TULLOW OIL PLC

Corporate Finance: Tullow Oil plc



Corporate Finance: Tullow Oil plc

Introduction

Oil price movements and changes in the volume of production play key roles in determining the performance of the Global Oil and Gas Exploration and Production industry.

Global oil demand will increase as world economic growth continues to accelerate over the five years to 2016. This paper presents the analysis of Tullow Oil PLC that has undergone major changes in past few years. Tullow Oil PLC is a leading independent oil company in African continent; it has acquired 90 licences for oil exploration and extraction in 22 countries (Tullow Oil PLC, 2011a). It is headquartered in London, listed in Irish and London Stock exchanges, and has workforce of approximate 1200 people (Tullow Oil PLC, 2011a). Company's global growth will increase its position in crude oil exploration and extraction industry as an emerging company that continues to grow quickly, while developing national outputs. New capacity of Tullow Oil is expected to come on stream in several oil-producing countries that will extend its operation base further in future.

Part 1

Investments

Tullow oil has made significant investment in Ghana, Gabon, Senegal, Uganda, and French Guinea. Considering the effectiveness of oil exploration in many African countries, it is opting to penetrate in Liberia. Tullow Oil exploration and appraisal gained significant momentum in Equatorial Atlantic region offshore countries. Remarkable investment of 1.2 billion dollar in Uganda proved to be a successful investment for the company, as all 10 wells became successful projects. Tullow is also planning to initiate 40 Well Exploration campaign in South America and Africa by the end of 2011 (Tullow Oil PLC, 2011a).

In Ghana, Jubilee Phase 1 project of Tullow Oil will enhance the production capacity by the mid of year 2012. Enyenra and Tweneboa oil fields tests have turned as major discoveries in favour of the company that will enable the company to increase its market share in oil exploration (Tullow Oil PLC, 2011a). Tullow Oil also acquired West Cape Three Point license at the end of year 2010 in Ghana. In Kenya and Ethiopia, Tullow acquired the licence for around 100,000 square km area in January 2011. Due to financial constraints and finance need of additional 350 million dollar has propelled the company to reschedule to project initiation in mid 2012 (Ibis World, 2011).

Despite an anticipated tightening of regulations after the moratorium on African offshore drilling, increased levels of demand will drive oil output and quickly result in revenue growth. Tullow Oil revenue is anticipated to shoot up 8.8% from 2011 to 2012 (Ibis World, 2011).  The geographic spread of the foreign Oil Drilling and Gas Extraction approach of the company essentially reflects the distribution of oil and gas resources. The importance of various producing regions varies over time, as reserves come into production and some fields are depleted (Ibis World, 2011). Another reason for the investment in African oil fields is that larger oil and gas deposits are generally more economic to develop. Industry players that can acquire these types of ...