Tullow Doubles Dividend Amid Record Earnings
LONDON - Tullow Oil PLC Wednesday doubled its dividend, capping off a year in which the London-listed oil explorer completed a $2.9 billion deal to sell some of its license blocks in Uganda and made a significant discovery in South America.
Tullow, which posted an almost sevenfold increase in pretax profit to $689 million, also said it had begun a remedial program in Ghana to try and correct the well design flaws that have inhibited the expected ramp-up in production there.
"Tullow now has a very strong balance sheet and increased cash flow, which gives us real financial flexibility and a firm foundation for further growth," said Chief Executive Aidan Heavey.
However, this wouldn't include acquisitions, said Heavey, who stressed Tullow will look instead to the "numerous opportunities" in its exploration portfolio to deliver further momentum.
In the wake of the news, Tullow shares rose, at one point edging close to a 2% gain. However, by mid-morning they had settled slightly. At 1000 GMT, shares were up 15 pence, or 1.03%, at 1469p.
The board has proposed a final dividend of 8 pence a share, twice as much as a year ago, and doubling the full-year investor payout to 12 pence a share from 6p a share. The move to reward shareholders reflects Tullow's strong earnings growth, as higher oil prices helped the company realize 38% more per barrel of crude than it did in 2010, delivering record revenue of $2.3 billion for the period.
Work has begun on a $1.1 billion program to further develop the Jubilee field offshore Ghana, which Tullow expects to deliver some 78,000 to 86,000 barrels of oil a day in total net production by the end of the year.
Some Jubilee wells were beset with problems last year that meant Tullow had to revise down its initial estimates for production growth from the field. The company said work was underway to fix the problem, with additional measures planned for later this year.
Tullow last month completed the long-awaited $2.9 billion sale of part of its interests in the three oil blocks in Uganda to France's Total SA and China's CNOOC Ltd., which is expected to unlock investments worth $10 billion to develop the country's oil fields. The company said Wednesday it expects to start production from these fields in 2016.
And in September, a consortium including Tullow, Total and Royal Dutch Shell PLC made a large discovery off the coast of French Guiana, opening up a potentially massive frontier of petroleum development along the northern coast of South America.
Analysts said the results were broadly in line with their estimates and didn't contain any real surprises. Investor interest in exploration firms such as Tullow tends to focus less on pure earnings and more on how successful they have been at finding and developing new fields.
"While reported net income was 7% ahead of our forecasts--and is a positive--we see Tullow's investment case hinging on the breadth of its exploration portfolio," said Barclays Capital's Alessandro Pozzi.
In particular, the firm's assets in French Guiana, Mauritania and Kenya "offer short-term exploration catalysts that could unlock significant shareholder value," said Pozzi, who duly raised his price target on the stock 0.83% to 1815p a share.
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