Tullow Oil, the Irish-founded crude exploration group, said it will increase its exposure to potential global oil price increases this year after a number of its legacy hedges expired in the first half of the year.
The London-listed group, which reported first-half earnings on Wednesday, said oil production in the six months to the end of June was ahead of expectations across its portfolio of African wells.
Group revenues at the Africa-focused exploration outfit was down by just over 2 per cent to $759 million (€695.56 million) in the first half compared with the same period last year despite Tullow’s achieving higher prices for its oil over the period.
Profits after tax, meanwhile, increased by 64 per cent to $196 million, driven mainly by a reduction in impairments, asset revaluations and provision releases, it said.
Tullow had said in May that a number of its legacy hedges on oil prices had increased its positive exposure to potential increases in global crude prices, which are up by around 9 per cent this year, creating boosting cash flow generation at the formerly Dublin-listed group. On Wednesday, Tullow said it expects a “significant free cash flow uplift” in the second half of the year with its full-year guidance unchanged at $200 million to $300 million.
“We now progress into a period of lower capex in the second half of the year and beyond,” said Rahul Dhir, chief executive at Tullow. “We will continue to reduce debt through sustainable free cash flow generation, strengthening our balance sheet and providing optionality for investment, growth and future returns.”
It has also made efforts to reduce net debt, which increased sharply during the Covid-19 pandemic as Tullow borrowed when oil prices collapsed. The group said it is on track to reduce net debt to less than $1.4 billion after it ballooned to more than $3 billion in 2020.
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