Tullow Oil Plc has reported $905 million in revenue from its half-year global operations as the London-based company waits for approvals of the farm-down of its Uganda assets to France’s Total E&P and China’s Cnooc, which are expected to be concluded later this year.
The company, which was also bidding farewell to its founder Aidan Heavey, who has been serving as its chairman after stepping down as chief executive in 2013, said revenue jumped from $788 million to $905m over the six months period ended June.
Gross profit rose 71.9% to $521m, while profit after tax came in at $55m, up from a loss of $348m in the previous corresponding period. Tullow also said it had exceeded its three-year cost reduction target, saving $708m since 2015, which is far above the planned $500m.
“Today’s results are further evidence of the progress that Tullow has made in the first half of 2018,” Tullow’s chief executive Paul McDade said in a statement. “With this firm financial foundation, we can concentrate on growth across our three core businesses.”
Tullow’s expenditure in Uganda in the reporting period was $23.1m, up from $15.8m last year, according to the results, although the amount will be recovered at the completion of its farm-down. The company’s noncurrent assets in Uganda at the end of June were valued at $608.2m compared to $530.8m last year.
Commenting on the remnants of its Uganda operation, Tullow said it expects the government to approve the farm-down its assets by the end of this year. In January last year, Tullow announced a sale and purchase agreement in which the company agreed to transfer 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A to Total E&P for $900m to be paid in instalments. The deal would leave Total E&P with a 54.9% shareholding in all exploration areas.
Cnooc, however, exercised its preemption rights under the joint operating agreements it has with the two companies to acquire half of the transferred interests. The three joint venture partners – Tullow will retain an 11.76% interest in the upstream and pipeline projects after completion of the farm-down, to reduce to a 10% interest in only the upstream project when the government acquires equity in the pipeline once Tullow recovers its costs on the project – are currently waiting for approval of the farm-down from the Uganda government.
Once the farm down is approved Tullow will remain in a non-operator position with both Total E&P and Cnooc retaining a 37.5% shareholding, respectively.
“At completion of the farm-down, Tullow anticipates receiving a cash payment of $100 million and a payment of the working capital completion adjustment and deferred consideration for the pre-completion period ($59 million for 2017 and an estimated c.$70 million for 2018),” the company said yesterday.
“A further $50 million cash consideration is due to be received when FID [the final investment decision] is taken.”
The statement added that the front end engineering design activities for the upstream project are now complete and are currently undergoing initial technical and commercial reviews. Later, engineering, procurement and construction contracts for the project will be awarded as the partners work towards a final investment decision, expected at the end of this year.
It added: “Important geophysical and geotechnical surveys across the upstream area, including at the proposed location for the Central Processing Facility, were completed in June.”
The upstream ESIA [Environmental and Social Impact Assessment] has been completed and has been submitted to the National Environmental Management Authority for review with approval expected in the third quarter.
Aidan Heavey, who founded Tullow in 1985 “as a small gas producer in Senegal”, retired from the company. He was replaced by Dorothy Thompson who was appointed chair of Tullow on 20 July 2018.