Prospects look good for Tullow

TULLOW OIL has become something of a master of the game-changing move in recent years. A decade ago, it was not much more than a minnow, with some productive interests. Yesterday it reported that first-half earnings per share trebled to 35 cent, while profits quadrupled to $540 million (€374 million). The first step in the transformation was the company’s purchase of Energy Africa in 2005. This gave it a foothold in the continent, where it now holds more exploration licences than anyone else. It also provided the bulk of the record $1 billion first-half revenues it reported yesterday. Tullow followed this with the Jubilee field off the coast of Ghana, which is now on track to produce 120,000 barrels of oil a day by early next year. The company has adjoining interests that could be just as productive. Next up was Uganda, where it is finally due to complete the sale of a two-thirds interest in the east African country’s Lake Albert rift basin to its development partners, Total and Cnooc, for $2.9 billion. The deal will leave Tullow debt free and consequently with plenty of headroom to continue funding its activities, including exploration, which could turn up the next big prospect. The group started work on the Zaedyus prospect in French Guiana in South America last March, which is a geological mirror of the Jubilee field. A positive result there could prove just as lucrative. Similarly, in Kenya, Tullow has begun exploration work on a rift-basin formation related to Lake Albert in Uganda. Off the Liberian coast, the Montserrado well in the Cobalt prospect is potentially another lucrative find. At this stage, potential is the key word. Exploration is about establishing whether a prospect contains oil and can be commercially exploited. The company is likely to give a clear indication on its exploration work in French Guiana, Kenya and Liberia by the end of the year. The odds against one turning out to be another Jubilee or Lake Albert are high. However, given Tullow’s recent record, you could not write off the prospect of yet another game changer.