A large profit from a farm-down in its Ugandan assets meant Tullow posted an increased first-half net profit as soaring costs eroded higher revenues.

The London-listed explorer boosted its production in the period but also ran up write-off costs and increased expenses at mature fields.

In February Tullow completed the farm-down of its assets in Uganda to Chinese giant CNOOC and Total of France.

The total headline consideration for the sale of majority interests in three blocks was $2.9 billion with a total profit of $701 million hitting Tullow’s books.

This sum was instrumental in lifting net profit for the six months to the end of June to $566.9 million from $347.3 million in the comparable period a year earlier.

Although Tullow raised revenues from $1.06 billion to $1.17 billion, costs were also up, mainly due to fixed operating costs on mature fields with declining production.

The cost of sales soared from $342.6 million to $488.5 million to send gross profit down from $719.8 million to $678.7 million.

The profit from the Uganda deals, however, meant that Tullow could ride increased administrative expenses as well as a huge $451.3 million exploration write off as compared with a write off of $54.6 million in last year’s first half.

Tullow said production rose 3% in the period to an average of 77,400 barrels of oil equivalent per day. Sales volumes ballooned 6% to 67,900 boepd with the average realised oil price dropping 1% but the gas price climbing 4%.

UK production was slightly down on expectations due to schedule delays at the Ketch 10 infill well on Block 44/28b.

Shares in Tullow were down over 1% in pre-opening trading in London on Wednesday.

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