Business

Tullow Oil on track to reduce net debt to less than €1.3bn

Africa-focused producer has increased access to oil price upside for the remainder of this year and next, it said in trading update

Tullow is on track to reduce net debt to less than $1.4 billion after it ballooned to more than $3 billion in 2020. Photograph: Bloomberg

Thu May 16 2024 - 14:11

Tullow Oil increased its exposure to global oil prices after a drop in debt allowed the Africa-focused producer to take on more risk.

As some of its hedges expire this month, Tullow has “increased access to oil price upside for the remainder of 2024 and 2025,” it said in a trading update on Thursday.

Those changes mean that a $10 increase in the oil price to $90 (€83) a barrel this year would generate an additional $100 million of free cash flow, Tullow said.

The global benchmark Brent traded at about $83 on Thursday morning in London.

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Tullow is on track to reduce net debt to less than $1.4 billion after it ballooned to more than $3 billion in 2020 as oil prices collapsed.

That dictated a more conservative hedging strategy that capped the benefit of higher prices after crude recovered.

The company, as of April 30th, has protected a quarter of production from falling prices in the first half of 2025.

“We expect to take additional positions to protect 60 per cent of 2025 downside by the end of this year,” a company spokesman said in a response to questions.

Overall, Tullow is “on track to deliver our free cash flow expectations of [about] $600 million over 2024 to 2025 at $80 [per barrel] and we are well placed to capitalise on a higher oil price environment. At the same time, we are positioning ourselves to deliver material sustainable free cash flow in 2026 and beyond,” company chief executive Rahul Dhir said.

The company produced an average of about 66,000 barrels of oil equivalent per day (boepd) during the first quarter of the year. That includes about 7,000 boepd of gas production, within the expected range for the period, it said.

Tullow’s working interest production guidance for the year remains at 62,000 to 68,000 boepd. For the full year, production is expected to be “towards the lower end of the range,” it said.

Shares of the Irish-founded company rose 2.5 per cent. The stock is down about 1.3 per cent so far this year.

Tullow derives most of its production from the Jubilee in Ghana, which produced a net 36,000 boepd day during the quarter while production from its Ten field came in “ahead of expectations.” – Additional reporting by Bloomberg

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