Tullow Oil faces hefty £243m tax bill in Ghana following bumper revenues
Tullow Oil faces a hefty £243m ($300m) tax bill in Ghana – home to the fossil fuel producer’s flagship fields – with the company expected to fully utilise its capital allowances by the end of the first quarter of 2023.
The oil producer revealed the chunky tax bill in its latest robust trading update ahead of its 2022 full year results in March.
In its performance review of 2022, Tullow reported revenues of £1.38bn ($1.7bn), at an average realised oil price post-hedging of $87 per barrel, with free cash flow of $469m.
This was ahead of guidance and driven by the increased equity interest in Ghana ($126m) and excluded the impact of the Norwegian arbitration payment ($72m).
The oil trader reduced year-end net debt to $1.9bn from $2.1bn the year before, while capital and decommissioning expenditure were priced in at $354m and $72m respectively.
Looking ahead to this year, Tullow announced it will invest $400m over 2023, including $300m on its flagship fields in Ghana and $90m in decommissioning projects.
Tullow expects to produce between 58,000 and 64,000 bpd, broadly in line with last year.
Meanwhile, cost cuts and a focus on its fields in Ghana means Tullow is now presenting a guide of $700-$800m in free cash flow for the 2024-2025 period – if an oil price of $80 a barrel is realised.
“Strong operational delivery, rigorous focus on costs and capital discipline, the increased equity in our key operated fields in Ghana and higher oil prices drove material, expectation-beating free cash flow generation in 2022, accelerating the group’s deleveraging towards a net debt to EBITDAX ratio of 1.3 times by the year-end,” said chief executive Rahul Dhir.
Alongside the headline figures, the company has been exposed to new tax assessments from the country’s revenue authorities – who are pushing the company to pay further tax on historical trading.
In a statement to the London Stock Exchange, Tullow argued the assessments were “without merit”.
It has been holding back and forth talks with government in a bid to resolve the dispute on a “mutually acceptable basis”.
Tullow made headlines last year for its proposed merger plans with Capricorn Energy, which fell through following a rival bid by Newmed Energy – whose takeover has also hit the rocks following activist pressure.
Shares in the company were up 3.63 per cent on the FTSE 250 this morning following the announcement.