Tullow Oil takes impairment charge but delivers growth in 2013

15th Jan 2014 07:00

- Revenues and profits improved in 2013- Company to book 730m dollars in write-offs- 2014 production guidance below expectations- Kenya update points to upside potentialStable oil and gas prices and growth in production led to strong revenue and profit growth in 2013, according to a pre-close trading update from Tullow Oil on Wednesday.The firm also gave a positive update on recent oil discoveries from one of its blocks in Kenya, which have pointed to significant upside potential from the region.However, Tullow did reveal that while it spent $1bn on exploration and appraisal activities during the year, it expects to write off $405m in relation to this expenditure after some wells were unsuccessful.The firm will also write off a further $325m in relation to activities in 2012, with total net exploration write-offs for both years expected to be $730m. These are expected to be taken in the group's full-year results due on February 12th.Working interest production during 2013 averaged 84,200 barrels of oil equivalents per day (boepd), up from 79,200 boepd in 2012. This was towards the bottom end of company guidance for output of 84,000-88,000 boepd.Looking ahead to 2014, Tullow said that production is expected to average between 79,000 boepd and 85,000 boepd after accounting for the sale of assets in Bangladesh. Analysts at Numis Securities had expected 2014 guidance for around 87,000 boepd.Sales volumes rose from 68,000 boepd to 74,400 boepd in 2013, helping push revenues higher from $2.34bn to $2.6bn. Gross profit rose from $1.35bn to $1.40bn."Tullow is a stronger company at the beginning of 2014 than in January 2013. We made good progress across the business over the past year despite facing challenges within the oil and gas sector," said Chief Executive Aidan Heavey.Oil discoveries in KenyaIn a separate statement on Monday, Tullow said that it has made oil discoveries at the Amosing-1 and Ewoi-1 wells in Block 10BB onshore northern Kenya.After accounting for other recent discoveries nearby, the group has updated its estimate of discovered resources in this basin to over 600m barrels of oil.The company said that the overall potential for the basin will be fully assessed over the next two years with over 20 wells planned across its licences; but it believes it carries over 1bn barrels of oil."Exploration results to date from the first basin, amongst a chain of basins, have proven that Tullow's onshore acreage in northern Kenya has the potential to become a significant new hydrocarbon province," said Exploration Director Angus McCoss.BC