Tullow loses $153m in revenue due to hedges

West Africa-focused Tullow Oil lost out on $153 million in revenue due to hedges.

Oil prices have soared in recent months, with current benchmark contracts at around $130 a barrel, but Tullow hedges most of its output with price floors and ceilings to shield against price volatility.

The company, which had a market capitalisation of around $1.2 billion as of Tuesday and net debt of $2.1 billion, said on Wednesday it had it lost out on $153 million in revenue due to hedges.

It hedged 42,500 bpd (barrels per day) of its 2022 output at an average floor of $51 a barrel and ceiling of $78 a barrel and around 33,100 bpd of next year’s output at $55 and $75 a barrel, with smaller production volumes hedged into 2024.

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The energy group had free cash flow of $245 million in 2021, about 45 per cent down from the previous year and broadly in line with guidance of $250 million.

The firm reiterated its free cash flow would reach $100 million at an oil price of $75 a barrel, while it plans to spend $350 million, mostly in Ghana, forecasting overall output of 55,000 to 61,000 barrels of oil equivalent a day.

Tullow’s 2020 cashflow was boosted by the $500 million sale of its stake in Ugandan onshore oilfields to TotalEnergies. - Reuters