Yahoo Finance Falling oil price pushes Tullow Oil to £400m loss
Tullow Oil has laid bare the full cost of the floundering oil market recovery after revealing a $650m (£498m) writedown on its African oil assets and gloomier than expected results.
The relapse in ailing oil prices over the first months of this year meant that Tullow was forced to stomach a impairment at its TEN oil field in Ghana of £493m in the first half of 2017.
The FTSE 250 explorer warned investors of the hit earlier this year but disappointed the market again with a deeper than expected pre-tax loss of almost £400m compared to a modest pre-tax profit of $24m in the same period last year.
The swing into the red came despite a 46pc rise in revenues, from $541m to $788m.
Les Wood, Tullow's chief financial officer, said he would urge the market to look beyond the heavy loss to a stronger operational performance over the period.
"We've cut our net debt by about a $1bn since the end of 2016 to $3.8bn and we're ahead on our targets to increase free cash flow. We feel in a good place. The loss was all driven by non-cash impairments. We would ask people to look past that," he said.
The company's share price rose 10pc over the morning to a five week high of 164.50p with help from a buoyant oil market. The price of Brent has climbed to over $50.50 a barrel this morning in a third day of gains after Saudi Arabia pledged to cut even deeper into its output.
Tullow is expected to continue to grow its cash flow from $200m in the first half after cutting its capital expenditure by 20pc from its earlier budget of $400m from $500m. Mr Wood said it could tighten its belt further.
The extra cash is expected to erode its heavy debt pile with the help of a $750m rights issue earlier this year.
"As we said in June, the rights issue was the correct decision because it has given us the financial flexibility that we need," said Mr Wood.
Paul McDade, the chief executive who took the top job in April, said the company had performed well "despite continued challenging market conditions".
“Combined with the rights issue completed in April, this has allowed us to retain operational and financial flexibility and reduce our debt during the first half by around $1bn,” he said.
