PROFITS AT exploration company Tullow Oil soared by 181 per cent in the first half of 2008, due to high oil and gas prices.
Although production increased by just 1 per cent, to the equivalent of 70,550 barrels of oil a day, and the volume of sales fell back by 2 per cent, rising oil and gas prices saw pretax profits at the firm jump from £66.6 million (€83.6 million) for the first half of 2007 to £187.3 million for the same period in 2008.
Revenue from the sale of oil and gas rose by 33 per cent to £378 million as the average price of oil and gas prices increased by more than 40 per cent. This led to basic earnings per share increasing by 237 per cent to 17.2 pence. A strong financial performance also saw the firm pay down its net debt by 19 per cent to £417.3 million.
Aidan Heavey, chief executive of Tullow, said that the business was in “outstanding shape”.
“One of the biggest problems in the oil industry is access to cash, but Tullow has a very strong financial base,” he said.
Tullow is to keep its interim dividend unchanged at 2 pence, due to its intention to increase capital investment in its planned work programmes. The firm currently has 50 exploration wells in 15 campaigns, with the potential of producing multiple billions of barrels.
Operating costs increased by 11 per cent to £72.1 million, driven by upward cost pressures in oil and gas services and an increase in royalty payments Tullow made in Gabon, which are directly linked to oil prices.
Tom Hickey, chief financial officer at Tullow, said that 2008 is set to be a record year, as disposal of two non-core assets will net the firm an additional £340 million.
Tullow also hopes to refinance $2 billion in existing debt facilities over the next six months and anticipates a total 2008 capital expenditure of approximately £480 million. Tullow’s activities in Africa will comprise 75 per cent of the anticipated capital outlay, with the principal expenditures being in Ghana and Uganda.
Tullow also announced yesterday that Ian Springett will assume the role of chief financial officer from September 1st, taking over the position from Mr Hickey, who gave notice of his resignation last April. Mr Springett moves to Tullow from BP, where he has worked for 23 years.
