Oil and gas company Tullow Oil (TLW) was a notable stock market success story of the first part of the 21st century.
The company enjoyed notable discoveries in Ghana and Uganda and could point to a 70% success rate on exploration and appraisal wells against an industry average of somewhere around one-in-seven.
It went from a share price of 76p at the start of this century to a peak above £15 in 2012 and what looked like a fairly entrenched position in the FTSE 100.
WHAT WENT WRONG
Then a combination of headaches bringing existing discoveries into production and the oil price crash in 2014 sent an overly indebted Tullow all way back down to a little north of 100p.
Today the company, which is up 2.5% on its latest update, trades at 216.3p. There are signs in this set of full year results that Tullow Oil may have finally consolidated its position ahead of a new phase of active exploration drilling, recording its first net profit for five years.
Backed by free cash flow of $411m, net debt was reduced from $3.5bn to $3.1bn in 2018. The company is successfully increasing output and even feels confident enough to pledge returns of at least $100m per year to shareholders and making a dividend payment of 4.8 cents per share.
PLATFORM FOR GROWTH
Production totalled 88,200 barrels of oil equivalent per day (boepd) in 2018 and is expected to reach between 93,000 and 101,000 boepd in 2019. Longer term the company has a plan to get to 150,000 boepd.
Davy analyst Job Langbroek says the stability offered by this growing production base could provide a platform for growth.
Langbroek says: 'The current year will see a meaningful pick-up in drilling activity, with three wildcat wells expected offshore Guyana in South America.
'The first of two operated wells on the Orinduik block is expected to spud by mid-year and will firstly target the 100m barrel Tertiary Jethro prospect.
'Tullow will also participate in a well on the Repsol operated Kanuku block later in the year. A drilling unit has been identified and will shortly be contracted to drill the Orinduik targets.
'More generally, there has been a steady step-up in licencing activity and seismic processing.
'While Tullow never completely stopped its exploration spend, the stabilised production profile that we outlined earlier has enabled a return to more sustained and deeper exploration activity.'
