Interactive Investor

ii view: Tullow keeps production guidance

12th July 2023 15:44

by Keith Bowman from interactive investor

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This UK listed oil and gas explorer has operations in both Africa and South America. We assess prospects. 


First-half trading update to 30 June

  • Reiterates full year production guidance
  • Net debt at the end of the half of $1.9 billion (£1.46 billion)

Chief executive Rahul Dhir said: 

"This is an exciting time for Tullow and a pivotal moment in 2023 as we are on the cusp of the start-up of Jubilee South East, a project that demonstrates our operational capability and continued investment in Ghana's world class Jubilee field. Gross production from the field is expected to exceed 100,000 bopd which will mark the outset of increased cash flow generation to materially deleverage our business.”

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ii round-up:

Africa focused energy company Tullow Oil (LSE:TLW) today reiterated its  full-year production estimate, as it reintroduced an oil price hedging policy against an uncertain backdrop of global demand and potential recession. 

Production for the full year is expected to come in at between 58,000 and 64,000 barrels of oil equivalent per day (boepd). Its hedging policy now ensures 60% downside protection for the first year ahead, and 30% for the second year, while maintaining full upside exposure for no less than 60%. 

Shares in the Irish company fell 1% in UK trading having come into this latest update down by around a third over the last year. That’s similar to fellow explorers Harbour Energy (LSE:HBR) and EnQuest (LSE:ENQ), although in contrast to gains of more than 15% for oil majors BP (LSE:BP.) and Shell (LSE:SHEL)

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. 

Group net debt of $1.9 billion is forecast by management to reduce to around $1.7 billion come late December 2023. Gross debt fell by $266 million over the period, aided by its own bond buyback. 

Free cash flow over the half year proved a negative $100 million, although it's expected to be a positive $200 million over the second half at an average oil price of $80 per barrel, aided by the expected imminent start-up of its Jubilee South East operation. 

Tullow production averaged 53,000boepd in the first half, with total revenues coming in at around $800 million – down from last year’s $846 million. The price of Brent crude oil is down by almost a fifth over the last year. 

First-half results are scheduled for 13 September. 

ii view:

Founded in and named after the town of Tullow in the Republic of Ireland in the mid-eighties, the company's 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 was eventually scrapped as Capricorn found an alternative partner.  

For investors, net debt of $1.9 billion (£1.46 billion) compares to a stock market value of around £430 million.  In early 2019, Tullow had interests in over 85 exploration and production licences, which is now down to over 30. Concerns about a global economic slowdown continue to overshadow potential oil demand, while fossil fuel use remains under the spotlight given long term climate change concerns.

On the upside, management continues to focus on reducing group debt. The start-up of its Ghana Jubilee South East operation is expected soon, directors have bought Tullow shares, while US interest rates may now be close to their peak. 

In all, and while Tullow’s return to a pre-tax profit in its last financial year was a positive, the shares remain high risk, with investors potentially demanding further reductions in net debt before investing.


  • Full-year production guidance unchanged
  • New operation in Ghana remains imminent


  • Uncertain economic and oil price outlook
  • Fossil fuels negatively linked to climate change

The average rating of stock market analysts:

Strong hold

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