Tullow to push ahead with cost cuts despite oil price rally

Ahead of a meeting with shareholders Tullow Oil reaffirmed its full-year guidance for production, cost savings and capital expenditures, despite the recent rally in the price of oil.

Production from West Africa and Europe rose to 74,800 barrels of oil equivalent per day (boepd), with the bulk of that coming from Africa, in line with previous guidance and estimates from analysts at Westhouse Securities.

The TEN cluster development project – in which Tullow has a 49.95% working interest - is now 55% complete with first oil on track to be achieved by mid-2015, the company said in a statement.

Said project is located offshore Ghana and consists of three discoveries in the deepwater Tano block, Tweneboa, Enyenra, and Ntomme, in water depths ranging from 1,000 to 2,000 meters.

Among the highlights of the period, the International Tribunal of the Law of the Sea rejected Ivory Coast’s application to force the firm to suspend its operations along the border with Ghana.

The company stood by its guidance for capital expenditures of $1.9bn in fiscal year 2015.

Tullow stuck to its guns when it comes to its $500m cost savings programme, despite the recent rally in the oil price.

Thursday’s trading update was released ahead of the company’s Annual General Meeting which was due to be held at noon on the same day.

“The Tullow investment case is all about delivering strong production and cash flow growth from its high margin oil developments in West Africa and beyond that from East Africa. We retain our Buy rating and 600p target price,” wrote Westhouse analysts Mark Henderson and Jamal Orazbayeva in a research note e-mailed to clients on Thursday morning.

Net debt at period end stood at $3.5bn with $2.3bn of additional funding facilities available.

As of 08:54 shares of Tullow Oil were higher by 0.54% to 426.2p.