Tullow eyes Sh60bn via rights issue

Tullow Oil’s new rights issue should enable the company to clear some of its debt burden and allow for further exploration in its African oil fields in Kenya and elsewhere, according to its new chief executive.

The firm aims at raising $607 million (Sh60 billion).

The UK-based company is reported to have a debt burden of around $4.6 billion caused in part by the decline in oil prices over recent years.

Despite this, stock market experts believe the company’s assets are undervalued, particularly as oil prices are now on the rebound.

According to Mr Paul McDade, who is due to become the company’s chief executive next month, Tullow “has a strong set of low-cost production development and exploration assets in Africa and by accelerating the reduction of our gearing through this rights issue, we will be able to focus on growing our business”.

Tullow, which has been making losses for three years, says it also aims at improving production and selling assets — as it did recently in Uganda — to further cut its debt.

This, it says, should enable it to further “explore” and “appraise” its assets in Kenya as well as start further drilling in Ghana.

Earlier this year, some financial analysts were predicting Tullow’s eventual withdrawal from East Africa after its Ugandan sale to Total, which now holds 55 per cent of the Ugandan operations.

Critics warned that barring new findings and a new cycle of high global energy prices, its Kenyan fields, with just over 600 million barrels, could not support a viable production programme without leaning on joint commercial programmes with either Uganda or South Sudan.

Mr McDade, however, expects Tullow’s restructuring talks to conclude by the end of the year and that the rights issue boost will then help it to move ahead with a raft of projects.