Tullow Oil Plc, the worst-performing oil stock in the U.K.’s benchmark index, will maintain its focus on exploration rather than developing existing discoveries.
“We are an exploration-led company, there’s no value in chasing production targets,” Chief Executive Officer Aidan Heavey said in an interview after Tullow published annual results today. “We will farm down developments as appropriate.”
Tullow, which is selling fields in the U.K., Netherlands, Pakistan and Bangladesh, will consider more disposals including a stake in the TEN development in Ghana, Heavey said. The London-based company will drill more than 40 exploration and appraisal wells this year in countries including Kenya, Mauritania, Norway and French Guiana.
Tullow’s explosive growth -- its market value tripled between 2008 and 2011, driven by oil discoveries in Ghana and Uganda -- has stalled. Before today, the shares had dropped 23 percent in the last 12 months, the worst performance in the FTSE 350 Oil & Gas Index on concern the company’s biggest field, Jubilee in Ghana, wasn’t performing as well as expected.
“There’s been a misunderstanding what our strategy is among some analysts,” Heavey said. “We want a production base that’s suitable for our exploration. We built the company on exploration.”
The shares gained 6.8 percent, the steepest one-day gain since September 2011, to close at 1,260 pence in London.
Tullow will drill as many as 11 wells in Kenya this year as it explores areas with similar geology to the company’s find in neighboring Uganda. The company said today tests on its Twiga South well flowed oil at 2,351 barrels a day, showing the country’s first commercial flow rates.
“ We believe exploration activity is what will drive Tullow in 2013,” analysts at Sanford C. Bernstein & Co. said. “Exploration upside is largely unreflected in today’s share prices.”
The company holds rights to 10 basins across Kenya and Ethiopia, each a similar size to the Lake Albert Rift Basin in Uganda, where Tullow discovered almost a billion barrels of oil. The company completed the sale of two-thirds of its Uganda holdings to China’s Cnooc Ltd. and France’s Total SA last year.
In Ghana, production at the Jubilee field has risen to 110,000 barrels of oil a day after work on the field. The capacity of wells at the field is now 120,000 barrels a day.
Tullow, which holds 50 percent, and its partners submitted a plan to the Ghanaian government to develop the TEN project with a production capacity of 80,000 barrels a day.
The company’s working-interest production from all its fields worldwide averaged 79,200 barrels a day. Output in 2013 will be 86,000 barrels to 92,000 barrels a day, Tullow said.
Tullow said profit before tax rose 4 percent in 2012 to $1.1 billion. The company kept the full-year dividend unchanged at 12 pence a share.