Tullow now slashes oil exploration budget to $200 million
What you need to know:
Tullow has also scaled down its capital budget for this year from the $2 billion announced in November to $1.9 billion.
- British firm said the step had been taken to adapt to current market conditions.
In November, Tullow reduced its net exploration and appraisal to $300 million, citing similar reasons.
Firm to shift focus to oil production in West Africa, where it expects to deliver around 100,000 barrels per day by the end of next year to create long-term cash flows for the business.
The reduced exploration budget will also be primarily deployed on high-impact and low-cost exploration opportunities in East Africa.
Tullow Oil Plc has announced a further cut in its exploration budget as falling global crude prices impact its operations.
On Thursday, the British firm said the step had been taken to adapt to current market conditions.
The company’s new exploration budget of $200 million for all its operations across the world will apply for this year.
In November, Tullow reduced its net exploration and appraisal to $300 million, citing similar reasons.
COST SAVINGS
“We continue to carry out a review of the business to streamline processes and improve efficiencies, which will result in significant long term cost savings," said Tullow’s chief executive Aidan Heavey.
"While this is a challenging time for our sector, Tullow is fortunate to benefit from world class, low cost and high margin assets, strong growing cash flows and a broad diversified funding position."
He said the firm would shift its focus to oil production in West Africa, where it expects to deliver around 100,000 barrels per day by the end of next year to create long-term cash flows for the business.
The reduced exploration budget will also be primarily deployed on high-impact and low-cost exploration opportunities in East Africa.
While the firm did not state any specific action that will be taken on Kenyan operations, Tullow and its partner Africa Oil Corporation of Canada are known to be behind a majority of the local oil discoveries.
ANALYSTS CAUTION
The quantity of oil discovered since the maiden discovery in March 2012 is estimated to be above 600 million barrels, which industry analysts say meets the minimum threshold for commercial exploitation.
Talks on development and production of the Kenyan oil are ongoing between the government and players in the upstream sector, but analysts have cautioned that the country can only produce oil at a profit if the price of crude is at a minimum of $70 per barrel.
Crude prices are currently at $50 a barrel, a six-year low, having fallen sharply following a glut resulting from aggressive production by the United States.
Tullow has also scaled down its capital budget for this year from $2 billion announced in November to $1.9 billion.
The firm expects to report a gross profit of 0.6 billion and $2.2 billion in revenue when it releases its full-year results, scheduled for February 11.
“These results, versus the prior year, have been impacted by the oil price decline and lower gas production following asset sales in Europe and Asia,” reads a statement from the company.
