Tullow Oil swings to first-half loss

Tullow Oil said on Wednesday that it swung to a loss in the first half as it took a hit from low oil prices, impairments and write-offs.

In the six months to the end of June, the company swung to a net loss of $1.33bn from a profit of $103m in the first half of last year, with sales revenues down to $731m from $872m.

The company revised down its long-term oil price value to $60 a barrel from $65. Tullow recognised a $418m impairment charge on property, plant and equipment and recorded exploration write-off costs of $941m, mainly driven by a write-down of the value of its Ugandan assets.

The group said production averaged 77,700 barrels of oil equivalent a day, down 10% from the first half of last year, while the average realised oil price after hedging was $51.8 a barrel, down from $64.3.

The company narrowed production guidance to between 73,000 and 77,000 barrels of oil equivalent per day from between 71,000 and 78,000 to reflect recent strong performance in Ghana, offset by production curtailments in Gabon due to OPEC+ quotas being applied.

Chief executive officer Rahul Dhir 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."

At 1105 BST, the shares were down 10% at 17.48p.

William Ryder, equity analyst at Hargreaves Lansdown, said: "Tullow is in a difficult spot. Large writedowns have pushed the group into a loss, but even the underlying figures don’t make for particularly pleasant reading. However, production forecasts appear to have stabilised, the group is making progress on reducing its costs and intends to raise a lot of money through asset sales. Management are pulling out all the stops.

"Unfortunately the group’s liquidity is under strain, which makes it essential that the upcoming sale of Ugandan assets goes ahead as expected. Even then lenders will have to agree to waive some covenants, but that would at least buy Tullow the time it needs to sort out its cost base and return to profitability and free cash generation. The road ahead is looking far from smooth and Tullow desperately needs the oil price and its creditors to cooperate over the next 18 months."