Business and Finance

Uganda deal buoys Tullow

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A large profit from a farm-down in its Ugandan assets meant Tullow posted an increased first-half net profit as soaring costs eroded higher revenues.

The London-listed explorer boosted its production in the period but also ran up write-off costs and increased expenses at mature fields.

In February Tullow completed the farm-down of its assets in Uganda to Chinese giant CNOOC and Total of France.

According to Upstream website, the total headline consideration for the sale of majority interests in three blocks was $2.9 billion with a total profit of $701 million hitting Tullow’s books.

This sum was instrumental in lifting net profit for the six months to the end of June to $566.9 million from $347.3 million in the comparable period a year earlier.

Although Tullow raised revenues from $1.06 billion to $1.17 billion, costs were also up, mainly due to fixed operating costs on mature fields with declining production.

The cost of sales soared from $342.6 million to $488.5 million to send gross profit down from $719.8 million to $678.7 million.

The profit from the Uganda deals, however, meant that Tullow could ride increased administrative expenses as well as a huge $451.3 million exploration write off as compared with a write off of $54.6 million in last year’s first half.

Tullow said production rose 3% in the period to an average of 77,400 barrels of oil equivalent per day. Sales volumes ballooned 6% to 67,900 boepd with the average realised oil price dropping 1% but the gas price climbing 4%.

UK production was slightly down on expectations due to schedule delays at the Ketch 10 infill well on Block 44/28b.
Shares in Tullow were down over 1% in pre-opening trading in London on Wednesday.

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