterday morning the firm also said that two of its latest exploration wells failed to strike oil.

Tullow said that gas production at Jubilee, which was halted last month due to technical issues, has resumed ahead of its initial mid-August forecast.

Exports restarted on August 3 and have increased to around 100m standard cubic feet per day. Oil production has also returned to its previous rates.

Jubilee currently produced about 100,000 bopd.

Tullow produced an average of 75,200 bopd in 2014.

Tullow also highlighted the announcement by the governments of Uganda and Kenya on Monday, which stated the pair have agreed on a route for the regional crude oil export pipeline to run between the two countries.

"This is a major milestone, and Tullow looks forward to working with the governments and partners on development of the significant discovered oil resources in Uganda and Kenya," said Tullow.

Meanwhile, the firm said that it had abandoned two exploration wells, one in Suriname and one in Norway, after the company failed to find any significant hydrocarbons at either.

Chief executive Aidan Heavey said: "Tullow continues to make good progress in 2015 having reset the business and with continued emphasis on managing costs, capital expenditure and the balance sheet. We are also focused on operational efficiency and the Jubilee compressor issue has been resolved ahead of schedule.

"With production back to normal at Jubilee, we expect to meet our full year production guidance. Looking forward, we plan to further deleverage the business as we look at non-core assets and our retained equity in our major developments."

Gerry Hennigan, an analyst at Goodbody Stockbrokers, said that the Jubilee field's return to production is welcome as it contibuting almost half of the company's total production output for the 2015 financial year.

However, he added: "The news of two further exploration failures is more likely to grab the market's attention."

Last month Tullow first-half results were broadly in line with expectations, as revenue fell 35pc to $820m and pre-tax losses narrowed to $10m from $29m.

Its net loss was $68m which was much better than analysts expected. It was helped by lower exploration write-downs. It will spend between $200m and $250m this year on exploration.

Tullow, whose primary operational focus is in Africa, has been re-engineering its business in light of the oil price slump. It's cutting $500m (€453m) in costs over the next three years and has reduced staff numbers.

The company's shares were marginally down in Dublin trading yesterday, slipping by 0.3pc by mid-afternoon.

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