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Tullow books hefty pre-tax losses due to low crude prices, impairment charges

Tullow has trimmed its RBL to $1.8bn, from $1.9bn, with the next redetermination to begin after its Capital Markets Day in late November.
The TEN FPSO

Lower crude price forecasts and a large impairment charge on its TEN fields offshore Ghana drove UK-based Tullow Oil to pre-tax losses of £398million in the first half of 2017.

London-headquartered Tullow, which is focusing on Africa and South America following its exit from Norway, posted first half pre-tax profits of £18.5million a year ago.

The company said a test on the FPSO for TEN had uncovered an issue with the vessel’s flaring system, leading to a 10-day shutdown.

The Tweneboa, Enyenra, Ntomme (TEN) fields produced first oil on time and on budget in August 2016.

The firm also came up dry from an exploration well Kenya in the period under review.

But Tullow shares were up 3.25% on the London Stock exchange in early trading as the company lifted its three-year cost savings target by £115million to £500million.

First half revenues were up 46% to £605million and net debt has been reduced by £768million since year-end as Tullow raised £575million through a share placing.

Capex guidance has also been reduced by about £75million.

Furthermore, Preparations for the drilling of the Araku-1 well offshore Suriname, 30% owned by Tullow, are on track for the fourth quarter of 2017.

Tullow chief executive Paul McDade, who took over the role from Aidan Heavey in April, said: “Despite continued challenging market conditions, Tullow performed well in the first half of 2017 delivering strong revenues and organic free cash flow.

“Combined with the Rights Issue completed in April, this has allowed us to retain operational and financial flexibility and reduce our debt during the first half by around $1billion.

“Since taking over as CEO, I have appointed a new and highly experienced executive team who are focused on returning Tullow to growth through financial discipline, efficient use of capital and by delivering on the potential of our diverse portfolio of low-cost production, development and exploration assets.”

Tullow chief financial officer Les Wood said: “Today’s first half financial results are clear evidence of the good progress Tullow has made despite continued challenging market conditions.

“Strong revenues have come from increased production, underpinned by hedging and insurance receipts.”

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