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Tullow post loss but upbeat about Africa

Wednesday, July 30 10:29:13

Irish-owned, London listed energy prospector, Tullow Oil, this morning posted a half year loss after writing off more than $400 million in exploration costs but said it was confident that its African strategy will pay off in time.

A disappointing run of oil wells exploration in Mauritania, Ethiopia and Norway over the past six months translated into a half-year net loss of $95 million because of $402 million in write-offs.

Tullow is counting on drilling projects in Kenya and Ethiopia this year and next to improve its exploration performance.

"Exploration is a risky business... You have periods where you don't find oil and if you keep at it over a period of three to five years you generally have the success that we've had, so we are not overly concerned," Chief Executive Aidan Heavey said.

"Our basic strategy is to find around 200 million barrels of oil a year and we've done that very successfully over the last seven years and we are pretty confident we'll do it long term."

Tullow has had 14 successful well results and eight dry holes so far this year, mostly in East Africa, exploration director Angus McCoss said.

In Kenya, Tullow has made oil discoveries in 9 of 11 wells in the Lokichar basin where it has raised discovered resources to 600 million barrels of oil. It plans to drill wells in three new onshore basins in the East African country.

"Kenya has a dozens basins and we've only really explored one of them intensively so there is a lot of scope to repeat the success that we've had in the South Lokichar Basin," McCoss said.

Oil discoveries in Uganda and Kenya and gas deposits found off Tanzania and Mozambique have turned east Africa into a hot spot for hydrocarbon exploration.

The governments of Kenya, Uganda and Rwanda have signed a Memorandum of Understanding (MoU) in February on the construction of a oil export pipeline from Uganda through Kenya.

Tullow reported a net loss of $95 million for the six months ended June 30 compared with a net profit of $313 million a year earlier. Revenues fell 6pc to $1.265 billion.

It said production fell 12pc in the first half to 78,400 barrels of oil equivalent per day (boepd), short of its full-year production guidance of 79,000-85,000 boepd.

Tullow's shares traded 0.589pc lower at 758.50 pence on the London Stock Exchange by 0750 GMT (8.50 a.m. BST).

Production at its flagship offshore Jubilee oil field in Ghana averaged 103,000 barrels per day (bpd) in the first half of 2014, slightly above the group's full-year production goal. Tullow holds a 35.5pc stake in the Jubilee field.

The TEN project in Ghana remained on course and on budget for first production in 2016 with plans to reach 80,000 bpd production capacity by 2017. Tullow said the project was now 30pc complete and expected to cost $4.9 billion as it seeks to sell it to a third-party.

Tullow started selling assets in Pakistan, Bangladesh and the North Sea last year in order to boost profits and focus on its core areas.

Analysts at RBC Capital maintained a neutral recommendation on shares "underpinned by the steady, medium-term, delivery of Tullow's developments in Ghana, Kenya and Uganda."

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