Tullow Oil confident after fall in full-year revenue, earnings

(Sharecast News) - Tullow Oil reported a sharp fall in 2025 revenue and earnings on Tuesday as production declined, but said it had laid "significant foundations" for value creation after asset disposals, cost reductions and a comprehensive refinancing completed in April. The London-listed oil and gas group said working interest oil and gas production averaged 40.4 thousand barrels of oil equivalent per day in 2025, down from 51.5 kboepd in 2024. Revenue fell to $847m from $1.29bn, including $19m of hedge costs, compared with $74m a year earlier.

Adjusted EBITDAX declined to $586m from $1.01bn, while gross profit fell to $247m from $635m.

Profit after tax decreased to $7m from $55m, while the company reported a loss from continuing operations after tax of $129m, compared with a $55m profit in 2024.

Free cash flow was $99m, down from $156m.

Tullow said net debt at the end of 2025 fell to $1.35bn from $1.45bn, while cash gearing, measured as net debt to adjusted EBITDAX, increased to 2.3 times from 1.4 times.

Liquidity headroom was $322m, compared with $715m a year earlier.

The company completed the sale of its Gabonese and Kenyan assets in July and September respectively, generating $347m of proceeds during the year.

Capital expenditure was $166m, excluding $29m in Gabon, compared with $179m in 2024, excluding $52m in Gabon, while decommissioning expenditure including cash provisioning fell to $17m from $60m.

Chief executive Ian Perks said Tullow had delivered against "a clear set of strategic priorities" through 2025 and early 2026 to position the business for long-term success.

"This began with the consolidation of our business to focus on our high-value assets in Ghana, with the sale of our non-core assets in Gabon and Kenya, alongside significant cost reductions," he said.

"These efforts positioned the company strongly for the successful refinancing, which completed earlier this month with overwhelming support from our creditors.

"This transaction provides Tullow with the strong financial foundation and flexibility required to deliver value for stakeholders."

Operational performance improved in the first quarter of 2026, with group working interest production averaging 43.4 kboepd.

Tullow said that underpinned expectations that full-year production would be at the higher end of its previously announced 34 to 42 kboepd guidance range, including about 6 kboepd of gas.

The company said average FPSO uptime at the Jubilee and TEN fields was 97% in 2025.

One new Jubilee well, J72-P, came onstream in July and was currently producing about 8,000 barrels of oil per day.

The 2025-2026 Ghana drilling programme had continued this year, with J74-P onstream in January and J75-P onstream in March.

"Operationally, 2026 has started strongly, with momentum building across the business," Perks said.

"We are particularly encouraged by the positive early results from our Ghana drilling campaign, which highlight the quality and potential of our world-class assets."

The company said extensions to the Jubilee and TEN petroleum agreements to 2040 were ratified by Ghana's parliament in February, unlocking the potential to book further material oil and gas reserves.

Tullow also secured revised terms for gas supply from Jubilee to the end of the extended period at an escalating price of $2.50 per mmbtu, agreed heads of terms for potential gas supply from TEN, and agreed a gas payment security mechanism with the government of Ghana.

Tullow said it had signed an agreement in February to acquire the TEN FPSO on behalf of the joint venture for gross consideration of $205m, or $125.6m net to Tullow, payable on completion at the end of the first quarter of 2027.

The company said the acquisition would improve field economics by eliminating lease costs and creating scope for operating cost savings.

"A key milestone has been the agreement to purchase the TEN FPSO, a value-accretive acquisition that significantly improves the field's economics by eliminating lease costs and providing an opportunity to capture operating cost savings," Perks said.

"Additionally extending the Jubilee and TEN petroleum agreements to 2040, and higher oil prices have further strengthened our platform for sustainable growth."

For 2026, Tullow said it expected capital expenditure of about $200m, comprising around $190m in Ghana and $10m in Côte d'Ivoire.

It also expected UK decommissioning spend of about $5m and Ghana cash provisioning of about $20m.

A further four Jubilee wells, comprising three producers and one water injector, are expected onstream before the end of the year.

The company increased pre-financing cash flow guidance to about $260m to $365m at oil prices of $70 to $100 a barrel, citing stronger year-to-date production, higher realised oil prices and a higher oil price assumption.

Free cash flow guidance was set at $70m to $175m over the same price range.

Tullow said cash flow would increase by about $40m from $70 a barrel to $80 a barrel, and by a further $30m for every additional $10 a barrel rise, with the profile affected by hedges.

The guidance included recovery of 2025 cash call receivables and about $40m of gas revenues related to 2026 gas production, but excluded about $110m of historical gas receivables and a $50m receivable related to TEN development debt.

Tullow said it was working with the government of Ghana and its agencies to resolve the historical receivables on a mutually acceptable basis.

Tullow completed its comprehensive refinancing on 27 April, extending its senior secured notes and Glencore facility to November 2028 and May 2030 respectively, and adding a new $100m cargo pre-payment facility with Glencore.

Following completion, the company said it had liquidity headroom of free cash and undrawn facilities in excess of $200m.

"Looking ahead, we have four more wells scheduled to come onstream in 2026, and the continued interpretation of 4D and Ocean Bottom Node (OBN) seismic data which will support future drilling campaigns at Jubilee and TEN, driving reserves growth and unlocking further value from our assets," Perks said.

"Our focus remains on improving operational performance and executing our business plan."

At 1117 BST, shares in Tullow Oil were up 12.09% at 12.98p.

Reporting by Josh White for Sharecast.com.

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