Tullow Oil has pulled out of Syria at a gross cost of £4 million. This has been mainly responsible for the pre-tax loss of £4.4 million incurred in the six months to June 30th 1998, contrasting with the profit of £1.5 million in the comparable period last year.

The disappointing interim results also show an operating loss of £550,552 compared with a profit of £1,053,858. This has been attributed to lower gas production in Senegal due to the depletion of Diam Niadio reserves, and the low oil price obtained on production from Britain and Syria.

Earlier this month Tullow, in response to a 25 per cent drop in the share price, reassured the market, saying the share price movements were "unwarranted" and the company was "aware of no adverse or unusual event in the company's circumstances which should prompt such movements". The shares responded with a recovery.

The managing director, Mr Aidan Heavey, denied the reassuring statement was misleading in light of the interim results, stressing the position in Senagal was well flagged. While admitting the withdrawal from Syria was not known, he said the £4 million write-off represented capitalised exploration costs and did not affect cash-flow. However, it has led to a deficit of £1.3 million in the revenue reserves compared with reserves of £4.2 million. It also reflects past exploration expenditure. But Mr Heavey noted the net cost of the Syrian operation was £300,000. He stressed: "we are a victim of our very conservative accountancy policy." Mr Heavey said Tullow did not include revenue from the Syrian field into the accounts - this is reflected in the drop in revenue from £2.9 million to £2.1 million.

On an optimistic note, he said the company's trading position had improved significantly since the end of June. It returned to generating an operating profit on July 1st as the new Wayambam gas well in Senegal was brought into production. He hoped an operating profit would be generated in the full year. However, this is likely to be below the £1.3 million generated in 1997.

The chairman, Mr Tom Toner, said the next 12 months would include the start of production in Pakistan, further exploration in India, Pakistan and Bangladesh and the phased withdrawal from non-core, low-return operations. The latest results show a loss per share of 1.91p compared with earnings of 0.63p. Shareholders' funds increased from £52.9 million to £54.5 million.

Tullow converted the $10 million convertible loan into equity in the first half.