Oil exploration company Tullow Oil said it will use free cashflow of $401m to pay down debt and invest rather than pay an interim dividend after having raised the possibility of a return to payouts.
Tullow returned to profit last year after three years in the red and chief financial officer Les Wood in April indicated that the company could start to pay dividends again.
"The board considered carefully whether to pay an interim dividend but concluded that, for the moment, free cash flow is best used to continue to pay down debt and to invest in assets," Tullow said in a statement.
Les Wood said today that the company did not need to reach its general net debt target of $2.5 billion in order to reinstate payouts, adding both dividends and share buybacks had their merits.
Tullow's net debt of $3.1 billion was slightly below expectations for the first half.
The company had said it expected free cashflow to come in at around $300m for the first six months of the year.
It said today it could potentially generate around $650m in free cashflow for the full year, but this could be impacted by litigation costs.
A London judge ordered Tullow this month to pay Seadrill around $254m, saying Tullow was wrong to end a contract between the companies on the grounds of force majeure over a maritime border dispute in West Africa.
Tullow had originally said its partners would pay in keeping with their stakes in the project, but Kosmos, which owns around 20%, successfully challenged this.
Tullow today said it plans to drill an exploration well in Namibia in September and expand drilling in Ghana into next year.
It aims for final investment decisions on Uganda towards the end of this year and Kenya in late 2019, which would open up those countries' oil industries for exports.
In Kenya, however, Tullow has stopped a pilot scheme producing oil and trucking around 600 barrels a day to the coast due to security issues around cattle rustling and banditry, chief executive Paul McDade said.
He said he did not expect this to change the overall timeframe for the project.
Earlier the company reported an after tax profit of $55m for the first half of the year, a major turnaround on the loss of $348m the same time last year.
Tullow Oil said its revenues for the six month period amounted to $905m, up from $788m in the first half of 2017.
The company said its West African oil production averaged 88,200 bopd for the six month period, in line with expectations.
Tullow said its TEN field in Ghana and its non-operated assets in Gabon, Côte D'Ivoire and Equatorial Guinea all performed ahead of expectations.
It said that while its Jubilee field in Ghana performed slightly below expectations, enhancements to the gas compression system completed during the recent shutdowns are expected to improve oil production capacity.
Tullow's chief executive Paul McDade said the results are further evidence of the progress that the company has made in the first half of 2018.
He said that with this firm financial foundation, Tullow will concentrate on growth across its three core businesses.
"Over the next two years, we will increase production from our current assets in West Africa, progress two large onshore developments in East Africa and step up our search for material new oil fields in Africa and South America through a multi-year exploration campaign which will initially focus on Namibia and Guyana," Mr McDade added.
