Tullow Oil plc (LON:TLW) shares strengthened on Thursday as the company reinstated dividend payments to shareholders.
At the start of the oiler’s capital markets day, in a stock market statement, chief executive Paul McDade said: "Tullow has made excellent operational and financial progress over the past 18 months.
“Having reached our target of being a balanced self-funding exploration and production business and having embedded cost discipline across the group, this is the right time to reinstate a dividend and focus on our plans for growth."
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It plans to pay the dividend based on the group’s free cash flow generation, retaining a balance between debt reduction and investment.
The company does not expect to pay out more than US$100mln in ordinary dividends in any year, though it said that at times of particularly strong free cash flow generation it will look to supplement the dividend with additional returns.
It added that it will consider the potential for such a pay-out for the 2018 financial year.
Additionally, Tullow also revealed today that, in light of its balance sheet strength, it has decided to cancel its undrawn US$350mln evolving corporate credit facility. The company said that it will subsequently have unutilised debt capacity and free cash in excess of US$1bn.
It also announced that it has secured interests in three exploration blocks in the Indian Ocean, offshore the Union of Comoros. Tullow will hold 35% of the assets and it will be the operator.