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Tullow Oil ups 2022 free cash flow outlook, Ghana tax looms

FILE PHOTO: Workers walk past storage tanks at Tullow Oil's Ngamia 8 drilling site in Lokichar

By Shadia Nasralla

LONDON (Reuters) -West Africa-focused oil producer Tullow Oil on Wednesday raised its 2022 free cash flow guidance to $267 million, slightly ahead of previous guidance and up from $245 million the previous year.

It plans to invest $400 million this year, mainly on its flagship fields in Ghana, expecting free cash flow to come in at $100 million at an oil price of $80 a barrel, or twice that at $100 a barrel.

Finance Chief Richard Miller said on a call that this year's cash flow would be impacted by higher capital spending, some of which is deferred from 2022, and decommissioning costs, which are two factors that will weigh much less on cash flow from 2024.

Cost cuts and a focus on its fields in Ghana led Tullow to forecast $700-$800 million in free cash flow for the 2024-2025 period, at an oil price of $80 a barrel.

Tullow faces a 2023 group cash tax bill of at least $300 million at an oil price of $80 a barrel, up from $230 million last year, as tax incentives in Ghana are running out, a company spokesperson said.

It also believes some of Ghana’s historic tax "assessments are without merit" and is engaging with Ghana's government to resolve the dispute, Tullow said in its trading update.

Ghana has to restructure its mountain of debt to access a relief package from the International Monetary Fund.

Tullow hedged 33,100 barrels per day (bpd) of this year's output and 11,300 bpd of 2024's production at between $55 and $75 a barrel.

After hedging, Tullow achieved an average of $87 per barrel in 2022, it said.

This year it expects to produce between 58,000 and 64,000 bpd, broadly in line with 2022.

Net debt at Tullow, which has a market capitalisation of around $648 million, went down to $1.9 billion at end-2022.

It is due to report full-year results on March 8.

(Reporting by Shadia Nasralla; editing by Jason Neely, Louise Heavens and Jane Merriman)