Tullow Oil shares tumble after it reports a third year of losses
Tullow shares plunged after it announced its third straight annual loss caused by big exploration write-offs in its Africa arm.
The figures
The oil giant's shares fell more than five per cent in morning trading after taking gross exploration write-offs of $723m (£579m).
Revenue fell 21 per cent to $1.3bn from $1.6bn in 2015 due to weak oil prices.
Tullow posted an operating loss of $754.7m, down from a loss of $1.09bn in the previous year. This was bigger than analyst forecasts of $639.4m, however.
Year-end net debt was up to $4.8bn from $4.02bn a year before.
Why it’s interesting
Tullow has yet to recover from a hit of low oil prices in 2014 as it was investing heavily in its flagship TEN oil project off Ghana, which came on stream this year.
"The completion of, and ramp up of production at, the massive TEN oil field in Ghana gives the group the tools it needs to start paying down the huge debt mountain it has built up in recent years," said Laith Khalaf, analyst at Hargreaves Lansdown.
Khalaf added the effectiveness of its TEN oil field is dependent upon oil prices, which are still lagging but are just high enough to allow Tullow to pare some losses.
Exploration work this year will focus on Suriname, where it will start drilling in the second half of the year in an area that has a resource potential estimated at more than 500m barrels.
As previously announced, Tullow's founder and long-serving chief executive Aidan Heavey will hand over to chief operating officer Paul McDade in April.
What Tullow said
Heavey said the highlight of 2016 was delivering its TEN fields on time and budget, which has provided the company with positive free cash flow.
"As we focus our free cash flow primarily on reducing our debt, capital discipline remains critical. We have made excellent progress with our East African developments and are building a high quality exploration portfolio to grow our business.
He added: “As I move to become chairman of the group and hand over to Paul McDade, Tullow has the right assets and expertise to take full advantage of the opportunities ahead."
In short
Tullow will focus on reducing its debt in the year ahead, but low oil prices could still derail its plans.