29th Jul 2020 10:56
(Alliance News) - Tullow Oil PLC on Wednesday said it expects revenue to drop in the first half of 2020 and added it will take an impairment of up to USD1.7 billion amid a slump in oil prices.
The oil & gas exploration company said its working interest production for the first half of 2020 end June averaged 77,700 barrels of oil a day, meeting the company's expectations. In the first half of 2019, oil production was around 86,300 barrels per day.
Tullow narrowed its output guidance for 2020 to between 71,000 barrels and 78,000 barrels daily "reflecting continued good performance across the portfolio". In April, the firm said it expected between 70,000 and 80,000 barrels of oil a day in 2020.
The FTSE 250-listed company expects revenue to be around USD700 million in the first half of the year, down from USD872 million a year ago, with a realised oil price of USD52 a barrel versus USD64.3 a year prior.
Brent oil prices started the year around the USD66 mark a barrel, but crashed below USD20 as the coronavirus crisis hit demand.
"As a result of lower near-term oil price forecasts, and a revision in the group's long-term oil price assumption from USD65/bbl to USD60/bbl, the group expects material impairment and exploration write-offs to be recorded at the half-year in the range of USD1.4-1.7 billion," said Tullow.
Tullow currently has 60% of its 2020 sales revenue hedged at a floor of USD57 per barrel for 2020 and 44% hedged for 2021 with a USD51 per barrel floor.
The impact of Covid-19 on its Kenya work programme has led the joint venture to call "force majeure" on its licences, delaying investment decisions and impacting the ongoing farm-down process. The firm said "constructive" discussions are ongoing with government over the next steps.
The company's sale of Ugandan assets to France's Total SA is still underway, awaiting tax agreements from the Ugandan government and Revenue Authority. Tullow expects to secure a total payment of USD500 million on deal completion and USD75 million at the final investment decision to ease the firm's net debt, which at June 30 is expected to be USD3.0 billion.
Tullow will release its half-year results on September 9.
Tullow shares were trading 4.4% lower at 26.73 pence each on Wednesday morning in London.
By Neetika Kurup; [email protected]
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