Tullow Oil is contesting a hefty £243m (US $300m) tax bill in Ghana – home to its flagship oil fields.
This comes after MTN Ghana, was also hit by a whopping $773 million back tax bill after a tax assessment by a dodgy entity called Safaritech Ghana Limited, which claimed MTN hid 30% revenue from the Ghana Revenue Authority (GRA) between 2014 and 2018.
Tullow’s higher than expected tax this year was also based on new tax assessments from the GRA, and after fully utilising capital allowances by the end of the first quarter of 2023.
In a statement to the London Stock Exchange, Tullow argued the assessments were “without merit,” which is similar to the response MTN gave when they were slapped with the unusual tax bill.
Tullow has therefore been holding back and forth talks with government in a bid to resolve the dispute on a “mutually acceptable basis”.
It revealed the tax bill in its latest robust trading update ahead of its 2022 full year results in March.
In its performance review of 2022, Tullow reported revenues of £1.38bn ($1.7bn), at an average realised oil price post-hedging of $87 per barrel – with free cash flow of $469m in 2022.
This was ahead of guidance and driven by the increased equity interest in Ghana – $126m – and excluding the impact of the Norwegian arbitration payment – $72m.
The oil trader reduced year-end net debt to $1.9bn from $2.1bn the year before, while capital and decommissioning expenditure were priced in at $354m and $72m respectively.
Looking ahead to this year, Tullow announced it will invest $400m over 2023 – including $300m on its flagship fields in Ghana and $90m in decommissioning projects.
Cost cuts and a focus on its fields in Ghana led Tullow to guide for $700-$800m in free cash flow for the 2024-2025 period, if an oil price of $80 a barrel is realised.
Tullow expects to produce between 58,000 and 64,000 bpd, broadly in line with last year.
“Strong operational delivery, rigorous focus on costs and capital discipline, the increased equity in our key operated fields in Ghana and higher oil prices drove material, expectation-beating free cash flow generation in 2022, accelerating the group’s deleveraging towards a net debt to EBITDAX ratio of 1.3 times by the year-end,” said chief executive Rahul Dhir.
Tullow made headlines last year for its proposed merger plans with Capricorn Energy, which fell through following a rival bid by Newmed Energy – whose takeover has also hit the rocks following activist pressure.
Shares in the company were up 3.63 per cent on the FTSE 250 this morning following the announcement.
