Tullow Oil’s profit after tax declined by 68 per cent from $666 million (Shs1.7 trillion) last year to $216m (Shs553 billion) this year, the latest company annual financial report released this week reveals.
As a result, basic earnings per share decreased by 73 per cent to 18.6 cents down from 68.8 cents in 2012.
According to the company chairman Mr Simon Thompson’s report to the shareholders, the loss was due to higher exploration write-offs and lower portfolio management profits.
According to the report, the Uganda business contributed to the profit slump by registering a $67 million (Shs171 billion) in exploration “write-offs” in respect of its offshore Ngassa discoveries.
The loss is part of a $280 million (Shs717 billion) write-off brought about as a result of “license relinquishments and changes to future work programmes.”
The other write-offs in the same category include Kenya’s $79 million (Shs202billion) due to the relinquishment of Block 10A and the UK $30 million (Shs76 billion) due to the relinquishment of the Cameron discovery.
No returns registered
Relinquishment of a block means that the company drilled the area but failed to hit commercially viable hydrocarbons.
Daily Monitor couldn’t verify the number of unsuccessful wells Tullow drilled in Ngassa.
By press time, the company’s corporate affairs manager had not responded to email inquiries.
According to Investopedia, an online investment dictionary, a write-off is a reduction in the value of an asset or earnings by the amount of an expense or loss.
Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues.
Tullow performance releases also included revelations of all its payments to foreign governments on a project by project basis. This is the first time an oil company has ever done this.
The disclosures show the taxes, royalties, license fees and other public revenues generated by the company’s operations across 21 countries – 14 of which are in Sub-Saharan Africa – for the years 2012 and 2013.
According to the report, Uganda was given income taxes amounting to $4.1m (shs10.6billion), 136m less of last year’s $141m (shs361.3bilion).
Uganda received another $11,000(shs28 million) in license fees last year.
At the moment it is not possible to track payments into the Ugandan budget because they only appear as one lump sum figure for all companies and all payments. However, the Public Finance Management Bill currently before Parliament will, if passed in its current form, make it possible to disaggregate oil monies from the URA tax bandwagon.
The Bill seeks to create a petroleum fund where all oil monies will have to be deposited.
Tullow’s disclosure comes at a time Uganda government is being pushed to join the Extractives Industries Transparency Initiative so that it is compelled to voluntarily make public monies it gets from the oil companies.
Global witness’s researcher George Boden hopes that Tullow’s transparency move will help create the demand for the same transparency on the part of governments so that citizens can ‘follow the money’ into government accounts.
Global Witness is an international non-government organisation established in 1993 that works to break the links between natural resource exploitation, conflict, poverty, corruption and Human rights worldwide.
According to a statement the NGO released, Tullow’s voluntary disclosures were released in advance of a new European Union law, due to come into force in the UK in 2015.
The law will require EU oil, mining and logging companies to publish their payments to governments on a project-by-project basis.
“Tullow’s disclosure reflects the emergence of a new global reporting standard for natural resource payments,” the statement reads.
It adds that the disclosures “will enable citizens in economically poor but resource-rich regions to monitor public revenues worth hundreds of billions of dollars and hold governments to account for how the money is used.
Tullow came to Uganda after buying off Heritage oil’s interests and it discovered commercial quantities of oil in 2006. It later, in 2011, farmed down to Total and China National Offshore Oil Company.
However, since then, there has been a slow movement in the company’s progress in Uganda especially as regard to acquiring a production license.
Tullow says the delay has enabled it to focus on Kenya.