Tullow Oil Looks Forward to Another Record Year


LONDON -- Tullow Oil (ISE: TLW.L) has been one of the energy industry's big success stories over the last decade, which has seen the company's shares rise from around 1 pound to more than 15 pounds at their peak.

This morning's interim results saw sales rise by 10% to $1.17 billion and profit before tax leap 48% to $829 million. The token interim dividend was maintained at 4 pence per share.

The leap in profit was largely due to one-off gains arising from a farm-in of its Ugandan assets by Total (NYS: TOT) and CNOOC (NYS: CEO) . The $2.9 billion provided by these two companies, in return for a two-thirds stake, meant that Tullow's net debt has tumbled from $2.6 billion to $695 million over the last 12 months. This should give it much more firepower for new exploration projects -- and it has plenty of those.

Tullow boasted an enviable success rate of 17 out of 22 on wells drilled in the first half of the year. The next six months look set to be equally busy. For all of 2012, Tullow aims to spend $730 million out of its $2 billion capital expenditure budget on exploration activities.

On the production front, 77,400 barrels of oil equivalent was the average daily rate for the first half of the year, up 3% on last year. The majority of Tullow's production now comes from Africa, and this continent will be increasingly important going forward, although the U.K., Netherlands, and Bangladesh all currently chip in, too.

For the full year, an average daily production rate of 80,000 to 84,000 barrels is expected, with the run rate potentially hitting 90,000 by the year's end.

Aiden Heavey, Tullow's CEO, commented:

Our exploration-led growth strategy continues to yield an exceptional success ratio and Tullow has, with the discovery of oil onshore Kenya, opened up a fourth new basin within five years. Our balance sheet has been transformed by the Uganda farm-down and our financial strength will continue to improve through growing production, as Jubilee fulfils its potential. A strong pipeline of activity in the second half of 2012 promises another excellent year for the Group.

Tullow's shares slipped 2% to 1,345 pence this morning, valuing the company at 12.2 billion pounds.

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