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Tullow Oil, the Africa-focused independent oil company, has lowered its 2019 oil production guidance to 90,000 - 98,000 barrels per day from previous forecast oil production of 93,000-101,000 barrels of oil per day for the year. The company adjusted its full-year production guidance after its fields off the coast of Ghana experienced "technical issues". According to the latest trading update, the issue has now been resolved. In the first quarter of 2019, the group's oil production was also below expectations following technical issues; it averaged 84,600 barrels/day.
The performance was below expectations due to a delay in completing the Enyenra-10 production well at the TEN field and gas compression constraints on Jubilee during February. Though both the issues have been resolved now, it forced the group to revise down its full-year production guidance compared to the earlier forecast provided in February. The Enyenra-10 production was successfully completed and became operational in early March, while gas compression on Jubilee has been reinstated. As the new Simba and Ruche fields in Gabon significantly exceeding expectations, strong performance from the Central and West Africa non-operated portfolio helped to offset the lower production from Ghana. As additional wells in Ghana are expected to come on stream, production is expected to rise to 100,000 barrels/day from the current output of 95,000 barrels/day.
On 31 March 2019, the group had $1 billion of liquidity headroom and free cash with no near-term debt maturities, and net debt at the company was $3 billion. As Uganda expenditure of $130 million will be funded through the Uganda farm-down, capital expenditure guidance of $570 million for the year remained unchanged. As the oil lifting schedule is weighted towards the second half, the group expects to deliver the bulk of its forecast 2019 free cash flow in the second half of the year. Though the company continues to generate steady free cash flow, the full-year value will depend on the completion of the Uganda farm-down and oil prices.
The company announced a new dividend policy of paying investors not less than $100 million per annum with a final dividend for the year of 4.8¢/share recommended for shareholder's approval, costing a total of $67 million. This marks a significant turning point for the company, and as chief executive Paul McDade said, it reflects the operational and financial headway the group has made over the years. Moreover, according to the analysts, investors should be concerned about a 3 per cent reduction in 2019 net production guidance.
Share Price Commentary
 Daily Chart as at April-26-19, before the market closed (Source: Thomson Reuters)
On April 26, 2019, at the time of writing (before the market closed, at 04:40 pm GMT), TLW shares were trading at GBX 224.25, down by 4.51 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 279.35/GBX 163.30. At the time of writing, the share was trading 19.72 per cent lower than the 52w High and 37.32 per cent higher than the 52w low. Stock's average traded volume for 5 days was 6,563,927.20; 30 days â 5,769,261.57 and 90 days â 5,552,037.53. The average traded volume for 5 days was up by 13.77 per cent as compared to 30 days average traded volume. On the valuation front, the stock was trading at a trailing twelve months PE multiple of 8.5x as compared to the industry median of 2.2x. The company's stock beta was 1.94, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £3.16 billion with a dividend yield of 1.59 per cent.
