Tullow Oil plans to sell shares at Ghana Stock Exchange

By Russell Padmore
Business reporter, BBC News

image captionOil pumps will soon be a familiar sight in Ghana as the industry develops

Tullow Oil says its decision to sell shares to investors in Ghana, through a listing on the stock exchange in Accra, will underline its commitment to the country.

The Anglo-Irish energy company also claims the float of shares in Accra, due to launch on 13 June, will make it easier for investors in Ghana to buy its shares, as the country's oil industry develops.

Tullow's chief financial officer, Ian Springett, told the BBC that the company hopes it will get a good reception.

"Tullow wants to be in Ghana very much for the long term. I think a listing on the Ghana Stock Exchange is an excellent way to demonstrate that commitment and it really gives Ghanains an opportunity to invest in our company and share in our future," he said.

"The secondary listing and issue through Ghanaian institutions will help cement the group's local relationships," added energy analyst Job Langbroek at Davy Stockbrokers in Dublin.

Jubilee prospect

Tullow is helping to develop the Jubilee oil field in Ghana, a prospect that promises to transform the fortunes of the country's economy.

Jubilee, which was discovered in 2007, is one of the biggest oil finds in west Africa over the last decade and it is believed to hold more than a billion barrels of crude.

The company is heavily focused on exploring for gas and oil across Africa, with operations stretching from Ghana to Tanzania and notably in Uganda.

Tullow expects its project in the Lake Albert Rift Basin region of Uganda to yield more than 2.5bn barrels of crude oil.

Profits outside Ghana

From its roots in the Republic of Ireland, with a listing at the stock exchange in Dublin, in little more than a decade Tullow has been transformed from a minnow of the industry to become a much bigger player in the energy sector, with significant shareholders at the London Stock Exchange.

Mr Springett reminds investors in Ghana that if they buy Tullow's shares when they start trading, they will also benefit from profits made elsewhere.

"Not just Africa of course, which is still where most of our business lies, but we're also investing in South America and we still have substantial assets in the UK North Sea," he says.

Tullow has come a long way since its tentative start in 1985, when the founder and current chief executive, Aidan Heavey, overheard a friend talking about small oil fields in Africa which had been left behind by the majors and had no-one to work them.

"I contacted another friend of mine in the World Bank who told me about a project in Senegal," Mr Heavey says.

"They had some small gas fields that they were trying to get people to develop, so I set up Tullow Oil to re-work those old fields.

"I knew nothing about the oil and gas industry at the time, which made it more challenging," he candidly admits.

During the 1990s the Irish company made steady progress, but the turn of the new century saw a major leap forward for Tullow.

In 2000 its pace of growth accelerated markedly with the acquisition of gas fields and related infrastructure in the North Sea from BP.

This acquisition was the catalyst for the group to move its registration to the UK.

Avoiding disputes

Tales of big oil companies trampling over the rights of local people and falling out with governments in the developing world are common in the industry.

image captionTullow Oil's Ian Springett believes Ghana will prove lucrative for the company

Giants like Royal Dutch Shell and Exxon Mobil have faced tough challenges in Africa.

Tullow has overcome several problems in Ghana and Uganda but, according to finance chief Mr Springett, being a smaller company always seeking good relations can help.

"I think there are certain advantages, but above all it's down to the company and its leadership. Our view is that we're there for the long term," he says.

"Our object is to create long-term value for the shareholders, for the governments in the countries in which we operate and at the end of the day remembering it is their oil that we're developing.

"At the same time we also work with local communities to develop local resources, local service industries to employ local people. I think over 80% of our staff in Ghana are Ghanaian."

Positive spin

Mr Springett seems very good at talking up the business, but the figures show that he is not exaggerating its prospects, even if he makes light of its challenges.

It has operations in 22 countries and last year its revenues were more than $1bn (£607m).

In 2010 it found hydrocarbons in 24 out of the 29 wells it drilled, but that kind of success is a long way from actually pumping crude oil.

As the price of crude oil hovers around $100 a barrel the future looks profitable for Tullow and that might tempt investors in Ghana to bet on its future, especially if the major economies of Europe and the US get back on track and demand for oil rises.

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