Tullow Oil Swings To Major Loss On Kenya And Uganda Write-Offs

(Alliance News) -Tullow Oil PLC said Wednesday it swung sharply to a loss in the first half of 2020 after writing off more than USD900 million of exploration costs in Kenya and Uganda.

Shares in Tullow were down 10% at 17.41 pence in London in morning trading.

The South America and Africa-focused oil and gas company swung to a USD1.31 billion loss for the six months ended June 30 from a USD387.6 million profit the year before.

The company wrote off a total of USD941.4 million of exploration costs, compared to just a USD81.2 million write-off a year before. This USD941.4 million figure included a USD429.2 million write-off for Kenya Blocks 10BB and 13T due to a reduced long-term oil price assumption.

Tullow also wrote off another USD417.5 million in Uganda in relation to a sale and purchase agreement with Total Uganda, part of Total SE. Under the agreement, Tullow agreed to transfer its interest in blocks Blocks 1, 1A, 2 and 3A in Uganda as well as the proposed East African crude oil pipeline system to Total.

The consideration was structured as USD575 million in cash consisting of USD500 million on completion and USD75 million after final investment decision on the Lake Albert Development project as well as contingent post first oil payments, of which none were recognised as at June 30. This valuation resulted in the write-down.

Additionally, revenue fell 16% to USD731.0 million in the recent half from USD872.3 million a year before, while cost of sales climbed 51% to USD567.0 million from USD375.1 million, resulting in a sharp gross profit drop of 69% to USD164.0 million from USD526.5 million.

No interim dividend was declared, Tullow having paid out an interim dividend of 2.35 US cents per share the year before.

Chief Executive Rahul Dhir, appointed July 1, said: “Despite the very tough conditions in the first half of this year, we have successfully delivered reliable production and major, sustainable reductions to our cost base. We are also close to completing the important sale of our interests in Uganda. The quality of Tullow’s assets remains robust.

“Since my arrival as CEO, we have been developing new plans for our business, with the support of our joint venture partners and expert advisors. These plans will deliver enhanced value from our assets to benefit all our stakeholders including our host countries and investors. We will host a capital Markets Day towards the end of 2020 at which we will update the market on these plans to deliver on Tullow’s true potential.”

Tullow said production has been strong going into the second half and so narrowed its full-year guidance to 73,000 to 77,000 barrels of oil per day. Production averaged 77,700 bopd in the first half, in line with company expectations though down from 86,300 bopd a year before.

Separately, Tullow said it has appointed Mitch Ingram as an independent non-executive director with immediate effect. He will stand for election at the firm’s annual general meeting in April 2021.

Ingram’s most recent experience was at Anadarko, where he was executive vice president of International, Deepwater & Exploration and a member of its executive committee. Previous experience also includes senior positions at Occidental Petroleum and BG Group.

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