Tullow hits financial marks despite setbacks

The producer’s half-year numbers sent its share price down 2.5 per cent in morning trading, to 203p. The guidance cut – the second since January – was due to non-completion of the offshore Enyenra-14 well in Ghana. It has now moved the drill ship on from the site.

The company now expects 89,000-93,000 barrels of oil per day (bopd), compared with previous forecasts of 90,000-98,000bopd and 93,000-101,000bopd (from January). Free cash flow was down to $181m from $390m in the first half of 2018. 

Uganda remained a trouble spot for the producer as well, with Tullow and partners Total and China National Offshore Oil Corporation (CNOOC) making “limited progress” on the farm-down deal approval from the government needed for a final investment decision (FID).

Tullow has said the investment decision was incoming every year since 2017, when the deal was announced. Panmure Gordon analyst Colin Smith said an FID this year, as forecast by the company, looked “an increasing stretch”. Tullow said it was considering "all options in pursuing the sale of its interests" in Uganda as well. 

The company picked out positives in Kenya where it is moving along with Project Oil Kenya, set for a final investment decision by the end of 2020, and it doubled the post tax profit year-on-year to $103m (£82.6m). The drilling of the first of three Guyana wells has also begun, with results from Jethro-Lobe expected in August. Berenberg analyst Ilkin Karimli said this was the “main catalyst” for Tullow’s share price, but its existing valuation suggested a good result was partly priced in already. 

Tullow chief executive Paul McDade said earnings showed the company was in a good position despite operational issues. “We are disappointed that a mechanical issue at our latest TEN [offshore field] well has caused us to reduce our 2019 production outlook; however, our overall portfolio of low-cost West African production continues to provide a solid financial base for the business,” he said. 

The interim dividend of 2.35¢ a share is the second payout since 2015, and will cost the company $33m. Bloomberg consensus forecasts see Tullow’s 2019 adjusted earnings per share at 22.6¢ and pre-tax profit at $601m, climbing to 25.1¢ and $676m respectively in 2020.