Tullow Oil Optimistic over Prospects from East Africa Developments

Tullow Oil PLC is making excellent progress with its East Africa Developments now worth a net investment of KES 86 billion ($86 million) as it focuses on free cash flow primarily aimed at reducing its debt and capital discipline. This is according to Tullow Oil CEO Aidan Heavey who was speaking during the release of Tullow Oil Financial Results for the year ended 2016.

“We have made excellent progress with our East African developments and are building a high-quality exploration portfolio to grow our business,” said Aidan Heavey, Chief Executive.

The company said its exploration activities have continued, with progress made in Kenya and a farm-down deal agreed with Total in Uganda for a total consideration of $900m.

“Good progress was made during 2016 on a standalone development in Kenya with an export pipeline to Lamu; life-of-field development costs are expected to be in the region of $25 to $30 per barrel,” from the financial results.

Following the discovery of more oil at ERUT-1 South Lokichar Basin, the overall oil column for the field is estimated to be 100 to 125 metres, “Tullow believes that significant upside remains across the South Lokichar Basin with the potential to increase the resource estimate to over 1 billion barrels of recoverable oil.”

Read:  Tullow Oil Discovers More Oil At ERUT-1 South Lokichar Basin

“This well proves that oil has migrated to the northern limit of the South Lokichar basin and has de-risked – less likely to involve a financial loss-  multiple prospects in this area,” reads the report.

The company says it is likely to cease operations in Uganda this year after Total Uganda acquired 54.9 Percent stake of its Lake Albert Oil Project.

“Completion of the transaction is subject to certain conditions, including the approval of the Government of Uganda, after which Tullow will cease to be an operator in Uganda. The disposal is expected to complete in 2017. Tullow believes this agreement will allow the Lake Albert Development to move ahead and increases the likelihood of FID around the end of 2017.”

Read: Total Uganda to Acquire 54.9 Percent Stake of Tullow’s Lake Albert Oil Project

On Wednesday, the company announced its full year results for the year to 31 December on Wednesday, with sales revenue falling 21 percent to $1.27bn and gross profit down 8% to $546.9m.

The Board said no dividend will be paid. “At a time when Tullow is focusing on capital allocation, financial flexibility and cost reductions, the Board believes that Tullow and its shareholders are better served by retaining funds in the business.”

Tullow says its 2017 principal financial risks and uncertainties include:  Oil price and overall market volatility, Operational performance and project delivery, maintaining capital and operating cost discipline and the Execution of financial strategy to maintain appropriate liquidity.

Related: UK Pledges USD30M For East African Oil and Gas Sector