Tullow – Inching Forward On Growth Plans

By Anna Peel. Originally published at ValueWalk.

Tullow Ocado Saga top holdings of David Abrams

Tullow Oil plc (LON:TLW) has upped its stakes in the Jubilee and TEN fields in Ghana, to 38.9% and 54.8% respectively. The group paid a total of $118m in cash for the purchase.

This should add an additional 4,000 barrels of oil equivalent per day (boepd) each year and Tullow increased production guidance to 59,000-65,000 boepd for 2022.

Q4 2021 hedge fund letters, conferences and more

Increased ownership at the two fields will increase capital expenditure by $30m to $380m. Assuming oil prices of $75 per barrel, the larger stake should increase free cash flow by $300m between 2022 and 2026.

The shares rose 2.5% following the announcement.

Tullow’s Earnings

Laura Hoy, Equity Analyst at Hargreaves Lansdown:

“Tullow are making good on plans to expand its Ghana operations with an increased stake in two key fields and are taking advantage of buoyant oil prices, aiming to up production and get a larger slice of the growing pie. Given the supply constraints at the moment, things shouldn’t drop off anytime soon and this should help Tullow recoup the cost of the investment, and then some, relatively quickly. However that’s entirely dependent oil prices, so volatility can’t be ruled out.

With its finances largely under control, Tullow’s finally able to make some strategic moves. Hopefully this is the first of many. But the fact remains that Tullow is behind the curve compared to peers, who are using current conditions to shore up clean energy operations. Tullow risks being stuck clawing its way back to profitability while the rest of the industry marches ahead.”

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