Tullow Oil reports surprise loss after writing down reserves
Tullow Oil Plc reported a surprise loss after writing down the value of reserves off West Africa.
The company posted a full-year loss after tax of $110 million, missing analyst estimates for a profit. The result mainly reflects an impairment on its Ghanaian TEN development, whose fields are going into decline.
While Chief Executive Officer Rahul Dhir has stabilized the former wildcatter — all but ceasing frontier exploration to focus on established projects — years of borrowing have forced Tullow to channel capital into deleveraging, hampering opportunities for growth.
Dhir hopes to turn that around, in part by snapping up assets ditched by larger oil companies.
“There’s a structural shift in the industry, particularly in Africa, with the majors exiting mid- to late-life assets,” the CEO said in a phone interview. Tullow’s cash flow gives it “the ability to invest both organically and inorganically and start to return capital to shareholders.”
Tullow reported free cash flow of $170 million, ahead of guidance, and net debt of $1.6 billion. The company booked impairments and writeoffs totaling $435 million.
The shares rose at the open on Wednesday, trading up 0.9% at 8:38 a.m. in London. The stock has slumped 27% this year on concern output is stalling at some West African and non-operated fields.
Tullow expects to produce 62,000 to 68,000 barrels of oil equivalent a day this year, with net debt falling further to below $1.4 billion, it said in a statement.
