Owing to a ruling by the International Tribunal for the Law of the Sea (ITLOS) in Hamburg, Germany that work on the Tweneboa, Ennyera and Ntomme (TEN) project could continue, shares of Tullow Oil Plc rose yesterday.
The Tribunal rejected an application by Côte d’Ivoire that work on the TEN Project off the coast of Ghana should be stopped because it was in dispute.
Tullow’s shares had earlier surged as much as nine percent but news of the positive ruling by the ITLOS catapulted the prices by 4.43 percent to 436.50p.
The shares rose despite the fact that the company’s stock was down more than 40 percent on an annual basis.
Advice to Ghana
Even though the Tribunal ruled that ongoing work at the disputed territory should continue, it ordered Ghana not to start any new drilling.
The parties to the matter were also advised to “pursue co-operation and refrain from any unilateral action that might aggravate the dispute.”
The Francophone country filed an injunction appeal at the Hamburg-based Tribunal to force Ghana to suspend all ongoing oil exploration and exploitation operations in the disputed area and refrain from granting any new permit for oil exploration and exploitation in the disputed area until the definitive determination of the case.
Tullow, owner of about half of the TEN Project, located in the disputed waters, would have suffered a hefty blow financially if the application had been granted even though it is not a party to the dispute.
In a press release issued Friday, Tullow said work on the TEN was 55 percent complete, adding that first oil was expected in mid-2016. The arbitration does not affect work on the Jubilee Field.
Effects of the arbitration
In March, when the matter was first sent before the Tribunal, eight percent of Tullow’s valuation dropped on the day. According to Goldman Sachs, a two-year suspension of work at TEN, as demanded by Côte d’Ivoire, would have eroded as much as 16 percent of Tullow’s value.
Aidan Heavey, Chief Executive Officer of Tullow Oil, stated that “Tullow has long had interests in and strong relationships with both Ghana and Côte d’Ivoire and we have conducted our operations in both countries in line with our obligations as a contractor under our Petroleum Agreements and in accordance with international operating standards. Although the arbitration process allows for an application of provisional measures, it is our view that it is in the best interest of all parties that the TEN project continues to move ahead without delay and unencumbered by legal tactics of this nature.”
Tullow’s performance in 2014
Mr Heavey, touching on the performance of Tullow last year said, “2014 was a difficult year for our industry and a challenging one for Tullow as our results demonstrate. In response to this, and the fall in the oil price, we have reset our business and are focusing our capital expenditure on high-quality, low-cost oil production in West Africa. We have increased and diversified our sources of debt capital, reduced our exploration expenditure, implemented significant cost saving initiatives and we are suspending the dividend.
“The TEN Project in Ghana, which remains on track, will increase our net West Africa oil production to over 100,000 bopd by the end of 2016 generating substantial cash flows placing Tullow in a strong position when the sector recovers.”
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