Dividends are high on the agenda for Tullow Oil plc (LON:TLW) as it holds it AGM today, as the exploration and production firm is expected to confirm the restart of payouts to shareholders.
“This 2018 final dividend and our new dividend policy, which is expected to deliver at least $100 million per year to shareholders, reflect the financial and operational progress that Tullow has made over the past few years,” chief executive Paul McDade said in a statement.
“Oil production from our West African portfolio is currently running at 95,000 bopd after a short-term production issue in the first quarter and is due to grow in the second half of the year and beyond.
“In South America, our exploration team is busy preparing for our exciting exploration campaign in Guyana."
Guyana exploration drilling will potentially be a significant highlight as the company and its partners aim to follow up the back-to-back successes enjoyed by Exxon – which last week confirmed its thirteenth major discovery in its multibillion barrel Stabroek block.
Elsewhere in the business better oil prices and production growth see improved cash flow and profitability.
Stockbroker Hargreaves Lansdown, however, cautioned that downgraded production guidance – now 3% lower at 90-98,000 bopd – has “spoiled the party”.
“Today was meant to be about investors, who’ve been on a long and arduous journey through the oil price crash of 2014/5 and 2017’s rights issue, finally getting rewarded for their patience with the group’s first dividend since 2014.
“While shareholders will still be getting a payout, production issues in Ghana have spoiled the party.
“Beyond these problems though, Tullow looks in ever-improving health.”
In early afternoon trading, shares in Tullow shares were 1.4% lower at 236.80p.
George Salmon, equity analyst at Hargreaves Lansdown: commented: “Today was meant to be about investors, who’ve been on a long and arduous journey through the oil price crash of 2014/5 and 2017’s rights issue, finally getting rewarded for their patience with the group’s first dividend since 2014. While shareholders will still be getting a payout, production issues in Ghana have spoiled the party.
“Beyond these problems though, Tullow looks in ever-improving health. It’s locked in prices of over $56 a barrel for approaching half its anticipated volumes in the next two years, and the rest should fetch even more given the market price is well above that at the moment. Add in the fact production is ramping up, and the group should be able to easily afford the dividend and still reduce debt.
“The worry is there’s still some way to go before leverage reaches anything like that of the large players, and the focus on a select few sites means Tullow remains a relatively high risk way to play the oil game.”