Shares slide at Tullow as annual results disappoint

Shares in Tullow Oil fell sharply on Wednesday after its full-year results disappointed, despite soaring energy prices.

Revenues at the London-listed energy firm, which is focused on Africa, missed market expectations, falling to $1.27bn for year to 31 December, from $1.40bn.

Production averaged 59.2k barrels of oil equivalent per day (kboepd), in line with internal targets. Production rose at its Jubilee field in Ghana and Simba field in Gabon, but was lower than forecast at the TEN fields in Ghana and the Espoir field in the Cote d’Ivoire.

Production was also affected by the sale of Tullow’s interest in Equatorial Guinea and Gabon.

Gross profit improved to $634m from $403m, helped in part by reduced operating costs following the disposals. But one-off charges, including writing off exploration costs and impairments, meant the firm made a pre-tax loss of $81m, dragging it below market forecasts. Its pre-tax loss during the year before was $1.22bn.

Tullow also kept it guidance for the current year unchanged, with production expected to be between 55 to 61 kboepd. Assuming an oil price of $75 per barrel for the rest of the year, the group expects underlying cash flow to increase to $750m. The group reported underlying operating cash flow of $711m in 2021 and free cash flow of $245m.

As at 1030 GMT, shares in Tullow were off 10% at 55.92p.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: “With oil prices through the roof, and the crisis in Ukraine likely to keep them that way for some time, struggling to turn a profit as an oil and gas company is a bad look.

“Asset sales helped the group get costs under control. But it also meant the group exited a potentially lucrative position in Namibia. Plus Tullow’s not been expanding as quickly as hoped in Ghana, so it’s not been able to capitalise on the buoyant price environment quite as readily as expected.

“We are pleased to see the group getting its finances in better shape, but Tullow’s still in a rebuilding phase and profits are harder to come by.”

Rahul Dhir, chief executive, said 2021 had been a “transformational” year, with the balance sheet refinanced and “highly productive” wells drilled in Ghana.

He continued: “We are now concentrating on the successful delivery of our long-term business plan. This year will see a great deal of activity at our flagship Jubilee field, with investment in new infrastructure and new wells to grow production in the near term.

“With additional opportunities to deliver value across our portfolio, including gas commercialisation in Ghana, our revised Kenya development and an exciting well in a proven play in Guyana, we are well-placed to deliver value from our assets and to grow our business.”