Tullow ramping up oil drilling, exploration
LONDON -- UK-listed independent oil and gas company Tullow PLC is ramping up drilling and exploration efforts this year and expects to meet output targets at the key Jubilee oil field in Ghana, Chief Financial Officer Ian Springett said Friday.
Jubilee in offshore Ghana is Tullow's biggest producing oil field in Africa and delays to output increases there had weighed on shares in recent months.
"In Ghana, the Jubilee development is now looking very good indeed. We've fixed the problems and we're producing around 110,000 to 112,000 bpd," Springett said.
The company is working to debottleneck the gas handling facility at the floating production storage and offloading unit it uses to extract the crude oil in Ghana. This will allow Jubilee to reach targeted production of more than 120,000 bpd by the end of this year, Springett said.
Tullow, which partners Ghana National Petroleum Company, Kosmos Energy (KOS), Anadarko Petroleum Corp. (APC) and Sabre Oil & Gas in Jubilee, had originally planned to reach 120,000 bpd in mid-2011. But issues with clay in the oil clogging up the wells had delayed plans.
Tullow shares were down around 5% as the company narrowly missed investor estimates for production and earnings in 2012 and said it was writing off a total of $299 million for unsuccessful exploration activities and license relinquishments for the full year--more than double the previous year. Combined with the previously reported asset write downs, the total for the year is expected to be around $670 million.
Tullow's total average production in 2012 was 79,200 bpd versus company guidance of 80,000 bpd to 84,000 bpd due to a production shut-in in the North Sea.
Springer said the exploration write down was higher in 2012 than in the previous year because the company was less successful, particularly in Ghana. But it was also drilling more wells than previously.
This year the company will spend $900 million to $1 billion on exploration and appraisal across the portfolio including in Kenya, Ethiopia, Uganda, Cote d'Ivoire and Mozambique as well as moving towards development approval for projects in Ghana and Uganda.
Tullow's exploration and appraisal campaign is targeting 1 billion barrels of oil equivalent with over 40 wells planned for 2013.
The company had no new significant drilling results but said that a testing program at Tullow's Twiga South-1 well in Kenya is expected to be completed in February.
Analysts said the small earnings miss could weigh on stock in the short-term but the exploration-led outlook was positive.
"Today's update is a reminder of successes in 2012--remedial campaign on Jubilee, addition of new licenses and refinancing, which was a long-term overhang on the stock as spending was set to increase," said RBCCM analyst Al Stanton.