TULLOW OIL HAS suspended payments of dividends to its shareholders, slashed funding for new exploration and limited capital expenditure to key projects.
The company also sent a number of staff into redundancy in a bid to stay afloat in a tough year for the oil industry, its annual report for 2015 reveals.
The report to shareholders highlights tough measures taken by the firm “to address the new market reality of the sharp reduction in oil prices that started mid2014 and has continued ever since.”
“There has been a relentless focus on cost control during 2015,” said Tullow chairman Simon R Thompson. “Exploration expenditure was cut to $256 million (from $799 million in 2014) while capital expenditure was limited to key projects, such as TEN in Ghana, which will generate strong future cash flow even at low oil prices.”
Aidan Heavy, the Tullow CEO, said that they noticed in early 2014 that the industry was changing: The rise of the US shale industry and the cost of both development and deep water exploration challenged existing models.
While the firm paid $0.4 as dividend per share in 2014, no dividend was paid to shareholders in 2015 on account of a net loss of $1,037 million for that year down from $1,640 paid in 2014 after taxes.
For the Kenya operations, “Good progress continues to be made on development planning in Kenya,” Tullow said in the report Tough times Tullow is listed on the London, Irish and Ghanaian Stock Exchanges. The reduction in oil prices came at a time that Tullow had incurred heavy capital expenditure for the TEN multinational $5 billion project, which is expected to produceits first oil in August.
“The restructuring of the business has not been achieved without sacrifice.
Shareholders have seen their dividend suspended and many respected and valued members of staff have been made redundant while many of those who remained have seen their responsibilities and workload increase,” said Tullow chairman Mr Thompson.
These measures were intended to build resilience in the face of falling oil prices in the last quarter of 2014. By mid-2014 crude oil prices had peaked at $115 per barrel, averaging $52 a barrel before falling further to below $30 a barrel by January 2016.
“During one of the most difficult periods ever for the global oil and gas industry, these financial numbers do not do justice to a year of hard work and solid achievement by your company,” said Mr Heavy.
Overall, 2014/2015 was a difficult year as companies reduced capital expenditures with exploration budgets being the worst hit. According to a Wood Mackenzie report issued in August 2015, close to 46 major development projects had been deferred.
