Last August, Tullow Oil’s (TLW) mammoth TEN project pumped its first oil. Production from the fields now makes up almost three in every 10 barrels sold, just shy of Tullow’s share of output from its first venture offshore Ghana – Jubilee. Although TEN arrived on time and on budget, it wasn’t without major sacrifice. By March, the combination of big upfront costs and sustained low oil prices had left a staggering debt pile, forcing the group into a $750m (£577m) rights issue at a 45 per cent discount to the then trading price.
Consequently, half-year results show a much-improved balance sheet. A drastic drop in capital expenditure, higher operating cash flow and proceeds from the cash call allowed Tullow to repay $1.07bn of its bank loans. Net debt, still toppy at $3.83bn, has now fallen from 5.1 to 3.3 times cash profits before most business costs, including exploration and impairments.
The latter adjustment came in handy in these accounts, as TEN incurred a $572m write-down on reduced oil price forecasts. Further drilling at the field is also suspended amidst a border dispute between Ghana and Ivory Coast. However, this weaker environment for producers has not impacted full-year guidance for an average of 78,000-85,000 barrels of oil equivalent a day in 2017. Against this, Numis forecasts a pre-tax loss of $314m in the year to December, down from a loss of $908m in 2016.
| TULLOW OIL (TLW) | ||||
| ORD PRICE: | 157p | MARKET VALUE: | £2.2bn | |
| TOUCH: | 156-157p | 12-MONTH HIGH: | 300p | LOW: 142p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 195¢* | NET DEBT: | 140% | |
| Half-year to 30 Jun† | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 541 | 24.1 | 2.8 | nil |
| 2017 | 788 | -519 | -25.2 | nil |
| % change | +46 | - | - | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
*Includes intangible exploration assets of $2.1bn, or 152¢ a share £1=$1.30 †Adjusted for March 25-for-49 rights issue | ||||
