Tullow Oil Plc (TLW.L), a London-based oil and gas exploration and production company, Wednesday, provided lower revenue outlook for fiscal 2009, due to a decline in sales volumes and a significant reduction in realized commodity prices during the year. The company also announced a placing of up to 80.4 million new ordinary shares with both new and existing institutional investors.
The company's full-year revenue is expected to be in the order of GBP 570 million, compared with GBP 692 million a year ago.
Tullow said it invested approximately GBP 690 million in development, appraisal and exploration activities during 2009. Based on the current estimates and work programmes, capital expenditure for 2010 is forecast to be GBP 990 million. Approximately 40% of this investment will be allocated to exploration and appraisal and the remainder to development and production activities. The company's activities in Ghana and Uganda will comprise of approximately 60% of the anticipated 2010 capital outlay.
Further, Tullow stated that group working interest production for 2009 averaged 58,300 boepd, in line with previous guidance. The company expects average working interest production between 55,000 boepd and 57,000 boepd for 2010.
According to the company, realized commodity prices during 2009 were significantly below the 2008 levels. Realized oil price was approximately US$60/bbl, and realized UK gas price was approximately 31pence/therm for pre hedges and 39pence/therm for post hedges. The group's oil production sold at an average discount of approximately 2% to Brent during 2009.
As of December 31, the company's net debt reached about GBP 720 million.
Providing an operational update for fiscal 2009, Tullow said its African portfolio performed strongly in 2009, with production averaging 38,500 boepd, in line with expectations. The company also expects the African portfolio's production to remain relatively stable through 2010 at around 38,000 boepd. The company plans up to 12 Equatorial Atlantic, 10 Ugandan and 8 wildcat wells for 2010 E&A programme.
Tullow also said the first phase of the Jubilee development project continues to progress according to the plan. The Eirik Raude rig is ahead of schedule with all of the planned development wells now drilled. First oil production from the project is expected in the fourth quarter of 2010.
Well results from the Jubilee field continue to be in line with pre-drill expectations. The Jubilee field will increase the company's 2010 average production forecast depending upon the timing of field startup in the fourth quarter.
The construction of the Floating Production Storage and Offtake vessel, or FPSO, in Singapore is on track for sail-away to Ghana in the second quarter of 2010. All process modules have now been loaded on to the main deck. The external turret will be installed in February and module integration and commissioning activities have commenced, the company noted.
Further, Tullow stated that its major projects in Ghana and Uganda have made progress, and 13 out of 15 exploration and appraisal wells were successful. Exploration activities in Block 1 are expected to restart in April 2010 with the drilling of six exploration wells on material prospectivity around the large Buffalo field.
Tullow also said that the Front-End Engineering and Design, or FEED, for the Kasamene development project was initiated this month with the intention to deliver a facility with initial production capacity of 10,000 bopd by the end of 2011. In addition, the FEED for the development of the Nzizi gas field will commence in the first quarter of 2010. The Nzizi gas will be used in combination with the crude from Kasamene to fuel a power station in the Hoima region.
The development drilling campaigns are ongoing on the Okume Complex. Nine wells are planned for 2010 to maintain plateau production at current levels. In 2009, production performance from the East and West Espoir Fields was in line with expectations and averaged 23,550 boepd gross. Meanwhile, gross production from the M'Boundi field was below expectations in 2009 averaging 39,500 bopd due to delays tying in new wells and a slower ramp up of water injection. The M'Boundi field's gross production is expected to average 42,000 bopd during 2010. Further, gross production from the Chinguetti field averaged approximately 10,750 bopd for 2009.
Tullow's other activities are located in Europe, South Asia and South America. UK net production was lower than expected in 2009 and averaged 14,500 boepd, mainly due to the failure of the Bure North well.
Tullow said it expects to record an impairment charge to cost of sales of approximately GBP 20 million in respect of its producing assets. This relates to the UK Bure North well, which encountered depleted gas sands and the Chinguetti field in Mauritania following a downward reserves revision.
Tullow's exploration write-off for 2009 is expected to be in the order of GBP 55 million. This write-off is principally associated with unsuccessful 2009 exploration activities in Côte d'Ivoire, new ventures activity and licence relinquishments. Further, the group's interest rate derivative instruments had a net negative mark to market value of approximately GBP 5 million due to low U.S. Dollar swap rates.
Tullow also sees a pre-tax charge of approximately GBP 16 million for 2009, principally due to a combination of Brent forward oil prices strengthening during the year and reduced volatilities, with a consequent reduction in the time value of the oil derivative instruments for the company.
Separately, Tullow announced its intention to place up to 80.43 million new ordinary shares in the company, representing approximately 9.99% of Tullow's existing issued ordinary share capital, with both new and existing institutional investors.
When issued, the placing shares will be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 10 pence each in the capital of the company, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue of the placing shares. The placing will be made on a non-pre-emptive basis. If all the shares are placed, it would represent an increase of approximately 9.99% of the current issued ordinary share capital of the company, and the placing shares would represent approximately 9.1% of the enlarged issued ordinary share capital of the company. The company also stated that it will apply for admission of the placing shares to listing on the Official List and to trading on the main market of the London Stock Exchange and trading on the Irish Stock Exchange. The trading is expected to commence on February 1.
Subject to the satisfaction of certain conditions, the placing is being conducted through an accelerated book-building process to be carried out by Merrill Lynch International and RBS Hoare Govett Limited, who are acting as joint global co-ordinators and joint bookrunners. BNP Paribas and Calyon are acting as joint bookrunners and Natixis is acting as co-lead manager.
Tullow's full-year results are scheduled to be announced on March 10.
TLW.L is trading at 1,158 pence on the LSE, down 58 pence or 4.77%, on a volume of 8.12 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.