Tullow shares fall as delayed payments dent plans to pay off debt

Tullow Oil has been hit by delayed payments from a Ugandan exploration project, but expects production to increase this year, the company revealed this morning.

Production hit 88,200 barrels of oil per day last year, and should reach between 93,000 and 101,000 in 2019, Tullow told markets.

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Revenues are expected at $1.8bn (£1.4bn), and gross profit $1.1bn as the company prepares for its first year without founder Aidan Heavey at the helm.

However, the $208m from selling its stake in Ugandan oilfields, which Tullow was hoping would help pay off debt, did not materialise last year.

Net debt stood at $3.1bn at the end of last year, $300m more than forecast.

Shares were trading down 2.5 per cent to 195.45p in the early afternoon.

“Cash flows are short of expectations [which] probably explains why the shares are a little subdued this morning,” Hargreaves Lansdown analyst Nicholas Hyett said.

“They’re one-off headwinds though, and if you strip them out, Tullow’s promise of at least $100m in dividends from next year looks very deliverable.”

The company is planning to drill seven new wells in Ghana this year, which it hopes will add annual gross production of around 180,000 barrels per day.

However, if oil prices remain unstable, it could eat into Tullow’s business, Hyett said.

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“But the group’s got over half its production hedged for next year, and a floor of $56.24 should help mitigate a worst case scenario,” he added.

Chief executive Paul McDade said: “Despite a volatile oil price, Tullow’s improved balance sheet, low cost production and strong cash flow generation, even at lower oil prices, will allow us to both invest for growth and pay a sustainable dividend.”