Tul­low chief plans to boost ex­plo­ration spend and con­tinue to re­duce debt level

Irish Independent - Business Week - - Front Page - Gavin McLough­lin

TUL­LOW Oil plans to boost spend­ing on ex­plo­ration from around $90m (€77m) this year to around $150m (€128.5m) next year.

It has sig­nif­i­cantly re­duced its debt in re­cent years. CEO Paul McDade told the Ir­ish In­de­pen­dent that his “big agenda” is to get the com­pany back in strong growth mode af­ter re­pair­ing the bal­ance sheet.

The com­pany’s gear­ing ra­tio – a mea­sure of debt rel­a­tive to earn­ings – stands with debt at two times earn­ings. That’s be­low the board’s pol­icy tar­get of two-and-half times debt to earn­ings.

Net debt stands at $3.1bn. But de­spite out­per­form­ing the pol­icy tar­get, Mr McDade said he wants to re­duce the com­pany’s debt fur­ther, from $3.1bn to $2.5bn.

“When we look at the ab­so­lute level of debt, $3.1bn still feels a bit high given the ebitda [earn­ings be­fore in­ter­est, tax­a­tion, de­pre­ci­a­tion and amor­ti­sa­tion] we have and the shape of the com­pany, and we want to push it down a bit.

“$2.5bn feels like a com­fort­able level of debt for the com­pany – even if oil prices came off to $50 we would still be within the two-and-a-half times gear­ing ra­tio,” Mr McDade said.

Asked about the oil price, which has been trend­ing up­wards in re­cent months, Mr McDade said geopo­lit­i­cal events had brought in­creases for­ward.

“If we can keep steady at th­ese sort of prices we can gen­er­ate very high lev­els of cash flow and sus­tain them, and re­ally get the com­pany back to growth. That’s my big agenda now the bal­ance sheet is sorted out.”

He said the ex­plo­ration prospect the com­pany is most ex­cited about is in Guyana. Yes­ter­day Exxon Mo­bil lifted its es­ti­mate of re­cov­er­able bar­rels from a prospect at which Tul­low has ad­ja­cent as­sets.

“You could def­i­nitely ex­pect to see us drilling there next year and there may be a cou­ple of wells that we would drill in that area. It’s kind of the hottest ter­ri­tory glob­ally from an ex­plo­ration point of view.”

In Kenya, where the com­pany has been op­er­at­ing a pi­lot project dis­rupted by protests against the gov­ern­ment, Mr McDade said he ex­pects op­er­a­tions to be res­tarted over the com­ing weeks. “It’s part of what we ex­pected to hap­pen and we’re very keen to get th­ese sorts of is­sues ironed out now and early be­fore we start the re­ally big in­vest­ment,” he said.

Yes­ter­day the com­pany said first-half rev­enue was up from $788m last year to $905m this year. Profit af­ter tax was $55m.

Tul­low Oil CEO Paul McDade says his main agenda is growth

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