Debt has been closely-watched at Tullow over recent years.
An AGM update confirmed net debt had fallen to $3.4bn at 31 March 2018, from $3.5bn at the full year. While this is moving in the right direction, some analysts were hoping for a quicker pace.
The shares fell 4.8% on the news.
It was touch and go for a while in early 2016, but Tullow looks like it's finally back on the road to recovery.
Falling debt and new borrowing facilities have given the group extra breathing space, around $1bn to be precise, while the completion of the huge TEN oil field means production is rising. Increasing production as oil prices rise is driving better than expected cash returns, supporting further debt reduction.
Nonetheless, repairing the balance sheet is likely to remain a focus for some time yet. Reduced gearing has been driven more by earnings recovery than debt repayments, and the twin tailwinds of increasing production and a higher oil price won't blow this strongly forever.
However, improved conditions mean the group is able to look to the future.
Ghana will remain the driving force behind the group, and further development of those fields should increase output. Tullow has an excellent track record with the drill bit, and is turning its eye to exploration opportunities once again.
Ugandan and Kenyan assets are in the early stages of development, and signs are promising. The group has added acreage in CÃ´te d'Ivoire and Peru and expects to undertake exploration activities elsewhere in its portfolio in 2018. These early stage assets are speculative but have the potential to generate significant upside.
Tullow deserves credit for its exploration success, as well as its development achievements. A recovering oil price has dramatically increased the value of past achievements, and its expertise are a catalyst for future performance.
However, debt continues to loom large. Until it's back at manageable levels Tullow's future remains largely outside of its control. In combination with an unpredictable oil price, that means investors should maintain a healthy degree of caution.
Tullow's average net oil production was 87,700 barrels of oil per day (bopd) in the first quarter, including production-equivalent insurance payments. The company still says it expects to produce between 82,000 and 90,000 bopd across its full year.
In Ghana, the Jubilee field produced an average of 32,200 bopd, but there have been significant barriers to progress here. A broken turret led to a 19-day shut down on the vessel, and Tullow expects around four weeks of further stoppages later this year.
The TEN fields performed well during the quarter, with production averaging 32,400 bopd. Gas sales from the site are expected to start in June. Drilling at the Ntomme field began in March.
The West African non-operated portfolio delivered an average of 23,100 net bopd, with 2,700 barrels of oil equivalent from the soon-to-be decommissioned UK assets.
A farm-down agreement, which will see Total and CNOOC acquire rights to Tullow's assets in Uganda, is progressing, and the government is expected to approve it soon.
Tullow expects to make a final investment decision on Kenyan assets in 2019, and continues to explore new ventures in South America and West Africa. It expects 2018 capital expenditure to be $460m.
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