Business

Friday 23 February 2018

Tullow Oil chief hails 'major progress' as it targets Kenyan production by 2021

Tullow Oil’s Paul McDade: ‘Good set of results’
Tullow Oil’s Paul McDade: ‘Good set of results’
John Mulligan

John Mulligan

Tullow Oil hopes to produce the first oil from fields in Kenya between 2021 and 2022, as the once embattled group reported full-year results that underscored its return to more normalised operations.

Revenue at the group last year jumped 34pc to $1.72bn (€1.4bn), while it slashed its loss after tax to $189m (€153.1m) from $597m a year earlier. Its net debt fell to $3.5bn (€2.83bn) from $4.8bn.

Some of the figures had been flagged in advance by the company in a trading update last month.

Tullow also surprised analysts with a $22m (€17.8m) operating profit for 2017, when they had been expecting a loss of $103.6m.

The profit was Tullow's first in three years and compared to an operating loss of $755m a year earlier.

The company, which has been buoyed by higher oil prices, a lower cost base and higher than anticipated production, is primarily focused on west Africa, with the TEN (Tweneboa, Enyenra, Ntomme) and Jubilee fields off Ghana. It also has exploration acreage off Ivory Coast.

The company has also begun a search process to find a new chairman, who'll succeed founder Aidan Heavey. The appointment is due to be made by the end of the year.

Mr Heavey retired as chief executive of Tullow last year and became chairman, an appointment that was not due to last for more than two years.

Speaking to the Irish Independent, Tullow Oil CEO Paul McDade hailed the significant increase in the company's free cash flow during the year, which hit $534m (€433m), and noted that it gave the group flexibility to engage in asset investment. The free cash flow figure compared to a negative $792m in 2016.

"It's been a tough couple of years and a lot of what we've been doing is why we're able to stand up and give a good set of results today," he said.

"There's been major progress. The free cash flow exceeded all expectations," he said. "A lot of the business has been de-risked. When we went into 2017, there were a number of hangovers in the business - the boundary dispute between Ghana and Cote d'Ivoire; there were some question marks over TEN performance."

Tullow expects production this year to be between 86,000 and 95,000 barrels of oil equivalent a day.

Mr McDade said that while Tullow had in effect exited exploration from a drilling point of view as it set about resetting the business, it continued to undertake a significant amount of seismic surveys and building positions in new geographies such as Ivory Coast and Peru.

"We did more seismic surveys last year than we have ever done in the history of Tullow," said Mr McDade.

"I think 2011 was maybe about a similar level."

He said those seismic surveys had given Tullow the "prospect inventory" for moving forward with exploration.

The company expects to spend $460m on capital expenditure this year compared to $225m in 2016.

Mr McDade said that the costs for drilling rigs and seismic surveys are still "bouncing along rock-bottom", despite oil prices having increased.

"Even if oil prices hit $70 [a barrel, compared to about $67 for Brent crude now], for sure we'll see some inflation creep in, but it could be in 2019 or 2020."

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