- Tullow expects to achieve between $150m and $200m in free cash flow this year
- Its shares were among the FTSE All-Share Index’s biggest fallers on Thursday
Tullow Oil shares plunged on Thursday morning after the energy firm reduced its free cash flow forecast.
The West Africa-focused energy producer now expects to achieve between $150million and $200million in free cash flow this year, compared to previous guidance of $200million to $300million due to payment delays.
It now anticipates incremental payments from its Jubilee field to arrive in January 2025, while Ghana’s government currently owes around $40million in overdue gas payments to the firm.
The London-based company’s shares slumped by 9.4 per cent to 20.7p just after 11am, making them the FTSE All-Share Index‘s second-biggest faller behind Ithaca Energy.
Tullow further revealed that oil production at the Jubilee field in Ghana averaged around 89,000 barrels of oil equivalent per day (boepd) up to the end of October, which was below forecasts.
It said this was caused by the underperformance of a well, power cuts hitting water injection levels, and ‘unplanned downtime’ at an onshore gas processing plant.
Forecast: West Africa-focused energy producer Tullow Oil now expects to achieve between $150million and $200million in free cash flow this year
By comparison, oil production surpassed expectations at its TEN development, totalling about 19,000 boepd.
In addition, the group said non-operated production was set to average about 10,500 barrels per day in 2024, which is in line with predictions.
Rahul Dhir, chief executive of Tullow, said: ‘Our cash-generative business enables us to continue our deleveraging progress.
‘This has been achieved despite underperformance at the Jubilee field, which has been offset in part by strong performance at TEN.’
He added: ‘We are well positioned to optimise our capital structure and look forward to progressing plans to address our remaining debt maturities.’
Tullow expects its net debt to equal about $1.4billion at the end of 2024, meaning it will have halved over the past five years.
The company has partly accomplished this by cutting capital expenditure, selling assets in Gabon and Equatorial Guinea, and offloading a stake in some Ugandan onshore oil fields.
Its finances have also benefited from a surge in oil prices caused by loosening pandemic-related travel restrictions, OPEC+ countries limiting production output, and Russia’s full-scale invasion of Ukraine.
Under its current strategy, the group aims to have less than $1billion in net debt by 2025 and cash gearing below 1x in the near term.
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