Tullow returned to profit last year after three years in the red and Chief Financial Officer Les Wood in April indicated that the company could start to pay dividends again.

"The Board considered carefully whether to pay an interim dividend but concluded that, for the moment, free cash flow is best used to continue to pay down debt and to invest in assets," Tullow said in a statement.

Wood said on Wednesday the company did not need to reach its general net debt target of $2.5 billion in order to reinstate payouts, adding both dividends and share buybacks had their merits.

Tullow's net debt of $3.1 billion was slightly below expectations for the first half.

The company had said it expected free cashflow to come in at around $300 million for the first six months of the year.

On Wednesday it said it could potentially generate around $650 million in free cashflow for the full year, but this could be impacted by litigation costs.

A London judge ordered Tullow this month to pay Seadrill around $254 million, saying Tullow was wrong to end a contract between the companies on the grounds of force majeure over a maritime border dispute in West Africa.

Tullow had originally said its partners would pay in keeping with their stakes in the project, but Kosmos, which owns around 20 percent, successfully challenged this.

"The focus of the Tullow investment case should now be on moving developments forward to convert resources into reserves, and more frequent exploration activity," Barclays said in a note.

"Shareholder returns can also play a role, emphasizing that a measured step-up in activity does not equate to a loss of capital discipline."

Tullow plans to drill an exploration well in Namibia in September and expand drilling in Ghana into next year.

It aims for final investment decisions on Uganda towards the end of this year and Kenya in late 2019, which would open up those countries' oil industries for exports.

In Kenya, however, Tullow has stopped a pilot scheme producing oil and trucking around 600 barrels a day to the coast due to security issues around cattle rustling and banditry, Chief Executive Paul McDade said.

He said he did not expect this to change the overall timeframe for the project.

(Reporting by Shadia Nasralla; Editing by Louise Heavens and Susan Fenton)