Tullow forecasts higher first-half profit

Tullow Oil said today it expects “substantially'' higher profit for the first half of the year due to asset sales and gains from oil and gas hedging.

The UK oil and gas explorer which has focused its exploration work Uganda and Ghana said it plans to pump up to 72,000 barrels of oil and gas per day this year.

Aiden Heavy, Tullow chief executive said the "unprecedented strength in oil and gas pricing" had put the company in a very strong position at the end of the first half.

In a half year trading statement, Tullow said output rose 1 per cent in the first six months of the year 70,550 barrels a day and that it had found hydrocarbons in the Karuka-1 well in Uganda's Butiaba area.

The company is seeking between 350 million and 400 million barrels of oil to make the field viable for the development and plans to continue exploration for the next 12 months.

The Mahogany-2 well at Ghana's Jubilee deposit had showed that the field was more extensive than previously thought, the company said.

Another well, the Mahogany-3, "had potential to uncover additional zones,'' which could further boost the reserves estimate at the field.

Tullow plans to bring three drilling rigs to Ghana to explore and the first will start oil production in 2010.

The company has raised $1 billion (€636 million) selling assets, resulting in net income of £400 million (€502 million) according to today's statement. 

It said capital expenditure was $170 million over the period and expects to spend $480 million by year's end.

Davy analyst Caren Crowley said in an investors' note that the statement was broadly in line with expectations and that its key projects in Uganda and Ghana remain on track.

The company said planned to reduce hedging because of rising oil and gas prices.

Tullow hedged about 45 per cent of its expected oil and gas production in the second half of 2008 and less than 20 per cent of 2009 output.

At 2.45pm Tullow shares were trading down 2 per cent at €10.95 in Dublin and marginally lower in London at 871.5 pence.

The company's share price has risen over 40 per cent in the last 12 months giving it a market capitalisation of just under €8 billion.

Additional reporting Bloomberg