Tullow Slims Down after 'Intense' Year of Losses
UK Tullow made a loss after tax of $1.69bn but a gross profit of $759mn on revenues of $1.68bn in 2019, it said March 12. Exploration write-offs and impairments totalled $2bn. Working interest production averaged 86,800 barrels of oil equivalent/day with a capital investment of $490mn. That was down from 90,000 boe/d in 2018 but higher than guidance for this year of 75,000 boe/d.
Executive chair Dorothy Thompson called it an “intense year,” one which ended with the departure of CEO Paul McDade and exploration officer Angus McCoss. The new head of exploration is Amalia Olivera-Riley, formerly of Spanish Repsol and US ExxonMobil while the search for a new CEO continues. Mark MacFarlane has been appointed as COO with responsibility for the operated and non-operated businesses.
Ghana asset director, Wissam Al-Monthiry, formerly of BP, has replaced Alexandra Thomas, now at Neptune Energy, to manage integrated operations and commercial planning, while sub-surface management and analysis is centralised in London with day-to-day operations run in country.
The group is now being restructured to create an effective and efficient organisation which will see 35% of the employees leave, as it aims for cost reduction of about $200mn. It is planning a 45% reduction in the exploration budget and a 30% or so cut in capital expenditure this year, to $350mn. And it is eyeing in excess of $1bn of proceeds from asset sales.
Tullow's net debt stood at $2.8bn at the end of last year, and its debt capacity is expected at $1.9bn at the end of March, with liquidity of $700mn.
Tullow said it was working successfully with the government of Ghana to increase gas offtake and improve production at both Jubilee and TEN and the gas processing capacity on the Jubilee floating production, storage and offtake vessel has been successfully upgraded. Tullow is “identifying high-potential, undeveloped areas at Jubilee and Ntomme for future investment to build reserves and production," it said. The increased gas processing capacity delivered in February, flaring, and the renewed focus on well and facility optimisation has delivered improved production levels, with Jubilee producing over 90,000 b/d gross, it said.
It said 60% of 2020 sales revenue is hedged with a floor of $57/barrel and 40% of 2021 sales revenue is hedged with a floor of $53/b. Thompson said: "Even with recent events in oil markets, Tullow's assets remain robust: we are a low-cost African oil producer, with a strong hedging position, substantial reserves that underpin our business and a high potential exploration portfolio."