Mzee geza vipi wewe? tullow oil just made profits, heres friday news from daily telegraph u.k
Tullow Oil delivers surprise profit despite production woes
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Tullow Oil shrugged off lower production and weaker oil prices to post a surprise first half profit CREDIT: JODY AMIET/AFP/GETTY IMAGES
By Jillian Ambrose
27 JULY 2016 • 5:54PM
T ullow Oil has delivered a surprise half-year profit, despite production issues at its West African fields and weak oil prices.
The mid-cap explorer was expected to report a post-tax loss of $196m, but made a $30m profit. Pre-tax profit totalled $24m, compared with a loss of $10m last year.
Tullow’s unexpected growth comes in spite of low oil prices and falling production. Prices averaged less than $40 a barrel in the first six months of the year, and dropped to less than $28 in January. In the same period last year, the average price of a barrel of oil was $56.
“Tullow is well placed to move forward with a restructured and more efficient business that can deliver growth”
Tullow Oil chief executive Aidan Heavey
Ian Springett, Tullow’s finance boss, said the explorer has protected its production against the weaker market price by hedging around half of its volumes at $74 a barrel for 2016 and dramatically cutting spending levels at its already low-cost portfolio. For next year the company has locked in a price of $65 a barrel for its oil, he added.
“Even if oil prices were to fall we’re pretty well protected,” Mr Springett said, adding that the company should achieve free cash flow by the fourth quarter.
Tullow also suffered an extended shutdown of its Jubilee oilfield off the coast of Ghana in April
. Production restarted in early May.
The oilfield produced 62,900 barrels of oil a day in the first half, but this is expected to reach 85,000 barrel a day in the second half of the year. Tullow is also due to begin production at its TEN oilfield, which is also located off the coast of Ghana, in August.
Aidan Heavey, chief executive of Tullow, said the TEN field would be "transformational” for the company as it would allow it to increase production while cutting costs, and help it to tackle its $4.7bn debt pile .
"Tullow is therefore well placed to move forward with a restructured and more efficient business that can deliver growth from its portfolio of high quality, low cost producing, development and exploration assets,” Mr Heavey said.
Tullow has warned it may have trouble meeting one of its financial covenants this year as a result of low global oil prices
Tullow has warned it may have trouble meeting one of its financial covenants this year as a result of low global oil prices
Pic: Tullow Oil
Oil and gas explorer Tullow Oil has reported a $1.3 billion (£900 million) pre-tax loss for the 2015 year to December and has warned it may have trouble meeting one of its financial covenants this year.
Revenues were down 27 per cent to $1.6 billion (£1.1 billion), making it the second year of losses for Tullow following a $2 billion (£1.38 billion) pre-tax loss booked for the 2014 year.
Tullow, which focuses its exploration activities largely in the Africa and the Atlantic Margins, reports net debts rose to $4 billion (£2.76 billion) in the 2015 year, up from $3.1 billion (£2.14 billion) in 2014.
The company said amendments to the financial covenants – an agreement between borrower and lender to stay above a set debt-to-equity ratio – were agreed in the 2015 year “to address the risk of any potential covenant breach during a period of oil price volatility and investment in production and development assets in West Africa”.
Tullow adds: “Notwithstanding our forecasts of liquidity headroom throughout the 12 month period, there remains a risk, given the volatility of the oil price environment and its impact on operating cash flows and facility availability, that the Group’s liquidity position may deteriorate and/or the Group may become technically non-compliant with one of its financial covenants at the end of 2016.”
The company said it plans to cut capital expenditure dwon from $1.7 billion (£1.1 billion) in 2015 to $1.1 billion (£760 million) in the 2016 year and then down to $300 million (£207 million) “from 2017 onwards if the low oil price persists”.
Commenting on the full-year figures, Tullow Oil chief executive, Aidan Heavey, said: “Today’s results demonstrate that Tullow adjusted well to low oil prices in 2015.
“We secured current and future cash flow through good operational delivery in West Africa, continued to build our resource base in East Africa, significantly cut costs across the Group and benefited from our strong hedging position.
“Our challenge in 2016 is to be equally robust in responding to the uncertainties that remain in the sector.”
Shares in Tullow Oil were down 2.1 per cent in early Wednesday trading.
Read more at
Tullow Oil reports $1.3bn pre-tax loss for the 2015 year
Is trouble looming for shareholders at Premier Oil plc and Tullow Oil plc?
Image: Premier Oil: Fair use
By Roland Head - Friday, 1 July, 2016 | More on: PMOTLW
Mid-cap oil stocks have rebounded strongly so far this year. Shares in both
Premier Oil (LSE: PMO) and
Tullow Oil (LSE: TLW) have risen by 55% in just six months.
But these gains can also be seen as a warning. One of the reasons shares in Premier and Tullow fell so low at the start of the year is that the market was pricing-in the risk that these firms might have to raise cash from shareholders.
That hasn’t happened so far, partly because oil’s rebound has eased the pressure on both companies’ cash flows. But statements this week from Premier and Tullow have made it clear that the situation remains tight.
Bank tests delayed while talks continue
Premier Oil issued a statement on Friday morning confirming discussions are on-going with its lenders. The firm is trying to persuade its debt holders to relax the terms of its $2.68bn net debt, for the second time in two years.
Premier said today that the planned test of its financial covenants on 30 June has been delayed until 31 July. This will give the company and its lenders more time to negotiate a new deal.
My reading of this is that if Premier’s covenants were tested today, it would breach them. Once in default, Premier would have little choice but to raise cash through a fire sale of assets or an issue of new shares.
Although it’s good news that the lenders are still willing to work constructively with Premier’s management, these discussions have been going on for some months. Finding a solution obviously isn’t proving easy.
In today’s statement, Premier said that
“in return for the proposed amendments … additional security will be provided for existing debt holders.” No further details were provided, but this could affect shareholders’ interests.
For example, Premier might issue debt holders with warrants or additional shares. Another possibility is that Premier will have to sell or suspend certain projects — such as Sea Lion in the Falkland Islands — until its financial situation improves.
Premier is an excellent firm operationally, but in my opinion there’s still a strong chance it will have to raise cash by issuing new shares. After this year’s gains, I’d sell.
Better, but not good enough?
Thursday’s trading update from Tullow Oil was broadly positive. Like Premier, Tullow is an excellent operator with a track record of successful delivery. Tullow’s West African TEN project is expected to start producing oil in the next three-to-six weeks, on schedule and on budget.
The problem is that developing TEN has cost Tullow a lot of money. Net debt is now $4.7bn, up from $4bn at the end of last year. Although the firm currently has undrawn debt and cash of $1bn, this could fall fast. The group’s borrowing facilities are scheduled to be reduced by $250m in October and by a further $200m in April 2017.
Tullow plans to refinance its loans in 2017, but admits that
“strengthening the balance sheet and debt reduction” are key priorities for 2016. Options under consideration include asset sales and
“other funding options”. This could include issuing new shares.
Like Premier, Tullow is an excellent operator with too much debt. In my view, this makes the shares a sell. I believe there are better choices elsewhere.
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Is trouble looming for shareholders at Premier Oil plc and Tullow Oil plc?
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