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A production warning from Tullow Oil sent the energy group’s shares plunging over 20% on Wednesday, and weighed heavily on London’s midcap index.
Led by Tullow, the FTSE 250 MCX, -0.76% fell 0.9% to 20,246.66, outstripping losses for the FTSE 100 index UKX, -0.32%, which was down 0.5% to 7,330.52, tracking weaker global equity markets.
In a trading update, Tullow forecast average group oil production below guidance for the full year, and blamed poor production from Ghana. The company predicted full-year free-cash flow of around $350 million, which it said has been adversely affected by lower production and lower oil prices for much of the latter half of the year. Shares dropped 28% to roughly the lowest level in two years at 148 pence.
Tullow also said recent oil discoveries in Guyana have revealed heavy oil, which is a type of crude that is dense and tougher to get out of the ground. Tullow’s downbeat update “clouds genuine progress in Kenya, further debt reduction and a restart to dividend payments,” said Job Langbroek, an analyst at Davy Research.
Several global issues were in focus for global markets. Investors were waiting for Congressional testimony from Federal Reserve Chairman Jerome Powell, and were rattled by comments from President Donald Trump, who failed to soothe nerves over global trade negotiations in an appearance on Tuesday. Increasingly violent protests in Hong Kong were also putting some on edge.
HSBC Group HSBC, -0.08% fell 2.8% as banks dropped across the board and weighed on the main London index. Lloyds Banking Group LLOY, -0.94% LYG, +1.35% fell 1%.
Shares of property groups were also dropping, with British Land Company BLND, -3.51% leading FTSE 100 losses with a near 4% drop as it reported wider first half losses and said portfolio valuations fell. Shares of rival Land Securities Group LAND, -1.90% fell 2.6%.
