Tullow Oil lost over 200 million pounds ($308 million) of its market value on Monday, hit by concerns that a boundary dispute between Ivory Coast and Ghana could delay a project off the coast of west Africa.
The Africa-focused firm is developing the TEN project off the coast of Ghana, in waters over which there is a maritime boundary dispute between Ghana and Ivory Coast.
Ivory Coast has made a request to the authority handling the case, the International Tribunal of the Law of the Sea (ITLOS), that Ghana suspend ongoing exploration and exploitation operations in the disputed area while the matter is considered.
Tullow now faces a period of uncertainty while the tribunal makes a decision on the Ivorian request, which the company said was expected by the end of April.
Shares in Tullow lost over 6 percent of their value, making the company the top faller on Britain’s bluechip index and putting them not far off a six-year low hit in January.
“This has the potential to cause serious delays to Tullow’s flagship TEN project, which could significantly delay much-needed cash flow and put the balance sheet under pressure,” First Energy Capital analysts said in a note.
Uncertainty over the project comes as the company also tries to cope with low crude prices, which have dropped sharply since last June. Tullow scrapped its dividend in February after it posted a $2 billion pretax loss.
Traders also blamed the fall in Tullow’s share price on the oil company’s possible relegation from the FTSE 100, when the results of the quarterly index review are announced this week.
Tullow is due to finish work on TEN and start pumping oil by mid-2016, more than a year before ITLOS is expected to give a verdict in the maritime border dispute case.
The company, which sources almost half of its total oil production in Ghana and also has smaller operations in Ivory Coast, said its legal advice was that Ghana’s boundary claim had a strong case under international law.
“It is our view that it is in the best interest of all parties that the TEN project continues to move ahead without delay and unencumbered by legal tactics of this nature,” chief executive Aidan Heavey said.
Oil is a major source of revenue in Ghana, a politically stable country with a fast-growing economy that also yields gold and cocoa. Ivory Coast, the world’s top producer of cocoa, is keen to develop its own offshore oil and gas sector after years of political turmoil.
($1 = 0.6500 pounds)