Tullow Oil (TLW.L) on Wednesday kept its forecasts for steady output and lower cash flow for this year and downgraded reserves at its TEN field in Ghana, sending its shares lower, even as it reported higher free cash flows for 2022.
The company plans to invest $400 million this year, mainly on its flagship fields in Ghana, expecting free cash flow to come in at $100 million at an oil price of $80 a barrel, or twice that at $100 a barrel, unchanged from previous guidance.
For 2022, free cash flow came in at $267 million, up from $245 million in 2021 and in line with forecasts.
With some tax incentives having run out, higher investments, and new wells only starting in the second half to make up for declining output elsewhere, finance chief Richard Miller told a conference call cash flow would likely be negative in the first half before strengthening thereafter.
Tullow also booked a $391 million impairment mainly due to a reserves downgrade at its TEN field offshore Ghana.
Its overall reserves replacement ratio stood at 90% as the TEN downgrade was offset by Tullow increasing equity in some fields and other “positive revisions”, it said.
Tullow’s shares fell more than 8% to a two year low, compared with a flat index for European oil and gas firms (.SXEP).
Jefferies analyst Mark Wilson said in an email that even with new production coming onstream in the second half of the year, Tullow’s overall production was to expected to remain only steady.
Overall, Tullow expects to produce between 58,000 and 64,000 barrels per day (bpd) this year, after 61,000 bpd in 2022.
The company plans to hedge around 40% to 50% of its output around a year out, Miller told Reuters.
Tullow hedged 33,100 bpd of this year’s output and 11,300 bpd of 2024’s production at between $55 and $75 a barrel. Last year, its revenue would have been $319 million higher without hedges.
