Tullow Oil raised its production targets on Wednesday thanks to higher output from its flagship West African fields as higher crude prices brightened the outlook for the debt-ridden explorer.
The London-listed firm also slashed its 2017 spending target by a quarter to $300 million due to lower expenses in East Africa, and reduced its debt to $3.6 billion while increasing free cashflow to $400 million.
“With market conditions showing some early signs of improving, Tullow is well placed to benefit both from targeted investment in our diverse, low-cost portfolio and the opportunities that this point in the cycle presents,” Chief Executive Officer Paul McDade said.
“With oil at around $64 (a barrel), this solid update should be taken well this morning,” analysts at Morgan Stanley said in a note. Tullow shares traded 1 percent as the market opened in London.
Stronger than expected output from fields in Ghana and the deferral into 2018 of major maintenance work at its Jubilee field helped Tullow lift its 2017 production target to 85,000-89,000 barrels of oil equivalent per day (bopd) from a previous 78,000-85,000 bopd, when including production-equivalent insurance payments.
The turret bearing repairs on the Floating Production Storage and Offloading (FPSO) vessel, which reduced production since March 2016, are now expected to take place in the first quarter of 2018 and result in four to six weeks of shutdowns.
The delayed maintenance and good performance from the Jubilee field helped increase its full year production estimate to 89,000 bopd, of which Tullow owns 31,600 bopd.
Tullow is in the final stages of securing a rig to resume drilling at Ghana’s Tweneboa, Enyenra and Ntomme (TEN) fields in 2018, following an international tribunal ruling in September favouring Ghana in a dispute with its neighbour Ivory Coast. [ nL5N1NC5NZ]
Kosmos Energy Ltd , Anadarko Petroleum Corp , Ghana National Petroleum Corp and PetroSA also have stakes in the TEN project.
Prices of globally traded Brent crude have averaged $54.13 per barrel so far in the second half of 2017, about 10 percent higher than the $48.99 seen in the second half of last year.
The company, which was forced to abandon an exploration well offshore Suriname last month after it failed to make a commercial discovery, said net debt fell to $3.6 billion at Oct. 31.
Tullow said it had formally commenced the re-financing of its reserves-based lending facility in October and was on schedule to complete the process before the end of the year.