Tullow Oil forecasts cash flow beating guidance as it applauds a ‘year of positive change and transformation’
- CEO Rahul Dhir said the firm was ‘progressing well’ with its decade-long strategy
- Tullow Oil forecasts 2021 underlying operating cash flow will be around $700m
- The prices of oil has surged to a seven-year high as economies have reopened
Tullow Oil’s boss has hailed a ‘year of positive change and transformation’ as his firm revealed slashed debts and expectations that cash flow will exceed previous guidance.
Rahul Dhir said the company was ‘progressing well’ with implementing its decade-long strategy to exploit its West African assets and had seen major improvements in drilling performance, safety and efficiency.
The energy exploration firm said its net debts at the end of 2021 fell to around $2.1billion from $2.4billion the prior year and were about 25 per cent lower than in 2019.
Financially stronger: Tullow Oil said its net debts at the end of 2021 fell to around $2.1billion from $2.4billion the prior year and were about 25 per cent lower than its levels in 2019
It also predicts underlying operating cash flow will be around $700million while free cash flow will be about $250million thanks to the rebound in oil prices over the second half of last year and cost controls.
For this current year, the London-listed group anticipates to continue reducing its debt pile as it ramps up capital spending to about $350million, with just under three-quarters of that amount focused on its projects in Ghana.
Tullow intends to drill three wells at the offshore Jubilee field – its largest site – as well as two strategic development wells in the TEN field’s Ntomme riser base area and another one in the Enyenra area.
Across these two sites, the company expects to produce between 102,000 and 110,000 barrels of oil on average per day in 2022, even though it plans to shut the Jubilee field down for a fortnight for maintenance reasons.
Outside Ghana, the business forecasts expanding production at the Simba field in Gabon by 40 per cent this year following the successful installation of an offtake pipeline and a drilled infill well.
Dhir said: ‘2021 was a year of positive change and transformation for Tullow, and we ended the year on a firm financial and operational footing.
Dangers: Oil prices are at a seven-year high as economies have started reopening, OPEC has set tighter production limits and weather-related events have caused disruption
‘The delivery of our long-term business plan is progressing well with significant improvements in safety, operating efficiency and drilling performance.
‘In 2022, we will build on these firm foundations and focus on investing in our producing assets in West Africa…There is much to look forward to this year.’
Based on an average oil price of $75 per barrel, Tullow forecasts a higher operating cash flow of $750million but lower free cash flow of around $100million this year.
This weaker free cash flow reflects greater investment and a scheduled $75million payment from oil giant Total for purchasing its Ugandan assets and increased expenditure on decommissioning.
It has hedged around three-quarters of its anticipated sales volumes up to March 2023, followed by 50 per cent for the subsequent year for output of an estimated 60,000 barrels of oil each day between $51 and $78 a barrel.
The value of Brent Crude oil plummeted in early 2020 as coronavirus spread across the globe, a price war between Russia and Saudi Arabia erupted and travel restrictions led to a significant drop-off in demand for petrol.
This sent Tullow Oil to a $1.3billion loss for the first half of that year as it was forced to make a $941million write-off on its exploration assets, mainly those based in Uganda and Kenya, but also its Peruvian Marina-1 well and other assets situated in certain African countries.
Since then, prices have rebounded to a seven-year high as economies have started reopening, OPEC has set tighter production limits and weather-related events have caused disruption.
At the same time, wholesale gas prices have shot up due to a supply shortage caused by high demand from Asia, outages at French nuclear power plants and Russia’s Gazprom limiting its gas exports to Europe, amongst other factors.
Shares in Tullow Oil were down 2.9 per cent to 54.8p during the mid-afternoon on Wednesday, though their value has shot up by 88 per cent over the last 12 months.