Tullow Oil has enough money to weather a collapse in oil prices and expects the startup of a major oil project in Ghana this summer to replenish its coffers, it said on Wednesday.
The Africa-focused oil company said it entered 2016 with $1.9 billion in undrawn bank facilities, giving it the option to tap more money if needed, and that it was able to shave another $200 million off its $1.1 billion capital investment budget.
“We make money at $30 a barrel because we have low-cost fields, the question is just how much. Our job is to cut costs,” Tullow Chief Executive Aidan Heavey told Reuters.
Tullow’s balance sheet had been stress tested at $25 a barrel and that even at oil prices at this level the producer had sufficient liquidity to survive, he added.
Oil prices have fallen close to 12-year lows, intensifying a decline since mid-2014 due to a global oversupply in crude oil.
This decline meant Tullow booked impairments and exploration write-offs totalling $1.15 billion last year but said it expected full-year gross profit of $600 million on revenue of $1.6 billion.
The company will publish final results on Feb. 10.
Tullow also said net debt was expected to be $4 billion, lower than many analysts had forecast, lifting its shares. Tullow’s stock traded 10 percent higher at 0841 GMT.
“Tullow has provided a reassuring operational update and outlook. We believe the company has the financial flexibility in place to fund its capital commitments,” said analysts at Barclays who rate the stock as “overweight”.
Tullow’s TEN project is expected to start producing first oil between July and August, a turning point for the company that marks the end of its major financial commitments.
The TEN startup means Tullow expects 2016 West Africa oil output to average 73,000-80,000 barrels of oil per day (bopd), up from 66,000 bopd last year.
Source: Reuters
