Tullow falls to third annual loss on more exploration write-offs

Tullow Oil missed forecasts to fall to a third consecutive annual loss on Wednesday as it wrote off more of its Africa-focused exploration business, sending its shares lower.

Tullow, whose founder and long-serving chief executive Aidan Heavey will hand over to Chief Operating Officer Paul McDade in April, was hit hard by the collapse in oil prices in 2014 just as it was investing heavily in its flagship TEN oil project off Ghana.

It reported an operating loss of $754.7 million, down from a loss of $1.09 billion in 2015 but bigger than the $639.4 million loss forecast by analysts.

It took gross exploration write-offs of $723 million.

Revenue fell around 20 percent to $1.27 billion despite its TEN oilfields coming on stream, as weak oil prices ate into the value of sales.

Tullow shares were down 4.4 percent at 0850 GMT and fell as low as 275 pence, their weakest since Nov. 30.

They lagged a 0.3 percent decline in the sector index.

Tullow has tightened its investment budget to just $500 million this year, of which $125 million will be covered by Total which agreed last month to buy most of Tullow’s stake in a Uganda project for $900 million.

“2016 is likely to mark the low tide point for Tullow with production set to increase in 2017 into a rising oil price environment,” said analysts at Mirabaud Securities.

They said Tullow should now be able to reduce its debt pile, which rose last year to mainly pay for the TEN project.

The company’s net debt stood at $4.78 billion at the end of 2016, up from $4.02 billion a year earlier.

Tullow announced on Wednesday it had extended its corporate facility by a further year to April 2019.

It plans to refinance its debt this year.

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 500 million barrels.

Drilling is also under way in Kenya.