Tullow to slash budget for oil search in Kenya

Tullow Oil Plc will cut its budget for exploration in Kenya and instead focus on oil production in West Africa.

This is meant to generate cash in the face of falling global crude prices.

The latest update from the UK company contradicts a statement it released last month, indicating that it will concentrate on exploration in East Africa to realign itself to the current trends in oil prices.

“Last year was a difficult year for our industry and a challenging one for Tullow as our results demonstrate. In response to this and the fall in the oil prices, we have reset our business and are focusing our capital expenditure on high-quality, low-cost oil production in West Africa,” Tullow chief executive officer Aidan Heavey said in a statement accompanying the firm’s full-year results.

The oil and gas explorer is targeting a further reduction in capital expenditure, which may involve slashing exploration and appraisal budgets for a number of countries, including Kenya, Norway and Suriname.

EXPENDITURE BUDGET

Last month, it announced a cut in its global exploration and appraisal budget from $300 million to $200 million. The company’s planned capital expenditure budget for this year stands at $1.9 billion.

The exploration firm is targeting to increase its oil production in West Africa to more than 100,000 barrels a day by the end of 2016, to generate cash flows to sustain its business.

Tullow is seeking to realise cash savings of about $500 million over the next three years through reductions in capital expenditure, operating costs and administrative expenses.

Tullow and its partner, Africa Oil Corporation of Canada, are responsible for most of the oil discoveries in Kenya.

Last month, Africa Oil president and chief executive officer Keith Hill said at a conference call that both firms were in discussion on the exploration budget for Kenya, which will be a product of joint deliberations with the government.