Tullow’s (LON:TLW) 'first oil' from the Jubilee field in Ghana was the key highlight of its 2010 full-year results, and the company thinks the new oil field could reach a 120,000 barrel a day run-rate in 2011.
The company said that the financial results were materially ahead of last year and they are broadly in-line with the market’s expectations.
"With First Oil in Ghana and an excellent exploration and appraisal success rate, 2010 was undoubtedly a transformational year for Tullow,” chief executive Aidan Heavey said.
“This contrasted with slower progress on our agreed farm-down in Uganda. However, good progress has recently been made towards gaining government approval and establishing a strong fiscal and legal framework for the successful development of the basin.”
In the year ended 31 December 2010, revenues were up 19 percent to US$1.09 billion.
Tullow’s operating profits increased 56 percent to US$235 million and pre-tax profits more than trebled, increasing 361 percent to US$152 million. It reported a net profit of US$73 million, up 137 percent from the US$31 million in 2009.
It revealed a 90 percent increase in earnings per share to 6.1 pence and the final dividend remained unchanged at 4 pence a share.
Tullow’s production averaged 58,100 barrels of oil equivalent per day over the year, a figure which is set to be eclipsed in 2011 as the Jubilee field ramps-up towards its 120,000 barrel a day production target. The average realised oil price was up 30 percent to US$78 dollars a barrel and the average realised gas was up 7 percent at 42 pence per thermal unit.
Looking ahead Heavey added: “2011 has started very well with production increasing from Jubilee and continued exploration and appraisal success. With a diverse 40-well E&A campaign planned for 2011, we look forward to another year of significant progress."
Indeed the company highlighted that the Jubilee field, which began production in November, is expected to ramp-up to 120,000 barrels of oil per day during 2011. The company is also planning for further development work with two potential new field developments - Enyenra and Tweneboa.
“Over the next 12 months we plan to drill exploration and appraisal wells in French Guiana, Ghana, Sierra Leone and Uganda which have the potential to add material resources to the group,” the company said.
However Will Arnstein at City broker finnCap was not impressed: "Despite an upbeat message, we believe there are few positives to take away from Tullow's FY results and that the company has delivered a disappointing financial performance," the analyst said.
"The bulls may point to an active drilling programme planned for 2011, but political risks in a number of countries operated in could see this significantly curtailed, while we also believe the materiality of the vast majority of the wells is limited."
Arstein adds: "we continue to believe Tullow is over-valued and likely to underperform the wider E&P sector."