Debt-laden Tullow Oil posts first net profit in five years - Financial Times

Tullow Oil, the Africa-focused oil and gas explorer, has declared its first dividend since the 2014 oil price crash as it posted its first net profit for five years.

The London-listed group, which suspended payouts to shareholders in 2015, said it will pay a final dividend of 4.8 cents a share in May, totalling $67m. It has already pledged to distribute at least $100m to shareholders annually from 2019.

Tullow swung back into profit with full-year net of $85m, from a $175m loss in 2017, on revenues of $1.9bn, compared with of $1.7bn. It generated a pre-tax profit of $261m versus a $286m loss in 2017.

Like many of the other so-called independent oil explorers and producers, Tullow was caught out by the oil price crash of 2014 and racked up heavy debts as it had committed to developing capital-intensive projects.

Tullow still has debt of $3.1bn, down from nearly $3.5bn in 2017.

Paul McDade, who took over as chief executive in 2017, said the company had worked hard in the past three years to tackle its balance sheet and to cut costs. Its efforts to lower its debt burden included a $750m cash injection from shareholders in 2017.

"Tullow has worked hard over the past few years to become a self-funding, cash-generating business with a robust balance sheet, low-cost assets and a rigorous focus on cost and capital discipline," said Mr McDade.

Tullow was boosted last year by achieving a higher average oil price for its production of $68.5 a barrel, up from $58.3/barrel a year earlier, although average daily production from its projects in west Africa, which underpin the group, was slightly lower, at 88,200 barrels of oil a day compared with 89,100 barrels/day in 2017. Tullow has said it expects to boost production this year to 93,000-101,000 barrels/day.

Tullow plans to make final investment decisions this year on projects in Kenya and Uganda.

The Uganda project has been at the centre of a tax dispute with the country's authorities after Tullow struck a deal to sell a stake in the scheme to France's Total and Cnooc of China. The $900m deal was delayed by the row over how much tax should be paid but Tullow said on Wednesday that it had agreed "the principles" on how much capital gains tax should be paid.

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