Tullow Oil profit plummets by 92pc

TULLOW Oil's full year profits plummeted as a slump in oil and gas prices took the shine off outstanding exploration success.

The FTSE 100 oil exploration group posted a 92 per cent drop in after tax profit to £19m, compared to £226m in 2008, while sales revenue shed 16 per cent to £582m.

The group attributed the lower figures to a downturn in production volumes and commodity prices.

Production levels fell to 58,300 barrels of oil equivalent per day, down 12 per cent on 2008 levels, while a barrel of oil fetched $60 – 18 per cent down on the $73.6 price tag seen in 2008.

Realised gas prices shed 25 per cent in 2009 to 39.3 pence per therm, compared to 52.4 pence per therm the previous year.

At the same time, Tullow’s exploration and appraisal activity continued apace, achieving a record 87 per cent success rate.

It made 13 discoveries from 15 wells, most notably the 300m barrel Jobi-Rii discovery in Uganda and the Tweneboa discovery in Ghana.

Chief executive Aidan Heavey commented: "A strong performance in 2009 and an excellent start to 2010 has enabled the group to continue to create material exploration and development opportunities.

"Although our 2009 reported results still reflect a period of financial transition, first oil in Ghana from the Jubilee field later this year will result in considerable production growth and increased cash flow."

Tullow is targeting a further 30 wells this year, mostly located on its highly prospective acreage in West Africa ,and said it is poised for major production growth from the end of this year.

In January, Tullow exercised an option over partner Heritage Oil’s Ugandan assets – Blocks 1 and 3A – in parallel with a farmdown process which is now at an advanced stage.

Two new potential partners have been identified, CNOOC and Total.

The group has opted to keep the final dividend at 4p per share, bringing the total payout for 2009 to 6p per share, the same as 2008.

Peter Bassett, analyst at Westhouse Securities, commented: "Tullow is in an ideal position over the next 12-24 months to transform itself into a mid-tier producer whilst also remaining exposed to significant exploration upside.

"While this will make the group appealing from a takeover perspective, we also believe that current management has demonstrated the ability to unlock potential in the group’s area of focus in Africa."

Tullow"s shares were down 0.8 per cent to 1271p.