Tullow Oil raise prospect for return of dividend

Tullow Oil’s finance chief has raised the prospect that the Africa-focused producer may resume dividend payments, that were frozen in 2015 due to the oil price crash.

“This year we’ll be maximizing cash flow with a focus on strengthening the balance sheet. And, with our continued performance over the year, that allows us to consider return to the shareholders,” chief financial officer Les Wood said at the company annual meeting of shareholders in London on Wednesday.

Tullow swung back into profit in 2017 after three years in the red. It is set to generate around $500 million in free cash flow at oil prices around $60 a barrel, with every further $5 a barrel adding around $100 million in cash flow, Mr Wood said.

Benchmark Brent crude futures trade at around $74 a barrel.

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Tullow is still considering how to divvy up that money between paying down its $3.4 billion debt pile, investing in assets or shareholder returns.

“We’re considering ... whether we’d use any of that oil incremental free cash flow to accelerate drilling in Ghana. We’ve not come to a conclusion on that,” Mr Wood said. “That would really be accelerating production and cash flow particularly in 2019, more so than 2018.”

Ahead of the AGM, Tullow Oil pointed to "strong production" at its TEN field in Ghana, saying full-year guidance on track at 82,000-90,000 barrels of oil per day. Drilling at the Ntomme field in TEN is also under way, while the resources group has also made progress on its final investment decision in Kenya.

Tullow reduced its net debt to $3.4 billion as of March 31st from $4.6 billion a year earlier, and said it has “current headroom and free cash of approximately $1 billion”. Its 2018 capital expenditure forecast of $460 million remains unchanged, the company said.

“The drilling programme is now under way at the TEN and Jubilee fields in Ghana and we remain on track to deliver on our existing production guidance,” said chief executive Paul McDade. “In east Africa, our Ugandan and Kenyan developments are on track for final investment decisions in 2018 and 2019 respectively and we are preparing for the start of our multiyear exploration programme across our diverse portfolio of exploration prospects in Africa and South America.

“The progress we have made is due to the hard work and financial discipline of the team and the support of our shareholders, allowing us to focus on growing our business and delivering returns,” he said.

Tullow also announced some details on its board; Dorothy Thompson, who was recently appointed as independent non-executive director and chairwoman-designate, is to succeed Aidan Heavey, Tullow's current chairman and founder, from July 20th 2018. Mr Heavey will retire from the board, after more than 30 years with the company, at that time.

In addition, Kevin Massie will step down as company secretary to pursue another role in Tullow, with Adam Holland, currently deputy company secretary and senior legal adviser, taking up the role of company secretary.