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Tullow Oil’s rights issue to boost Kenyan exploration

A worker at the Ngamia 3 oil exploration site, run by Tullow, at Nakukulas Village, Turkana. FILE PHOTO | NMG
A worker at the Ngamia 3 oil exploration site, run by Tullow, at Nakukulas Village, Turkana. FILE PHOTO | NMG 

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

The UK-based company is reported to have a debt burden of around $4.6 billion (Sh474 billion) caused in part by the decline in oil prices over recent years and the rights issue is aimed at raising $607 million (Sh62.5 billion).

Despite the debt burden many stock market experts believe the company’s assets are undervalued particularly as oil prices are now recovering.

According to 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 though this rights issue we will be able to focus on growing our business.’’

Tullow, which has been loss-making for three years, says it also aims to improve production and sell assets — as it did recently in Uganda — to further cut its debt.

This is 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 who now hold 55 per cent of its 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.

The company is set to undertake exploration and appraisal work in its Jubilee and TEN fields near Ghana and its fields on the Kenyan coast.

Tullow added that it also hopes to take advantage of “other opportunities that industry conditions offer”.