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February 16, 2019

Tullow banks on East and West Africa to increase oil production

Gamia 1 oil exploration site in Lokichar,Turkana/file
Gamia 1 oil exploration site in Lokichar,Turkana/file

Tullow Oil plans to start transferring 2,000 barrels of crude oil from Turkana to Mombasa starting April.

In a trading statement and operational update issued yesterday, the UK based oil and gas firm expects to improve oil transfer after investing $70 million (Sh7 billion) in pre development infrastructure on the Kenyan project last year.

The firm said the transfer of stored crude oil from Turkana to Mombasa by road continues as part of the Early Oil Pilot Scheme with an average eight trucks being dispatched every two days, transporting approximately 600 barrels.

“This is expected to increase to 2,000 barrels from April 2019. Currently, there are 60,000 barrels of oil stored in Mombasa with a maiden lifting expected in the first half of 2019,” Tullow said in a statement.

The firm is banking on increased production in Ghana and East Africa to improve its global production to 93,000-101,000 barrels in 2019 up from 88,200 barrels in 2018.

“Tullow is well-placed to deliver on its growth ambitions. In 2019, we will increase oil production in West Africa, target Final Investment Decisions in East Africa and drill the first wells in an exciting exploration campaign in Guyana,’’ Tullow Oil Plc chief executive Paul Mcdade.

He added that despite volatile oil prices, the firm had improved its balance sheet, lowered cost production and a strong cash flow generation.

The firm is expecting to announce gross profit of $1.1 billion on February 13 for the year ended December 31.

Total revenues are expected to grow $1.8 billion (Sh183 billion), thanks to additional proceeds of $0.2 billion (Sh20.4 billion) from corporate business interruption insurance.

According to the unaudited statement, the oil producer is expected to deliver strong free cash flow of $410 million which includes the exceptional payment of approximately $200 million associated with the Seadrill litigation in July 2018.

In addition, the receipt of $208 million of Uganda farm-down proceeds is now expected in the first half of 2019.

The firm’s debt obligation declined to $3.1 billion in 2018 from $3.5 billion the previous year.

The company partners in Uganda, Total and CNOOC, are working with the government to finalise the farm-down which is now expected to be complete in the first half of 2019.

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