Tullow Oil targets significant ramp-up in production

Tullow Oil has said its total net production levels could break the 100,000 barrels of oil per day (bopd) mark this year.

However, Tullow’s shares took an initial knock as 2018 debt reduction and cash flow levels missed expectations.

In a trading update ahead of the publication of full-year results next month, the Irish-founded exploration company forecast its 2019 oil production to be between 93,000 and 101,000 bopd.

That would be up from 90,000 bopd last year.

Significant production increases from Tullow’s big two Ghana fields – Jubilee and TEN – are expected this year and the company plans to drill seven new wells in the country.

Tullow also said 2018 revenue will amount to approximately $1.8bn (€1.6bn), almost 6% up on the previous year.

However, the delayed conclusion of the farm-down of its Ugandan assets meant Tullow missed its 2018 free cash flow targets.

The company said it closed 2018 with net debt of $3.1bn – down from $3.5bn – and free cash flow of around $410m.

It had expected the latter figure to be closer to $700m, but the Ugandan deal which will boost this is now not set for completion until later this quarter.

Tullow’s shares were down by around 2% before paring losses and closing just 0.3% down. The stock has fallen by over 13% in the past 12 months.

However, the lower-than-expected cash flow figure hasn’t changed the company’s mind on dividends.

In November, the company confirmed its intention to resume paying dividends – after a five-year break – this year.

Payment will be no less than a combined $100m.

“Despite a volatile oil price, Tullow’s improved balance sheet, low cost production and strong cash flow generation, even at lower oil prices, will allow us to both invest for growth and pay a sustainable dividend,” said Tullow’s chief executive Paul McDade.

Mr McDade said Tullow remains “well-placed to deliver on its growth ambitions”.

“In 2019, we will increase oil production in west Africa, target final investment decisions in east Africa and drill the first wells in an exciting exploration campaign in Guyana,” he said.

Tullow also said it will seek further exploration acreage this year.

“The update underlines the fact that better oil prices and a growing production profile builds significant cash flows,” said Davy’s Job Langbroek.