- with reporting from Fred Ojambo
Tullow Oil shares fell by almost 16% after the company warned of a likely $1.5bn (€1.3bn) financial hit to its 2019 figures due to a lower oil price forecast and a reduction in reserves at one of its flagship fields offshore Ghana.
In its end-of-year trading update, ahead of its annual results announcement in March, Tullow largely retained earlier 2019 guidance, saying total revenue would be around $1.7bn and gross profit would amount to approximately $700m.
But Tullow has lowered its long-term oil price forecast by $10 per barrel to $65 and said reserves were 30% lower at its TEN field offshore Ghana — with these factors likely to result in the $1.5bn of impairment charges.
Tullow said it ended 2019 with average production of 86,700 barrels of oil per day.
This was also in line with recent guidance, but the Irish-founded exploration company reduced its 2019 production guidance several times last year amid technical glitches in its Ghana operations.
Group output this year is forecast at 70,000 to 80,000 barrels a day and production for the next three years will likely hover around the bottom of that range.
Earlier this month, Tullow shares crashed when the company said its latest oil find, in Guyana, was smaller than expected. That value fall followed a similar meltdown in December when the company cut its production outlook, suspended dividend payments, and parted company with its CEO and exploration director.
In its latest update, Tullow said the recruitment of its new chief executive is “well under way”, with the assistance of an executive search firm, but the company’s executive chair Dorothy Thompson told analysts that it remains “too early” to say when a new boss will be in place.
“Tullow’s senior team has been working hard on a major review, focused on delivering a more efficient and effective organisation,” she said.
However, Ms Thompson declined to comment on expectations of job losses across the exploration group.
She said the fundamentals of Tullow’s business remain intact, with “solid” underlying reserves and resources in western and eastern Africa and continuing good cash flow being generated from the company’s producing assets.
“The board and senior management are confident of the long-term potential of the portfolio and see meaningful opportunities to improve operational performance, reduce our cost base, deliver sustainable free cash flow, and reduce our debt,” said Ms Thompson.
Meanwhile, Uganda said it expects the planned development of two oil fields connected to Tullow to cost at least $5bn, as the government seeks to resolve a tax dispute with the companies that own the sites and pave the way for increased infrastructure spending.
That amount is part of the $15bn-$20bn that the east African nation anticipates will flow within three to five years to its nascent oil industry, including a refinery and crude pipeline.
The Ugandan government is in talks with Tullow, Total, and Cnooc Ltd, which jointly own the Kingfisher and Tilega fields, over Tullow’s plan to reduce its interest in the assets and allow final investment decisions to be inked.
A fallout over how much tax Tullow’s share sale attracted led the company to abandon a deal in August and total to suspend plans to build a $3.5bn crude export pipeline from Uganda to Tanzania.
Uganda was on course to see a final investment decision last year to develop the fields when the tax disagreements emerged.
Former energy minister, Irene Muloni, said last month that the government offered a “package” to the companies that could end “pending hindrances”.
Uganda is struggling to fund this fiscal year’s budget of 40.5 trillion shilling (€10bn) after revenue from sources including pre-oil development activities declined.
- Irish Examiner and Bloomberg