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Tullow (TUWOY) to Focus on West Africa Fields to Reduce Debt

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Zacks Equity Research
·3 min read
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Tullow Oil TUWOY is deviating from its typical oil and gas exploration to prioritize its major assets in West Africa with an aim to reduce debts and secure its future during the current uncertain times.

The London-based company committed to investing 90% of its capital expenditure on its producing offshore oilfields in West Africa. As part of its plan, Tullow expects to generate $7 billion of operating cash flow over the next 10 years, of which $2.7 billion will be reinvested into the company, primarily for the commencement of a multi-well drilling program in Ghana. The remaining $4 billion will be utilized to mitigate its $2.4 billion of debt and for shareholders’ returns at oil prices of $45 per barrel in 2021 and $55 per barrel from 2022 onward.

The drilling program in Ghana is likely to start in the second quarter of 2021 and is considered a possibility to revive the troubled company for further production in the country. Tullow already accomplished 400 million barrels of oil from its assets there, from an estimated 2.9 billion barrels. The company, which previously targeted to raise $1 billion from divestitures, sold its Ugandan stake to TOTAL SE TOT for $575 million to improve the company’s liquidity. However, it plans to hold further sales only if it adds to its profit because of its cash generation plans.

Notably, its year-to-date production averaged 75,000 barrels of oil per day, which lived up to the company’s expectations of a full-year production guidance of 73,000-77,000 barrels per day. Further, the upstream company expects a production curtailment in 2021 due to reduced drilling operations this year with a hope to neutralize this shift from the savings made. On its part, Tullow’s new strategies focus on a deep portfolio of short-cycle, high-return opportunities within its asset base to fulfill its financial obligations and deliver material value for investors.

Company Profile & Price Performance

Headquartered in London, U.K., Tullow is an independent upstream company.

Notably, the company’s shares have underperformed the industry in the past three months. Its stock has gained 24.6% compared with the industry’s 30.2% growth.

 

 

Zacks Rank & Stocks to Consider

Tullow currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Hess Midstream Partners LP HESM and DCP Midstream Partners LP DCP, sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hess Midstreamis expected to see earnings growth of 137% in 2021, whereas DCP Midstream is likely to see an earnings improvement of 199.5% next year.

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TOTAL SE (TOT) : Free Stock Analysis Report
 
Tullow Oil PLC (TUWOY) : Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
 
Hess Midstream Partners LP (HESM) : Free Stock Analysis Report
 
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Zacks Investment Research