Dry wells can take their toll on oil and gas companies. Tullow Oil (TLW) turned in a net loss of $95m (£56m) at the half-year mark after writing off more than $400m in exploration costs. The problems were linked to drilling in Mauritania, Ethiopia and Norway over the past six months, which resulted in the cancellation of a number of licences.
There were also set backs on the production front. Output fell 12 per cent in the first half to 78,400 barrels of oil equivalent per day (boepd), which is 600 barrels adrift of the lower end of its full-year production guidance. At least production from its flagship offshore Jubilee oil field in Ghana, in which Tullow holds a 35.5 per cent stake, remained above the group’s production target.
There was also good news from the TEN project in Ghana, which remains on track and within budget. First production should kick in from 2016 onwards, with plans to reach capacity of 80,000 boepd by the following year. Tullow said the project was now 30 per cent complete and the expected cost remains $4.9bn. Moreover, Kenya could soon open up as another frontier oil and gas hot spot, following Tullow's recent efforts. The company has logged success in nine of the 11 wells it has drilled in the Lokichar basin.
Canaccord calculates Tullow's risked core book value (comprising producing and development assets, net of debt) at 458p a share.
| TULLOW OIL (TLW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 764p | MARKET VALUE: | £7.0bn | |
| TOUCH: | 762-766p | 12-MONTH HIGH: | 1,089p | Low: 736p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | NA | |
| NET ASSET VALUE: | 567¢* | NET DEBT: | 53% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.35 | 486 | 32.2 | 4 |
| 2014 | 1.26 | -29 | -8.3 | 4 |
| % change | -6 | - | - | - |
Ex-div:27 Aug Payment:03 Oct *Includes intangible assets of $£4.8bn, or 522¢ per share. £1 = $1.70 | ||||
