Ahead of the publication of Tullow Oil’s (TLW) 2018 numbers, analyst eyes were trained on three areas: dividends, the Lake Albert farm-down in Uganda, and exploration drilling offshore Guyana. Full-year results confirmed what we already knew: that Uganda remains a slow burner, the three Guyanese wells due for 2019 are “high potential, high risk”, and management intends to use shareholder distributions to signal their bullishness.
The last point is our interpretation of a payout equal to four-fifths of net earnings, which will be paid in May if shareholders give their stamp of approval at the oil company’s AGM on 29 April. Before then, they will also want a clearer timetable for the $900m (£698m) farm-down in Uganda to Total and CNOOC, which could net Tullow $150m in cash once a final investment decision is struck.
That is expected “around mid-2019”, although could lead to a slip in first oil from 2022 to 2023 and a capital gains tax payment to the Ugandan state. At present, this charge is unspecified, although Numis models $80m, while local press reports have suggested the figure could be as high as $167m.
Analysts at Numis are guiding for adjusted pre-tax profits of $995m and EPS of 34.6¢ this year, up from $287m and 1.5¢ in 2018.
| TULLOW OIL (TLW) | ||||
| ORD PRICE: | 212p | MARKET VALUE: | £2.94bn | |
| TOUCH: | 209-212p | 12-MONTH HIGH: | 279p | LOW: 164p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 45 | |
| NET ASSET VALUE: | 208¢* | NET DEBT: | 106% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢)** | Dividend per share (¢)** |
| 2014 | 2.21 | -2.05 | -146 | 3.4 |
| 2015 | 1.61 | -1.30 | -97 | nil |
| 2016 | 1.27 | -0.91 | -55.8 | nil |
| 2017 (restated) | 1.72 | -0.29 | -13.7 | nil |
| 2018 | 1.86 | 0.26 | 6.1 | 4.8 |
| % change | +8 | - | - | - |
| Ex-div: | tba | |||
| Payment: | tba | |||
| £1 = $1.29. *Includes intangible assets of $1.9bn, or 137¢ a share. **Adjusted for Apr 2017's 25-for-49 rights issue. | ||||
