Tullow Reinstates Dividend After Returning to Profit Last Year

ACCRA (Capital Markets in Africa) – Tullow Oil Plc will pay a dividend for the first time since 2014 after returning to profit last year.

“The board has decided to recommend a final dividend of 4.8 cents a share, representing a total shareholder return of about $67 million,” the oil producer said in its 2018 results statement. The payback follows success in cutting debt and reflects increased confidence after drilling in Guyana was brought forward.

“We take the dividend as a positive surprise,” analysts at Barclays Plc said in a note. “The dividend is a tangible demonstration of capital discipline.”

Since Chief Executive Officer Paul McDade took the helm in 2017, Tullow has focused on spending restraint and new exploration areas amid declining profits, and it’s starting to pay off. Net income totaled $85 million in 2018, compared with a loss a year earlier, according to Wednesday’s filing.

Tullow had a “good strong year all around,” McDade said in a phone interview. The dividend is “very much sustainable through the cycle” of oil prices, which he sees staying at $50 to $70 a barrel. Net debt fell to $3.1 billion at the end of 2018 from $3.5 billion a year earlier.

Share Gain
Tullow jumped as much as 3.3 percent in London trading, and was up 2.7 percent at 216.7 pence as of 8:07 a.m. local time, the best performance on the Stoxx Europe 600 Oil & Gas Index.

McDade’s revamp includes an acceleration of drilling plans in Guyana, where the company is set to begin its well program mid-year rather than in late 2019 following exploration success there for Exxon Mobil Corp. Plans for installing the first rig are “well advanced,” McDade said.

In West Africa, Tullow’s traditional area of focus, the company’s net oil production averaged 88,200 barrels a day last year and is forecast to rise as high as 101,000 barrels a day in 2019.

In Uganda, Tullow has been waiting to complete the sale of a stake in its Lake Albert project to keep a lid on spending. It has now agreed on the principle terms for a capital gains tax on the disposal, and is working with the government to complete the deal, according to the statement. The company targets a final investment decision on the project around mid-year.

source: Bloomberg Business News