Tullow’s Jubilee production delayed by two weeks

Shares in Dublin-founded Tullow Oil recovered ground after an initial fall on Friday, after it said flows from a production vessel at its flagship field offshore Ghana will be further delayed by about two weeks and the explorer will have to review its output guidance. "Tullow currently estimates that production from the floating production storage and offloading (FPSO) will re-start in approximately two weeks' time and will also take time to ramp-up," it said.

“Tullow’s production guidance will be re-issued once the new operating arrangements have stabilised.”

The company said in mid-February it had discovered a potential technical issue involving a turret bearing at the production vessel, the FPSO Kwame Nkrumah. At the time, Tullow said oil and gas output from the Jubilee field was unaffected. On Friday, the company said the bearing was damaged and is no longer able to rotate as originally designed. The issue can be “fully resolved,” the company said, adding that it does not anticipate a “material impact” on revenue.

Tullow had said earlier this week it planned to resume exports from the FPSO this weekend.

Shares of Tullow fell as much as 4.4 per cent in London trading on the news, but by later trading they were slightly ahead on the day. Market reaction was cautious.

"Investors are likely to be unnerved by operational difficulties, production delays and potential future restriction on the company's key asset," FirstEnergy Capital said in a note. "The level of future capital expenditure exposure to resolve the bearing issue" could be another source of concern, it said. Each month of shutdown at Jubilee reduces full-year production by 3,100 barrels a day, FirstEnergy estimates.

The Jubilee field produced 102,600 barrels a day in 2015 and was forecast to pump 101,000 barrels a day this year, the company said February 10th. Planned maintenance at the Jubilee field started on March 20th.

Bloomberg