Tullow Oil production falls but seen rising in 2019

Tullow Oil revealed full year oil production fell 1% into the bottom half of its guided range, but said it expects to grow output 6-15% in 2019.

The Africa-focused group had produced an average of 88,200 barrels of oil per day last year, down 1% on the previous year and versus the most recent guidance of 87,000-91,000. For 2019, it expects to produce 93,000-101,000 bopd.

The fairly flat production levels combined with higher oil prices during periods to boost revenues and cash flow.

Having sold its oil for an average price of $68 per barrel, the FTSE 250 group expects full year revenue of around $1.8bn, which will be further swelled by roughly $0.2bn of business interruption insurance proceeds. The previous year's revenues came out at $1.7bn, with $0.16bn of insurance proceeds.

Free cash flow, after taking account of a roughly-$200m payment due to Seadrill over a litigation ruling last July, is expected to remain strong at circa $410m, though this is down from the $543m the prior year.

Cash flow was dented by a number of positive working capital items that had been expected in the fourth quarter but which moved into early 2019 and the receipt of $208m of Uganda farm-down proceeds is now expected in the first half of 2019.

Net debt was trimmed to around $3.1bn by year-end from $3.5bn 12 months before, with gearing still at the higher end of the operating range of 1-2 times EBITDA.

Capital expenditure on operating activities is expected to be less than forecast at around $425m, but will rise to $570m this year, almost half of which is investment in seven new wells across Ghana's TEN and Jubilee fields to boost production in line with forecasts. Some $1.4m will be spent on exploration and appraisals.

Dividends will be no less than $100m in 2019.