Tullow Sees 2017 Cash Flow Beating Forecast After Oil Rally

ACCRA (Capital Markets in Africa) – Tullow Oil Plc raised its expectation for free cash flow in 2017 as the crude-price rally offered a helping hand.

The oil and gas producer expects to report $500 million of cash in its full-year results on Feb. 7, up from a previous forecast of $400 million, it said Wednesday. The company cited “rigorous cost discipline and a rising oil price” and said its West African output also beat forecasts.

“This is a solid trading update,” James Thompson, an analyst at JPMorgan Chase & Co., said in a note. The shares rose as much as 3.9 percent, before trading up 1.4 percent at 224.4 pence as of 9:25 a.m. in London.

The Africa-focused producer and its peers have benefited from a recovery in oil prices, which rose about 18 percent in 2017 — a second year of gains — as output curbs by OPEC and its allies helped to deplete a global surplus.

Tullow’s net output at its West African operations averaged 89,100 barrels a day in 2017, surpassing previous guidance of 85,000 to 89,000 a day, the London-based company said. Sales climbed to about $1.7 billion from $1.3 billion a year earlier.

“Over 2018 we expect to continue this positive momentum,” Chief Executive Officer Paul McDade said. Capital spending will be focused on drilling off Ghana, making up for lost time after a maritime boundary dispute was resolved in September. A rig is en route to Ghana, and the company and its partners are weighing bringing another to accelerate production, he said.

Source: Bloomberg Business News