Tullow Oil considers return of dividends

By Geoff Percival

Tullow Oil is to consider a resumption of shareholder dividend payments, which it last made in the middle of 2014, depending on cash flow generation in the next couple of years, writes Geoff Percival.

Tullow Oil's chief executive Paul McDade

Speaking on the back of the company’s annual results — which showed a return to operating profit after three years of losses — Tullow’s chief executive Paul McDade said the company’s board is likely to look at the dividend question at the end of 2018, adding that a resumption of shareholder returns is “back on the table”.

At this stage, all that ultimately means is that Tullow is open to considering dividends again — based on it being on a firmer financial footing — rather than being intent on doing so.

Mr McDade said Tullow’s expected doubling in capital expenditure for this year, to $460m (€374m), was budgeted based on an oil price of $50 per barrel, meaning the company should still be able to deliver free cash flow should current prices fall back to that level this year.

He said that the company would look at ongoing investment in its asset base, further debt reduction and shareholder returns on the back of any additional cash flow this year.

The Irish-founded exploration company yesterday reported its first operating profit — of $22m — in four years, for 2017.

This marked a turnaround from a loss of $755m in 2016 and compared to analyst expectations of nearly $104m in losses.

Revenues rose by over 35% to $1.72bn, while on a post-tax basis Tullow’s losses fell from $597m to $189m.

Free cash flow amounted to $543m last year. Net debt fell, last year, by 27% to just under $3.5bn.

Tullow’s share price — down around 26% in the past 12 months — inched up by nearly 1.4% yesterday in response.

“Strong production and disciplined cost management has allowed us to continue to both reduce debt and invest in our high-return production assets in Ghana,” said Mr McDade.

Tullow is set to commence fresh drilling rounds at its TEN and Jubilee fields in Ghana this month.

It also said that results from its recent exploration and appraisal campaign in Kenya’s South Lokichar Basin confirm the potential of its assets in that country, which have a resource range of 240m-1.23bn barrels of oil.

The company plans to undertake a number of high impact drilling campaigns in Kenya over the next three years with the view of first oil delivery in 2021 or 2022.

“With good progress being made in Uganda towards first oil delivery, east Africa is on the verge of becoming a major oil exporting region,” said Tullow’s executive vice president for east Africa Mark MacFarlane.

Most Read in Business