Tullow Oil, an Irish-born crude exploration conglomerate, has announced plans to expand its potential exposure to global oil price increases this year. This comes as multiple of its longstanding hedges ceased in the initial part of the year.
Releasing its earnings for the first half on Wednesday, the London-traded group expressed that oil production for the duration ending in June exceeded its anticipations across all its African wells. However, despite fetching higher prices for its oil during this phase, the African-centric exploration firm experienced a slight dip in group revenues – a little over 2% to $759 million (€695.56 million), compared to the same period the previous year.
Post-tax profits saw a significant rise of 64% to $196 million, this increase was primarily attributed to reductions in impairments, asset reassessment and the release of provisions.
Back in May, Tullow had indicated that several of its longstanding price hedges had enhanced its positive exposure to potential increases in worldwide crude prices. This has contributed to an approximately 9% price increase this year and has fueled increased cash flow for the group formerly listed in Dublin. Tullow anticipates a sizeable upswing in free cash flow in the latter part of the year, with its full-year guidance remaining unaltered at $200-300 million.
Rahul Dhir, CEO of Tullow, commented on the impending phase of reduced capital expenditure, mentioning that the sustained generation of free cash flow would aid in trimming debt. He also emphasised that this would fortify the company’s balance sheet, providing flexibility for future investments, expansion and returns. Efforts have been made to slash net debt that rocketed amidst the Covid-19 crisis when Tullow had to borrow due to plummeting oil prices. The group says that they are well on their way to lowering the net debt to less than $1.4 billion, down from beyond $3 billion in 2020.