Shares of Tullow Oil plc (LON: TLW) crashed on Wednesday after the oil and gas firm warned shareholders about their 2019 production figures potentially missing targets following operational problems in Ghana.
In February, Tullow hit headlines after they announced that they would shift to an annual profit after a hike in revenues, which continued throughout a turbulent 2019 for the multinational oil and gas exploration firm.
The Oil market has been hit by market volatility, and big time names such as Shell (LON: RDSB) and Total SA (LON: TTA) had been hit by low oil prices leading to slumping profits.
During 2019, London-based oil producer Tullow sees production averaging 87,000 barrels of oil per day, but 2019 guidance was cut this morning.
In July, Tullow had warned production was likely to be between 89,000 barrels and 93,000 barrels, lower than the 90,000 barrels to 98,000 barrels initially guided, which caused shares to crash on Wednesday.
The FTSE250 (INDEXFTSE: MCX) listed firm said the lower than forecast production is mainly due to topside issues at the Jubilee field, which has constrained water injection and gas handling, as well as the suspension of a well at the TEN field.
“Ghana production has not met our expectations this year, and we are working closely with our Joint Venture Partners to ensure that both fields perform to their potential,” said Chief Executive Paul McDade.
McDade added “Tullow expects to deliver robust free cash flow for the full year. This has been supported by our continued disciplined capital investment and underlines our commitment to further reduce our debt and pay returns to shareholders”.
In Guyana, Tullow added that they were working with London listed Eco Atlantic, to develop the Orinduik block after two discoveries were made in July.
Eco Atlantic and Tullow on Wednesday said initial analysis of samples suggest the two wells contain heavy crude oil with a high sulphur content, which may not be suitable for industrial use.
“Recent analysis has shown that at these locations we have encountered heavy oil. We remain confident in the broader light oil potential of the Orinduik and Kanuku blocks located in this prolific oil basin,” said Tullow.
Eco Atlantic Chief Operating Officer Colin Kinley added: “Having spent three decades working within the heavy oil industry, we are very encouraged by the initial analysis of these wells and good parameters that define potential pathways to recovery.
“The fact the oil is already hot in the reservoir, and mobile, and has high quality porous sand to travel through, helps to eliminate a great part of the conventional heavy oil challenge.”
Tullow concluded that Kenyan operations were also making good progress, with a final investment decision to be made in the second half of 2020, which may act as a consolation for shareholders.
Shares of Tullow plummeted 22.39% as a result to 159p. 13/11/19 11:19BST.
