Mr Heavey was speaking yesterday on the back of a harsh set of annual results for the exploration firm, but said the second half of this year should see signs of recovery both for Tullow and the broader industry.
Tullow was ahead of the curve last year in cutting operating costs, capital expenditure, and re-sizing its operations to enable it to make money in the new oil price environment.
Yesterday, it said its capital spending levels will drop from $1.7bn to at least $1.1bn this year, but potentially $900m; adding that if low oil prices persist and if it doesn’t identify further investment opportunities, cap-ex levels could decrease to $300m next year.
Tullow’s TEN oil field, off the coast of Ghana, has been a big cost driver, but with that coming on stream and due to deliver first oil in the summer, and with no more committed capital expenditure projects, the firm should be in a positive net cash flow position later this year.
“We have a portfolio of world class, low-cost oil assets which will produce around 100,000 barrels of oil per day in 2017 and a major position in one of the world’s newest, low cost oil provinces in East Africa; both enabling us to create substantial value,” Mr Heavey said.
Tullow’s results, as already flagged, showed a 27% decline in annual sales to $1.6bn, but a slightly larger-than-anticipated net loss of almost $1.04bn.
Mr Heavey’s comments regarding crude oil prices — he added that a more gradual rise from $60/$65 per barrel could be seen in 2017 — came a day after prices saw their third biggest daily fall in eight years and a month after they hit 12-year lows of around $28 per barrel. Yesterday they were hovering around the $30 mark.
While still far away from summer 2014 levels of $112, the International Energy Agency is calling such ‘recoveries’ false dawns. BP yesterday said it is planning for prices to remain low for the first half of 2016, but not unlike Tullow, said the market should start balancing out from July onwards.
Meanwhile, Mr Heavey said Tullow has adjusted well to the low price environment and remains better placed than most to take advantage of investment opportunities.
If none materialise, he said Tullow will pay off debt, currently measuring around $4bn.
He also largely dismissed suggestions made in a recent research note by London-based brokerage Stifel, which claimed Tullow needs “at least $1bn in cash” in order to keep its balance sheet ticking over in the current climate and has four options open to it: Do nothing and hope for a price environment of $60 per barrel next year; sell assets; sell the company, and/or raise fresh capital.
Mr Heavey described an equity raise as a “daft” move in the current environment, said a sale of the company is not a realistic idea, but that the sale of assets is always under consideration; adding that all of Tullow’s non-core assets (basically anything it owns outside of Africa) are technically always up for sale.
He said such analyst lines are off target as they generally don’t take into consideration Tullow’s lowering capital expenditure totals and true financial headroom.
The firm’s share price has enjoyed a good run of late, but was down by over 8% in London yesterday.