UPDATE 2 -Tullow sees key Uganda deal completing in September

Posted August 24, 2011 by Ugandan Diaspora News Team in Economy ~ 3,325 views


LONDON, (Reuters) ~ British oil firm Tullow Oil (Stuttgart:591219) said it expected to conclude a long-awaited deal in Uganda in September as it posted soaring first-half profits and doubled its dividend.

Tullow has been waiting since last year to finalise a deal to bring in new partners French oil major Total (Euronext: FP.NX) and Chinese group CNOOC (HKSE: 0883.HK) to start a $10 billion oil development project in Uganda.

“While delays to the farm-down to CNOOC and Total have been frustrating, we now expect completion in September,” Chief Executive Aidan Heavey said in a statement on Wednesday as the company reported its first-half results.

Tullow, which has assets across Africa and in the North Sea, posted pretax profit of $540 million in the six months to June 30, a 312 percent jump from the year-earlier period, beating a consensus forecast of $509 million from a company-supplied poll of analysts.

Profits were boosted by higher oil prices and from the company’s ramp-up in production at its Jubilee oil field in Ghana.

The company said it planned to double the interim dividend to 4 pence per share to reflect the fundamental change in its finances brought about by bringing Jubilee onstream.

Royal Bank of Scotland (LSE: RBS.L ) analyst Phil Corbett called Tullow’s update “broadly positive”.

“Although no consensus dividend estimate was available, we feel that the dividend hike may be ahead of expectations,” he said.

Shares in Tullow, which have slumped 27 percent in the last month, lagging Britain’s bluechip index by around 14 percent, had gained 2.6 percent to 972 pence by 0750 GMT, making it one of the top FTSE risers.


With the Uganda deal close to finalisation, investor focus has switched to Tullow’s exploration prospects, with the company currently drilling two wells in French Guiana and Liberia.

“Tullow’s exploration push over the next 12 months looks unparalleled. The scale and diversity of the campaign offers materiality and transformational potential for Tullow,” said Bank of America Merrill Lynch analyst Alejandro Demichelis.

The company’s exploration director Angus McCoss said in a telephone interview that the French Guiana and Liberia wells were the most important Tullow has drilled since it made the first discovery at what is now its Jubilee field in 2007.

“There’s a potential in (French) Guiana to open up a trend which could be bigger than Ghana,” he said, adding that the results of both wells, called Zaedyus and Montserrado, were expected in the next two to three weeks.

Tullow will receive proceeds of $2.9 billion from Total and CNOOC shortly after the completion of the Uganda deal, giving it the firepower to carry out accelerated exploration and appraisal in French Guiana and Liberia should the wells be successful, finance director Ian Spingett said.

In a move that was widely expected, the company revised down its guidance for full-year oil production.

Tullow said full-year production was now expected to be between 82,000 and 84,000 barrels of oil per day (bopd), down from a forecast of 90,000 to 94,000 bopd given in July, due to rig delays at Jubilee.

“It’s all about timing of wells and productivity in the short term, which is why we anticipate a very strong year in 2012 where production for the group level will be in excess of 100,000 barrels per day,” chief operating officer Paul McDade said. (Editing by Matt Scuffham and Will Waterman)

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Ugandan Diaspora News Team

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