Oil titan Tullow missed production targets last year, while write-offs for unsuccessful drilling soared, causing shares
to tank on Friday morning.
Group working interest production last year averaged just 79,200 barrels of oil per day (bopd), below the forecast range of 80,000-84,000 bopd, due to the enforced shutdown of Tullow's non-operated production in the CMS area of the UK in early December following safety issues. This has now been resolved.
Average production is expected to rise to 86,000-92,000 bopd in 2013. This is below the previous guidance of 95,000 bopd, according to analysts at Investec.
Meanwhile, exploration write-offs more than doubled in 2012 due to a number of unsuccessful drilling activities.
Write-offs associated with unsuccessful exploration activities, new ventures activity and licence relinquishments totalled $219m in the second half, compared with just $80m in the first six months of the year.
As such, the total unsuccessful exploration write-off for 2012 activities is expected to total $299m, up from $121m in 2011. When combined with the asset value reduction of $371m reported in the first half of 2012, the total write off is expected to be approximately $670m.
Upbeat outlook after Kenyan success
The firm said that it expects a "very successful 2013" after "accomplishing much" last year: establishing Kenya as a new hydrocarbon province, resolving Jubilee production issues and raising commercial reserves.
Chief Executive Aidan Heavey said: "This continuing process of portfolio management, alongside increased Jubilee production and a strengthened balance sheet, provides a strong base from which our exploration-led growth strategy can continue to deliver.
"Tullow is now well positioned for a very successful 2013 and growth beyond."
Tullow said that the clear highlight in Exploration & Appraisal last year was Kenya, which was established as a new oil nation with two frontier discoveries at Ngamia-1 and Twiga South-1.
"These discoveries are, alongside successful exploration in Uganda and recent major offshore gas discoveries by industry peers, establishing East Africa as an exciting new energy region."
Tullow achieved a 72% (33 out of 46) exploration and appraisal success ratio last year.
The company said it would invest $0.9bn in drilling over 40 wells in 2013, taken from the capital expenditure budget of $2.0bn (up from $1.9bn in 2012).
Investec retained its 'sell' rating for the stock on Friday morning, saying that while it the business is still a "best-in-class explorer", there are "ongoing challenges for Tullow as it continues to seek the right balance between the 'E' and 'P' sides of its portfolio".
Shares were down 4.98% at 1,164p by 11:00.