Tullow Oil has sold the first output from its big new offshore development in Ghana, enabling it to begin paying down the $4.7bn debt that has strained its finances for the past two years.
Oil is due to begin flowing from the Tweneboa-Enyenra-Ntomme deepwater project next month and the first customer will be Royal Dutch Shell, which is due to ship 650,000 barrels from the field at the end of August.
The start of operations in the Ten field, 45km off the coast of Ghana, will mark a turning point for the UK-based Tullow, which has pressed ahead with the $4bn project in the teeth of falling oil prices and rising debts. The company launched a this month to increase financial headroom.
Aidan Heavey, chief executive, said the opening of the Ten field would lead to gradual deleveraging from the fourth quarter onward while freeing up resources for planned developments in Uganda and Kenya.
Net production from Ten is expected to be 80,000 barrels per day once it reaches full capacity around the end of this year, representing a 60 per cent increase in Tullow’s output.
The project was conceived during the boom era of $100-a-barrel oil and Mr Heavey admitted it would have been much harder to get off the ground today, with prices at around $45 a barrel. But with most of the capital expenditure out of the way, he said, Tullow would now reap the benefits of a large and productive field with expected operating costs of $8-9 a barrel — about half the level of mature UK fields.
“We’ve now got a business fit for the new oil price environment,” Mr Heavey added.
Shares in Tullow have fallen by 86 per cent since 2012 but they spiked by almost 6 per cent on Wednesday to 210.5p as the positive progress report on the Ten field was accompanied by stronger than expected.
The Africa-focused company reported a net profit of $30m in the six months to June 30, compared with a $68m loss in the same period last year, and much better than analysts’ consensus forecast for a $196m loss. The positive results were aided by aggressive cost-cuts and came in spite of a shutdown at Tullow’s Jubilee oilfield in Ghana in April.
Al Stanton, analyst at RBC Capital, said: “Tullow is turning a corner, albeit with a few bumps on the way, but the share price drop below 200p has provided investors with an opportunity to buy stock in a portfolio that includes sizeable stakes in world-class projects.”
