Tullow drilling in spotlight after mixed 2012

Updated 12 January 2013
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Tullow drilling in spotlight after mixed 2012

LONDON: Tullow Oil Plc has a record 49 wells planned this year, and drilling engineers due to deliver news by February are under pressure after a disappointing trading update from the Africa-focused company yesterday.
After a mixed year for one of the industry's best performing drillers of recent times, Tullow's output guidance for 2013 at 86,000-92,000 barrels of oil equivalent per day (boepd) came in below some analysts' forecasts, and its 2012 output at 79,200 boepd undershot company guidance.
In addition, parts of the update on drilling in Uganda and Kenya were more cautious than some analysts had hoped from Europe's largest oil and gas exploration and production company outside the industry's integrated giants.
Tullow's shares, which have tripled since 2007 while peers have flatlined, fell 5.3 percent to 1,160 pence by 1135 GMT.
But finance director Ian Springett said the company's view of its east African assets was unchanged and stressed that exploration, not production, remained Tullow's driving force, with a record 49 wells to be drilled during the year.
He said the negative Ugandan well results were establishing the margins of the basin and were relatively low cost, while in Kenya "it's very, very early days."
"We need to drill a lot more wells in Kenya before we really understand where are the best locations and what the flow rates are," he said. "We have a very large exploration program active in a number of countries with some basin opening potential in a number of them. It's a big and wide program."
The company said it would continue to focus on "high value oil and early monetization" in its exploration-led growth strategy - selling assets where it has found oil relatively early in the development and production process.
Some investors have begun to worry it is losing that focus, especially since December last year when it bought Norwegian driller Spring Energy, and attendees at a Macquarie investment conference this week expressed a desire to see it maintained.
Out of the more than 30 who responded, 65 percent said Tullow should avoid getting sucked into a production target structure, and err on the side of early sell-out.
Macquarie analyst Mark Wilson tagged Tullow shares as underperform early last year, and other analysts have moved in that direction since.
"While still a best-in-class explorer, we see ongoing challenges for Tullow as it continues to seek the right balance between the "E" (exploration) and "P" (production) sides of its portfolio," said Brian Gallagher of Investec, who rates the stock a sell, in a research note on Friday.
Analysts at Charles Stanley yesterday downgraded the stock to hold from accumulate.
In Kenya and Ethiopia, Tullow said it was expecting a result from its high-risk PaiPai-1 well in February and a flow rate test completion at its Twiga-South-1 well it shares with Africa Oil in the same month. The flow rate from the Twiga-South-1 test is unlikely to be more than 500 barrels a day, it said. Drilling on the Sabisa-1 well in the South Omo block in Ethiopia is expected to commence within the next two weeks.
In Uganda, Riwu-1, Raa-1 and Til-1 did not encounter commercial hydrocarbons, Tullow said, but extensive further drilling in partnership with operator Total is planned for 2013.
At another important prospect in French Guiana, drilling at Priodontes-1 (GM-ES-3) adjacent to the already drilled Zaedyus prospect started at the end of December 2012, and is expected to continue for four to five months, Tullow said. Zaedyus-1 was encouraging last year but Zaedyus-2 found no commercial quantities of oil, news that hit Tullow's shares in December.
Tullow has long targeted 120,000 barrels a day of output at its Jubilee field in Ghana, and had once hoped to reach that by 2011. The company said it was now producing 110,000 barrels a day "therefore allowing the current FPSO (floating production, storage and offloading vessel) capacity to be tested over the coming weeks." Analysts said this was good news.
Last year Tullow raised $2.9 billion by selling part of its Uganda franchise to Total and China's CNOOC.
Tullow is trying to sell more assets to help finance its capital expenditure program which is expected to total $2 billion in 2013, up from $1.9 billion in 2012, but it had no firm news on disposals in its trading update.


Airbus warns could leave Britain if no Brexit deal

Updated 22 June 2018
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Airbus warns could leave Britain if no Brexit deal

  • Industry analysts say Airbus would be unlikely to pull out of the UK abruptly because of long lead times and waiting lists for its planes
  • Airbus, which makes wings for all its passenger jets in the UK, said that leaving both the EU’s single market and customs union immediately

PARIS: European aviation giant Airbus warned Thursday it could be forced to pull out of the UK if Britain leaves the European Union without a deal.
In a Brexit risk assessment, Airbus said Britain withdrawing from the EU without a deal “would lead to severe disruption and interruption of UK production.”
“This scenario would force Airbus to reconsider its investments in the UK, and its long-term footprint in the country, severely undermining UK efforts to keep a competitive and innovative aerospace industry, developing high value jobs and competences,” it warned.
“Put simply, a no deal scenario directly threatens Airbus’ future in the UK,” Tom Williams, chief operating officer of Airbus Commercial Aircraft, said in a statement.
In its risk assessment, Airbus said under a “no deal” scenario, delays and disruptions to its production could cost it up to one billion euros ($1.2 billion) a week in lost turnover.
It said a no-deal Brexit “would be catastrophic” for the aviation group.
Airbus employs 14,000 people at more than 25 sites in Britain, where it manufactures the wings of its aircraft.
“In any scenario, Brexit has severe negative consequences for the UK aerospace industry and Airbus in particular,” Williams said.
“While Airbus understands that the political process must go on, as a responsible business we require immediate details on the pragmatic steps that should be taken to operate competitively,” he said.
“Without these, Airbus believes that the impacts on our UK operations could be significant. We have sought to highlight our concerns over the past 12 months, without success.”
On the future trade relationship between Britain and the EU, Airbus said the current transition period, which runs until December 2020, “is too short for the EU and UK Governments to agree the outstanding issues, and too short for Airbus to implement the required changes with its extensive supply chain.”
“In this scenario, Airbus would carefully monitor any new investments in the UK and refrain from extending the UK suppliers/partners base.”
Britain is due to leave the European Union in March 2019 but continue the current trading arrangements during the transition phase to December 2020 to give time for the two sides to agree the terms of a new partnership.