Tullow cuts losses despite heavy write-offs

Wednesday February 10 2016

An oilrig worker at Ngamia 3 oil exploration site in Nakukulas Village, Turkana County, on July 13, 2014. Last year, Africa Oil and its partner, Tullow Oil, reduced the number of rigs operated in Kenya from four to one. PHOTO | BILLY MUTAI |

An oilrig worker at Ngamia 3 oil exploration site in Nakukulas Village, Turkana County, on July 13, 2014. PHOTO | BILLY MUTAI | NATION MEDIA GROUP 

By IMMACULATE KARAMBU
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British oil explorer Tullow cut its losses to Sh102 billion ($1 billion) after tax for the year 2015 compared with a loss of Sh158 billion ($1.55 billion) in 2014 as it continued to nurse sliding oil prices.

The company’s revenue dropped 27 per cent to $1.6 billion as operating cash flow also declined 38 per cent to just below $1 billion, its full-year financial results show.

Among the costs that weighed down the company’s net earnings were write-offs on exploration contracts totalling $749 million and a contract service charge of $186 million resulting from much lower levels of exploration and appraisal drilling activity planned for the first half of 2016.

CUT COSTS

“We secured current and future cash flow through good operational delivery in West Africa, continued to build our resource base in East Africa, significantly cut costs across the group and benefited from our strong hedging position.

"Our challenge in 2016 is to be robust in responding to the uncertainties that remain in the sector,” said Tullow chief executive officer Aidan Heavey.

He said this year the company would put oil production in West Africa at the top of its priorities, and reduce further its operating costs and capital expenditure.

Tullow’s planned capital expenditure for this year stands at $1.1 billion. The company is considering reducing this to $0.3 billion from 2017.