Tullow Oil reported a surprise loss after writing down the value of reserves off West Africa as the company looks to boost growth.
The company (LON:TLW) posted a full-year loss after tax of $110 million, missing analyst estimates for a profit. The result mainly reflects an impairment on its Ghanaian TEN development, whose fields are going into decline.
While Chief Executive Officer Rahul Dhir has stabilized the former wildcatter — all but ceasing frontier exploration to focus on established projects — years of borrowing have forced Tullow to channel capital into deleveraging, hampering opportunities for growth.
Dhir hopes to turn that around, in part, by snapping up assets ditched by larger oil companies.
“There’s a structural shift in the industry, particularly in Africa, with the majors exiting mid- to late-life assets,” the CEO said in an interview. Tullow’s cash flow gives it “the ability to invest both organically and inorganically and start to return capital to shareholders.”
Tullow reported free cash flow of $170 million, ahead of guidance, and net debt of $1.6 billion. The company booked impairments and writeoffs totaling $435 million.
The TEN project was the largest impairment at $301 million. This was due to a development plan before the government that’s taking longer than anticipated to be approved, Dhir said. “They’ve just been pushed back in time.”
The shares were trading down 2.9% at 10:00 a.m. in London. The stock has slumped 30% this year on concern output is stalling at some West African and non-operated fields.
Tullow expects to produce 62,000 to 68,000 barrels of oil equivalent a day this year, with net debt falling further to below $1.4 billion, it said in a statement.
“We’re changing the narrative around the company,” said Dhir, who estimates debt is on track to fall under $1 billion by the end of 2025. “That puts us in a strong position where rather than paying lots of money to service debt, you can invest that in either growth and you can invest that in returning capital.”
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