Interactive Investor

ii view: Africa-focused Tullow Oil punished for production downgrade

Shares in this UK listed oil and gas explorer fell by a fifth in 2022 and remain on the backfoot this year. We assess prospects.

13th September 2023 11:28

Keith Bowman from interactive investor

First-half results to 30 June

  • Revenue down 10% to $777 million
  • Earnings per share of 4.9 US cents, down from 18.4 US cents
  • Net debt at the end of the half of $1.9 billion, unchanged from late December

Chief executive Rahul Dhir said: 

"We are at an important inflection point in the evolution of our business plan. For the last two and a half years we have relentlessly focused on capital discipline, operational performance and appropriate investment in our assets. This has resulted in a much-improved business, material debt reduction and most recently, the delivery of Jubilee South East which has substantially increased production. 

“We now switch to harvesting mode as our business is set to generate c.$800 million of free cash flow between 2023 and 2025, whilst we will continue to run our business with the same discipline. This will enable us to further reduce our debt, put in place a sustainable capital structure and grow our business to create value for our investors, host nations and employees."

ii round-up:

Africa-focused Tullow Oil (LSE:TLW) today lowered the its expected full-year production forecast as it detailed reduced first-half profits given a lower average oil price. 

Production for the year to the end of December is now forecast to come in at between 58,000 and 60,000 barrels of oil equivalent per day (boepd), down from a previous 58,000-64,000 boepd. Bosses blame the downgrade on lower-than-expected first-half output from its offshore Ghana Jubilee field and the timing of a related start during the second half. 

Earnings per share dropped to 4.9 US cents from 18.9 cents a year ago on an average oil price of $73 per barrel and down from 2022’s $86 per barrel. 

Shares fell over 10% in UK trading having come into this latest news down by almost a quarter over the last year. Shares for rival oil producer Harbour Energy (LSE:HBR) have halved during that time, while oil major Shell (LSE:SHEL) is up almost a tenth. The FTSE Small Cap index is down by almost 4% during that time. 

Tullow has interests in over 30 exploration and production licences across eight countries, including Ghana where it operates the Jubilee and TEN fields along with operations in South America. 

The oil and gas explorer left its hopes for full-year free cash flow unchanged at $100 million based on an average oil price of $80 per barrel. Group net debt is expected to fall to $1.7 billion come its December year-end from $1.9 billion in late June.

Overall sales volumes for the first half rose to 56,900 boepd, up from an adjusted 53,500 in the first half of 2022. Revenue fell 10% to $777 million. 

A further trading and operational update is scheduled for 14 November. 

ii view:

Founded in and named after the town of Tullow in the Republic of Ireland in the mid-eighties, Tullow shares today are listed on the London, Irish and Ghanaian stock exchanges. Its South American operations are situated in Guyana and Argentina. Its previously announced merger with Capricorn Energy (LSE:CNE) was eventually scrapped as Capricorn found an alternative partner.  

For investors, net debt of $1.9 billion (£1.52 billion) compares to a stock market value of around £500 million.  In early 2019, Tullow had interests in over 85 exploration and production licences, which is now down to nearer 30. Concerns for a global economic slowdown still overshadow potential future oil demand, while fossil fuel usage remains under the spotlight given long term climate change concerns.

More favourably, management remains focused on reducing group debt. The start-up of its Ghana Jubilee South East operation should assist production output medium to longer term, directors have also previously bought Tullow shares, while recent cuts to production made by Saudi Arabia and Russia have helped boost the oil price. 

For now, and while Tullow’s return to a pre-tax profit over its last full financial year was a positive, the shares remain higher risk, with more investment interest likely once there's a meaningful reductions in net debt.


  • Previously reinstated its oil price hedging policy
  • Delivering new operations in Ghana


  • Expose to operations in politically troubled Garbon
  • Fossil fuels negatively linked to climate change

The average rating of stock market analysts:

Strong hold

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