By Nicholas Earl
Tullow Oil has kept its forecasts for steady output and lower cash flow this year, sending its shares lower, even as it reported higher free cash flows for 2022.
Shares in the company are down 7.7 per cent on the FTSE 250 this afternoon, compared with a flat index for European oil and gas firms.
The company plans to invest $400m this year, mainly on its flagship fields in Ghana, expecting free cash flow to come in at $100m at an oil price of $80 a barrel, or twice that at $100 per barrel, unchanged from previous guidance.
For 2022, free cash flow came in at $267m, up from $245m in 2021 and in line with forecasts.
It also revealed revenue in 2022 increased to $1.78bn, from $1.29bn a year ago.
However, with some tax incentives having run out, higher investments, and new wells only starting in the second half to make up for declining output elsewhere, finance chief Richard Miller told a conference call cash flow would likely be negative in the first half before strengthening thereafter.
Jefferies analyst Mark Wilson argued that even with new production coming onstream in the second half of the year, Tullow’s overall production was to expected to remain only steady.
He also pointed to the $100m cash flow guidance for 2023 at $80 a barrel as a reason for the share price weakness, given oil prices are already at around $83 per barrel .
Overall, Tullow expects to produce between 58,000 and 64,000 barrels per day (bpd) this year, after 61,000 bpd in 2022.
The company plans to hedge around 40-50 per cent of its output around a year out, Miller told Reuters.
Tullow hedged 33,100 bpd of this year’s output and 11,300 bpd of 2024’s production at between $55 and $75 per barrel.
Last year, its revenue would have been $319m higher without hedges.
Reuters – Shadia Nasralla
The post Tullow Oil’s shares tumble as company stays cautious over output appeared first on CityAM.
