1st Jul 2015 06:02
LONDON (Alliance News) - FTSE 250-listed Tullow Oil PLC on Wednesday increased its full-year production guidance from West Africa but reported an expected fall in revenue and profit in the first half of 2015, reflecting the fall in oil prices.
"We have taken a number of important steps to ensure that Tullow remains on a firm financial footing. This approach is paying off with good progress across the business in the first half of 2015. Our major oil producing assets in West Africa have performed strongly, and we have upgraded our 2015 full year production forecast accordingly," said Chief Executive Aidan Heavey.
In a trading statement, Tullow reported a gross profit of USD300 million in the half year to June 30, down from USD700 million a year earlier, as revenue fell to USD800 million compared to USD1.30 billion a year earlier, reflecting the fall in world oil prices. Pre-tax operating cash flow also was down, to USD500 million from USD900 million.
Tullow is scheduled to provide its full interim results on July 29.
Oil prices achieved in the period averaged USD71.40 per barrel compared to USD106.70 in year-earlier half, whilst gas prices also fell. Tullow also reported a USD50 million loss on hedging instruments in the period, compared to a USD18 million loss a year earlier.
Exploration write-offs in the first half totalled USD85 million. However the company benefited from a USD45 million tax credit, meaning the net write off stands at USD40 million.
Tullow has been restructuring and cutting costs to match its operations to lower oil prices. The company said it would book a total of USD64 million related to its restructuring, compared to no such charge a year before.
As part of that restructuring, capital expenditure fell to USD900 million in the first half and is expected to rise to around USD1.90 billion by the end of 2015.
Net debt has substantially increased to USD3.60 billion at the end of June, compared to USD2.80 billion at the end of June 2014. The amount of facility headroom, free cash and committed bank facilities all remained roughly the same from a year ago, Tullow said.
The oil company said net production from West Africa was within its guidance, averaging 66,500 barrels of oil per day, up from 63,900 barrels a year earlier. Tullow increased its full-year production guidance from West Africa to between 66,000 to 70,000 barrels per day from the previous guidance of 63,000 to 68,000 barrels.
However, Tullow said it had excluded around 2,000 barrels per day from its first-half results that came from its operations in Gabon, due to ongoing license discussions with the government, but said it expects this to be resolved and included Gabon in its full-year guidance upgrade.
"The TEN project [in Ghana] remains within budget and on track for first oil in mid-2016. In East Africa, we are making steady progress towards project sanction with good appraisal and test results from our wells in Northern Kenya and strong support from the governments of Kenya and Uganda," said Heavey.
European production was in line with Tullow's guidance at 8,100 barrels of oil equivalent per day, but was down from 14,500 barrels a year ago. Full-year guidance has been lowered, after Tullow sold its Dutch asset, to between 6,000 to 8,000 barrels per day from 6,000 to 9,000 barrels.
The sale of its Dutch asset led to Tullow booking a USD50 million loss on asset sales in the first-half. A year earlier it reported USD115 million worth of losses related to asset sales.
By Joshua Warner; [email protected]; @JoshAlliance
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