Tullow Sees 1st Half Profit More Than Halving Amid Lower Oil Prices

By Selina Williams

LONDON--Tullow Oil PLC, the U.K.'s largest independent oil explorer, said Wednesday that gross profit for the first half of the year is expected to more than halve amid lower oil prices and slightly lower production.

Tullow said in a trading update that gross profit is expected to be $0.3 billion for the first half of the year compared with $0.7 billion in the same period a year earlier as revenues fell 38%.

Net debt increased to $3.6 billion in the first half to June 30 compared with $2.8 billion in the same period a year earlier.

The company said it had taken a number of steps in the first half of the year to re-set the business. Tullow had earlier this year said it was targeting cost savings of around $500 million over the next three years.

"This approach is paying off with good progress across the business in the first half of 2015," Chief Executive Officer Aidan Heavey said.

The decline in oil prices has hit the exploration and production sector hard. Unlike deep-pocketed major oil companies such as BP PLC and Royal Dutch Shell PLC, explorers don't have other parts of their business to fall back on, such as refining and marketing, when oil prices are low.

The company's output in the first half of the year averaged 74,600 barrels of oil equivalent a day, due to strong West Africa output and increased guidance for the full year to 75,000 boe/day, Tullow said.

Tullow said that its key Ghana TEN project remains within budget and on scheduled with first oil expected in mid-2016.

Tullow is scheduled to report half year results on July 29.

Write to Selina Williams at Selina [e-mail]