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Tullow Oil puts growth back on the agenda as revenue and cash flow surge

Published: 17:41 25 Jul 2018 AEST

oil and gas operations
Tullow shares traded up 5.3p or 2.44% in Wednesday’s early deals

Tullow Oil plc (LON:TLW) shares reacted positively to interim results showing US$900mln of revenue and US$400mln of free cash flow.

"Today's results are further evidence of the progress that Tullow has made in the first half of 2018. With this firm financial foundation, we can concentrate on growth across our three core businesses,” said Paul McDade, Tullow chief executive.

Tullow shares traded up 5.3p or 2.44% to change hands at 222.3p in Wednesday’s early deals.

The popular London oiler, meanwhile, also announced that chairman and co-founder Aidan Heavey has decided to step down and retire from the company.

READ: Tullow Oil nudges up production guidance

In terms of the financial results, Tullow reported US$905mln of revenue reflecting a 14% improvement from the US$788mln generated in the comparative period last year.

It comes as oil prices are stronger and as Tullow produced an average of 88,200 barrels of oil per day (adjusted to include 11,900 bopd of ‘production equivalent’ insurance payments) for the six months.

Gross profit was reported at US$521mln, up from last year’s comparative of US$303mln, while free cash flow for the half was measured at US$401mln, up from US$205mln.

Profit after tax came in at US$55mln, compared to a US$348mln loss in the first half of 2017.

Net debt, meanwhile, reduced significantly to US$3.08bn as at June 30 versus US$3.8bn a year before.

Growth is back on the agenda                                                                   

Operationally, Tullow is again focusing on production growth with a Ghana drill programme due to start in August, to be further bolstered with the addition of a second rig by October.

Tullow has an upgraded production guidance for 2018 set at 86,000 to 92,000 bopd, up from 82,000 to 90,000.

New developments are being advanced in east Africa. Project sanction is anticipated for the company’s Uganda joint venture by the end of this year.

In Kenya, the company is aiming to reach a final investment decision by late 2019 (though a pilot scheme, exporting crude by truck, got underway in June this year). Trucking has, however, been suspended in recent weeks amid protests in the local community.

Tullow said it is working with the authorities to resolve issues so that trucking can resume as soon as possible.

High impact, frontier exploration due to kick off

On the exploration front, high impact new drilling is due to start with the Cormorant well offshore Namibia.

Cormorant will kick off a new campaign which will see Tullow spend US$150mln on exploration per year, with three-to-five frontier wells slated each year.

“Over the next two years, we will increase production from our current assets in West Africa, progress two large onshore developments in East Africa and step up our search for material new oil fields in Africa and South America through a multi-year exploration campaign which will initially focus on Namibia and Guyana,” McDade added.

“There is much to look forward to for Tullow's shareholders, host countries and staff."

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