Tullow Oil cash forecast ups chances of dividend

By Geoff Percival

Prospects of a resumption of dividend payments by Tullow Oil have increased with the Irish-founded exploration company forecasting free cash flow, for this year, at a better-than-expected rate of approximately $700m (€618m).

The company previously expected to realise free cash flow of $650m this year.

In its latest trading update, Tullow said it expected net debt to fall from $3.5bn to around $2.8bn by the end of this year. It has also narrowed its 2018 oil production guidance to 87,000-91,000 barrels of oil per day.

The improved cash generation forecast largely depends on the long-awaited completion of the farm-down of Tullow badets in Uganda to French oil major Total and China’s Cnooc. That deal is due to close by the end of the year, generating proceeds of $200m for Tullow.

Earlier this year, Tullow said the prospect of paying a first dividend to shareholders since 2014 was “back on the table” but was only one option in a wider debate over how to treat additional cash flow.

Merrion badyst Darren McKinley, in June, said Tullow would likely pay a “modest” dividend based on its 2018 performance, before paying a more considerable one based on improved 2019 earnings. Improved production, a stronger balance sheet, and less debt repayments will allow this, he said.

Meanwhile, Botswana Diamonds, the John Teeling-chaired prospecting firm focused on Botswana and South Africa, has acquired full control of the Sunland Minerals joint venture it previously held with Russian diamond explorer Alrosa.

The Dublin-headquartered firm has bought out Alrosa’s share of the venture for a nominal sum and is already in “advanced negotiations” with a new potential partner, which is set to purchase the 50% stake.

“We are at an advanced stage of discussions with a significant diamond producer who has in place an experienced exploration team,” said Mr Teeling.

A deal could be finalised by the end of this year, which Mr Teeling said would pave the way for drilling activity on some of Sunland’s prospects next year.

Tullow’s shares were up by just over 1.8% yesterday, with Botswana ahead by over 2%.