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Tullow investors on edge despite TEN's debut

The market reacted negatively to news of extra exploration charges and impairments
February 9, 2017

Unsurprisingly, Tullow Oil (TLW) decided to lead with first production from the TEN field in its summary of 2016's highlights. But, while building Ghana's second major oil and gas development on time and on budget is a big achievement, full-year results for the FTSE 250 producer contained enough sources of concern for investors to mark the shares down by 5 per cent.

IC TIP: Hold at 281p

Chief among these concerns was a higher-than-expected attributable loss of $600m (£478m), partly due to higher exploration charges and impairments. This might not be such an issue if Tullow's balance sheet was less stretched, but because net debt stood at $4.8bn at the end of December, investors are getting nervous that the benefits of TEN's 50,000 barrels of daily production this year will be swallowed by interest payments.

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