Tullow Oil Plc, a leading independent oil and gas exploration group, has indicated that it has reset its business owing to the low price of crude oil on the world market.
2014 was a difficult year for the oil and gas industry and a challenging one for Tullow Oil Plc.
It is in line with this that the group has announced plans to focus its capital expenditure on high quality, low cost oil production in West Africa.
‘We have increased and diversified our sources of debt capital, reduced our exploration expenditure, implemented significant cost saving initiatives and we are suspending the dividend,’ said Aidan Heavey, Group Chief Executive Officer (CEO) at the company’s 4th Investor Forum in Accra yesterday.
He stated that such measures will provide Tullow Oil with substantial headroom and liquidity to deliver on its strategy.
Mr. Heavey also said the low price of crude oil makes it reasonable to suspend dividend payment to shareholders so it could be rolled over into the business to help keep its head afloat.
The company’s no final dividend payment for 2014 resulted in a 2014 full year dividend of four pence per share.
‘What is happening on the market now is like taking half of our profits outright.
Touching on the TEN Project in Ghana, which remains on track, he said it will increase Tullow’s net West Africa oil production to over 100,000 barrels daily by the end of 2016, generate substantial cash flow and place Tullow in a strong position when the sector recovers.
The group’s revenues were down 16 percent in 2013 impacted by oil price decline in the second half of 2014 and gas asset sales in Europe and Asia. Additionally, significant write-offs, impairment charges and a loss relating to its Uganda farm-down resulted in a loss after tax of $1.64 billion.
Tullow’s debt facilities increased through the issue of a second tranche of senior notes of $650 million and the refinancing of the revolving corporate facility to $750 million. Also, its hedging programme with a mark-to-market value of around $500 million provided substantial revenue protection, a 2014 year-end net debt of $3.1 billion and facility headroom and free cash of $2.4 billion.
The company’s reviewed cost base and efficiencies are expected to deliver cash savings of around $500 million over the next three years which will be realised through reductions in capital expenditure, operating costs and administrative expenses.
For 2015, its capital expenditure is forecast to be $1.9 billion with further reductions targeted. This includes a materially reduced exploration and appraisal budget of $200 million which includes basin-opening wells in Kenya, Norway and Suriname.
Tullow’s West Africa working interest oil production averaged 63,400 barrels per day in 2014; and production guidance in 2015 for the region is pegged at between 63,000 and 68,000 barrels per day.
Also, the TEN Project is 55 percent complete on budget and on track for first oil in mid-2016.
By Samuel Boadi
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