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News : International Last Updated: Nov 13, 2013 - 3:00 PM


Markets: Tullow Oil expects to exit 2013 with oil production at record levels
By Finfacts Team
Nov 13, 2013 - 2:56 PM

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Tullow Oil said today in a trading update that it remains confident that it will add 200 million boe (barrels of oil equivalent) to its resources this year - - as it has averaged annually for the past six years - - and exit 2013 with oil production at record levels. "Our high impact, basin opening exploration campaigns will continue in 2014, and with wells in Kenya, Mauritania, Norway, Ethiopia and Guinea planned for the first half, there is much to look forward to."

Tullow confirmed that it had recommenced operations in northern Kenya on November 8 after reaching a deal with local leaders to prevent a repeat of protests that halted work last month. Residents of the remote northern Turkana community, supported by a local politician, marched on Tullow operations on October 26 to demand more jobs and other benefits.

The government said protesters looted one site, which Tullow works on with partner Africa Oil.

Paul McDade, Tullow's chief operating officer, said the company had agreed to "accelerate" training programmes and other community involvement schemes.

Gerry Hennigan of Goodbody commented - - "Points of note within the Tullow Oil IMS this morning, which covers the period to November 13th, relate to production, planned asset disposals and forthcoming exploration activity.

Guided output for the year as a whole has been maintained in the range 84 – 88 (GBS 86 kbopd). Production from Jubilee (offshore Ghana) is expected to average 100 kbopd this year (GBS 97.5 kbopd) and exit the year at 120 kbopd. Total field capacity is now indicated at 150 kbopd on foot of new Phase 1A wells, underpinning potential future production. Aside from FPSO capacity limitations (c.125 kbopd), the sole constraint to field production would appear to be a delay in the gas export project to H2’14.

Bids for the farm-down on the TEN development (offshore Ghana) are expected this month (Tullow’s 47% stake valued at $1.1bn in our model). Elsewhere, the planned sale of its UK and Dutch interests is to be re-structured and now involve part sales of the portfolio. On the exploration front, as expected, bar an indication that the final well in the French Guiana campaign (GM-ES-5) has been plugged and abandoned (- 4.1p) there is limited incremental newsflow. Results are pending from Agete, onshore Kenya (30% risked contribution to NAV of 10.7p) and Tultule, onshore Ethiopia (10% risked contribution to NAV of 1.3p) by the end of the month with news on Fregate, offshore Mauritania (10% risked contribution to NAV of 11.0p) anticipated in December.

In August, Tullow received $345.8m following the court action against Heritage Oil. Net debt currently stands at $1.8bn, up from $1.7bn at the end of June, and is well within our year-end forecast of $2.2bn. Unutilised debt capacity stands at $2.5bn. Guidance on annual capex of $2.0bn has been maintained.
With the primary driver of the Tullow share price - incremental exploration newsflow from new frontiers - still pending, we expect the market reaction this morning to be muted. That said, there are few negatives in the statement to account for recent weakness, with the share price trading at a 16% discount to our total risked NAV of £10.72 (PT of £12.85 set at a 20% premium). On the contrary, positives in the statement relate to the stability of Jubilee production (40% of forecast FY13, 46% of FY14 group production) and a resolution to recent disruption in Kenya. Ahead of clarity on the emerging Kenya / Ethiopia frontier potential we maintain our Buy recommendation."

Economic View: Tackling youth unemployment will be a slow process; Dermot O'Leary, chief economist at Goodbody comments  - - "Following efforts kick-started during the Irish EU presidency earlier this year, leaders, social ministers and EU officials met yesterday in Paris to discuss the important issue of youth unemployment. It appears that the summit agreed on the urgency of the situation but there was little in the way of new policies to address the issue. Instead, the key elements of the €6bn plan agreed previously were reiterated. A key pledge within this is to ensure that no one under 25 remains without work or training for more than four months.

The goal of tackling youth unemployment is indeed a laudable and necessary one, but youth unemployment has been an issue for years, yet the youth guarantee scheme is not yet operational. Moreover, while putting policies in place to reduce the chances of embedded structural unemployment are necessary, an increase in demand in the euro area will also be required to solve this particular problem. In this regard, it is interesting that this debate is ongoing at the same time as the debate on the excessive current account surplus in Germany and the effect that this is having on the trajectory of the bloc as a whole.

Solving the youth unemployment issue is a very important political issue for European leaders. The latest summit highlights this fact, but with youth unemployment hovering at 24% and much higher in some countries, the journey back to 'normal' will be a long one."

US Markets

In New York Thursday, the Dow is down 34 points or 0.22% to 15,713.

The S&P 500 slid 0.41% and the Nasdaq slipped 0.99%.

Asia Markets

The MSCI Asia Pacific Index lost 0.9% Wednesday.

Japan's Nikkei 225 fell 0.15%; China's Shanghai Composite dropped 1.83%; South Korea's KOSPI dipped 1.60%; Australia's S&P/ASX 200 declined 1.37% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index slid 0.43%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 1.07% in mid-afternoon trade Wednesday.

In Dublin, the ISEQ  is off 1.03%

Tullow Oil has fallen 2.56% in London.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3444 and at £0.8411.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Tuesday, the BDI fell 21 points or 1.34% to 1,543.

Global rebalancing — the tanker scrapyard index?

Crude oil for December 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $93.25 up 21 cents from Tuesday's close. In London, Brent for December delivery is trading on the International Commodities Exchange at $106.73. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013:  US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,275.30 up $4.1 from Tuesday's closing.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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