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A new East Africa play for Tullow

RESULT: Tullow Oil's net earnings took a hit at the full-year mark, due to increased exploration write-downs and a $703m one-off profit in the previous year.
February 12, 2014

Despite news of a new oil formation discovered in Mauritania, the share price of Tullow Oil (TLW) drifted lower after it revealed a steep decline in full-year earnings. Tullow’s market value has fallen by nearly a third over the past 12 months due to a succession of exploration setbacks. Yet the prevailing negative sentiment needs to be set against the potential for a new oil play in East Africa, coupled with Tullow’s solid track record in project development.

IC TIP: Hold at 851p

In reality, Tullow recorded solid revenue and cash-flow growth, due to increased production from its flagship Jubilee field in Ghana. Despite a number of unplanned maintenance shutdowns through the second half, Tullow recorded a 6 per cent increase in overall net production to 84,200 barrels of oil equivalent per day (boepd).

This increase allowed Tullow to record an equivalent rise in gross profit to $1.4bn (£873m), but bottom-line comparisons suffered due to an additional $200m in exploration write-downs, together with a $703m one-off profit booked in 2012 from a partial sale of Tullow’s Ugandan assets to Total SA and CNOOC.

TULLOW OIL (TLW)
ORD PRICE:851pMARKET VALUE:£7.7bn
TOUCH:850-852p12-MONTH HIGH:1,270pLOW: 776p
DIVIDEND YIELD:1.4%PE RATIO:115
NET ASSET VALUE:585¢*NET DEBT:33%

Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (p)
20090.90.33.26.0
20101.10.28.16.0
20112.31.172.512.0
20122.31.168.812.0
20132.60.318.612.0
% change+13-72-73-

Ex-div:02 Apr

Payment:09 May

£1=$1.65 *Includes intangible assets of $4.5bn, or 494¢ a share