Tullow Oil Shares Tumble 35% as Debt Forecast Worsens and Refinancing Fears Mount

LONDON - Shares of Tullow Oil Plc dropped to a record low on Friday after the UK-based oil explorer raised its net debt forecast for the end of 2025. Trading of the stock was briefly halted as investors reacted to the company's updated financial outlook. The shares fell as much as 35% to 5.55 pence, marking the lowest level since the company began trading in 1989.

Tullow said it now expects its year-end net debt to reach $1.2 billion, up from an earlier forecast of $1.1 billion. The company attributed the increase to ongoing challenges, including natural declines in existing wells and delays in developing new projects. The revised debt forecast has raised concerns about Tullow's ability to refinance its debt ahead of a key 2026 bond maturity.

The company is currently in talks with bondholders, commodity traders, and other funding sources to explore refinancing options. Tullow said it is considering various forms of liability management, including an "amend and extend" exercise. However, analysts warn that the process could result in significant equity dilution for existing shareholders.

How Markets Reacted

The sharp drop in Tullow's stock came as investors digested the company's revised financial projections and the uncertainty around its refinancing plans. The stock's 35% plunge highlights growing concerns about Tullow's ability to manage its debt burden. The company's shares have been under pressure for months, with its debt outlook worsening amid falling production and rising borrowing costs.

Tullow's revised debt forecast comes amid a challenging backdrop for global oil producers. The company, which operates in Ghana, Gabon, and Côte d'Ivoire, has struggled to bring key Kenyan oil fields online. In 2025, it agreed to sell its Kenyan deposits and offload assets in Gabon to raise cash and reduce its debt load.

Risks to the Outlook

Tullow said it now expects 2025 production to fall to between 34,000 and 42,000 barrels of oil equivalent per day (boepd), lower than its previous range of 40,000-45,000 boepd. The decline is primarily due to natural attrition in existing wells and the absence of new production from key projects. The company also noted that its 2025 output could fall further depending on market conditions and operational performance.

The uncertainty around production levels has added to investor unease. With a key 2026 bond maturity looming, Tullow's ability to refinance its debt will depend on a combination of factors, including its production performance, the price of oil, and the willingness of creditors to support its restructuring efforts.

What This Means for Investors

Analysts suggest that Tullow's refinancing process could involve a range of options, including debt restructuring, equity issuance, or asset sales. James Hosie of Shore Capital noted that the company's new debt details suggest an increased likelihood of significant equity dilution. Such a move could further erode shareholder value and raise concerns about governance and transparency.

For now, Tullow's revised net debt forecast and production outlook highlight the fragility of its balance sheet. As the company continues to navigate its refinancing options, investors will be closely watching for signs of progress in its talks with creditors and the ability to stabilize its financial position before the end of the year.