Shares in Tullow Oil strengthened yesterday after the company issued an upbeat trading statement for last year and outlined an ambitious programme for 2006.
The oil firm said trading had reached "record levels" in 2005, when a strong production performance combined with favourable oil and gas pricing. The company's production levels increased by 44 per cent in 2005 to average 58,450 barrels of oil-equivalent per day.
Tullow chief executive Aidan Heavey said the company was well-placed for continued expansion in 2006. "The strong asset performance and production growth seen in 2005 is expected to continue with significant ongoing development projects in each of our core areas," he said.
The firm expects production this year to average about 68,000 barrels, with a peak of 75,000 by the end of December.
Strong energy pricing should support general growth, with Tullow having sold forward almost half of its expected gas production for the first half of the year. About one-third of overall production is hedged.
Shares in Tullow added 5p to close at 313.5p in London last night. Davy, the company's broker, has a price target of 292p on the stock but acknowledged yesterday that this was discounted. The broker said it would examine its forecasts again when forthcoming drilling projects have ben completed.
Tullow invested £192 million (€281 million) in development and exploration activities last year and expects to increase this to £280 million in 2006. About 70 per cent of the funds will be spent on development, with the remainder to go on exploration. Mr Heavey said a number of the wells to be drilled this year had "very high impact potential".
New exploration wells are scheduled for development in the UK, Uganda and Equatorial Guinea. Tullow already produces in the North Sea and in four west African states. It also has some production in Pakistan, and is exploring in a number of other African countries.
The company said yesterday it would write off £25 million in relation to pre-licence costs and unsuccessful exploration activities in 2005. Net debt at the end of 2005 amounted to £138.7 million. Tullow will issue full-year results on March 29th.
