Tullow Oil PLC (LSE:TLW) is now in “harvesting mode” which will yield US$800 million of free cash flow over the next two years, chief executive Rahul Dhir today told investors, as the oiler reported its interim results.
Whilst the Tullow boss provided bullish commentary of the oiler’s ongoing cash turnaround, shares in the company, which still owes nearly US$2 billion and seeks a major refinancing, were falling around 10% in Wednesday morning’s trade.
“We are at an important inflection point in the evolution of our business plan,” Dhir said in a statement.
“For the last two and a half years we have relentlessly focused on capital discipline, operational performance and appropriate investment in our assets.
“This has resulted in a much-improved business, material debt reduction and most recently, the delivery of Jubilee South East which has substantially increased production.
“We now switch to harvesting mode as our business is set to generate c.$800 million of free cash flow between 2023 and 2025, whilst we will continue to run our business with the same discipline.”
He added: “This will enable us to further reduce our debt, put in place a sustainable capital structure and grow our business to create value for our investors, host nations and employees."
Tullow today reported US$777 million of revenue in the six months ended 30 June 2023, on a realized oil price averaging US$473.3 per barrel, to turn a gross profit of US$351 million.
After tax, Tullow’s first-half net profit was reported at US$70 million. Underlying operating cash flow meanwhile amounted to US$188 million (whilst free cash flow was negative US$142 million).
It made US$187 million of capital investments in the half and ended the six-month period with US$1.9 billion of net debt and had US$700 million of liquidity headroom.
Looking to the full year, Tullow told investors it has narrowed production guidance to a range of 58,000 to 60,000 barrels per day (from 58,000 to 64,000) and it expects extra gas production in Ghana, equating to 7,000 barrels per day.
It expects to achieve a "significant free cash flow reversal" to plus US$200 million, on an average oil price of US$80, in the second half – to deliver positive US$100 million of full-year free cash flow.
Going forward, it anticipates US$800 million of free cash flow in the period between 2023 and 2025.
Tullow confirmed it expects further develeraging, with net debt forecast to reduce to US$1.7 billion by the financial year end. It additionally said it is progressing a range of options to address debt maturities and position the business for a successful refinancing.
In London, Tullow shares meanwhile fell around 10% to trade at 33.98p.