Tullow Oil lowers production guidance, confirms revenue in line with expectations

Oil and gas explorer Tullow Oil adjusted the full year production guidance from its West Africa operations as it confirmed revenue and costs are in line with annual expectations.

The FTSE 250 group lowered oil production guidance from between 66,000 to 70,000 barrels per day (bpd) to be in the range of 66,000 to 67,000 bpd, adding full year production from the Jubilee field in Ghana is expected to be approximatelyb100,000 bpd.

Earlier this year, Tullow lifted the guidance for its Ghana project, only to revert to the original 100,000 bpd halfway through 2015 due to short-term production difficulties, adding it was in the process of developing its TEN project in the country. The project is scheduled to begin producing halfway through next year and is expected to boost total production in West Africa to 100,000 bpd by 2017.

“As we approach the end of the year, we are focused on our priorities of generating steady cashflow from our operations, completing TEN on schedule and on budget, ensuring we retain appropriate liquidity and building on our exciting exploration prospect inventory for the future,” said group chief executive Aidan Heavey.

Meanwhile, the company said trading has remained in line with expectations since the start of the year, with revenue and costs largely in line with annual forecast. Tullow expects full year operating cashflow before working capital and tax to be around $1bn, with net debt of approximately $4.20.

Capital expenditure is anticipated to be $1.90bn in 2015, declining to $1.20bn in the following 12 months, while the company’s cost reduction plan, which aims to save $500m over three years, remains on track despite booking a $40m one-off restructuring cost this year.

The London-listed company said its current hedging programme has a net positive mark-to-market value of approximately $450m, with 34,500 bpd hedged at $85.98 per barrel in 2015 as of the end of October. In comparison Brent crude traded at $47.23 a barrel at 0910 GMT on Wednesday.

Tullow has 36,011 bpd hedged at $75.45 a barrel for next year, with a further 22,500 bpd hedged at $73.44 a barrel for the following 12 months and 9,000 bpd hedged at $62.67 a barrel for 2018.

Tullow shares were down 1.12% to 211.20p at 0912 GMT on Wednesday.