In Tullow Oil 's (TLW) last set of financial results in February, we identified three reasons for optimism in 2016: excellent hedging, a decline in capital expenditure, and an eventual uptick in low-cost production from the long-awaited TEN fields, offshore Ghana.
That's still a fitting summary of Tullow's current position, although weak oil prices, falling production and further funding requirements since February have left a slightly more stretched financial position. Following the issue of a $300m (£229m) convertible bond after the half-year point, net debt is now around $5bn, more than five times JPMorgan's forecast earnings before interest, tax and depreciation.
At those levels, first oil from the TEN field - due at the beginning of August - can't come soon enough. And while the project will eat up a further $200m in drilling costs this year, on top of the $400m Tullow spent in the first six months of 2016, the prize is a swift ramp up in production to the floating production vessel's capacity of 80,000 barrels of oil a day by the end of 2016.
JPMorgan forecasts pre-tax earnings of $148m in 2016 and 3¢ EPS, against losses of $1.3bn and $1.14 in the 12 months to December 2015.
TULLOW OIL (TLW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 204p | MARKET VALUE: | £1.86bn | |
| TOUCH: | 203-204p | 12-MONTH HIGH: | 290p | LOW: 116p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 320¢* | NET DEBT: | 161% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 820 | -10.2 | -7.5 | nil |
| 2016 | 541 | 24.1 | 3.3 | nil |
| % change | -34 | - | - | - |
*Includes intangible assets of $3.65bn, or 400¢ a share £1=$1.31 | ||||
