Tullow Oil expects $1.5 billion write-down on oil outlook

The energy firm lowered its prediction for oil prices by $10 to $65 a barrel

                                

Tullow Oil expects to report a $1.5 billion (£1.15bn, €1.4bn) write-down on its outlook after lowering its long-term oil price assumptions.

The energy firm lowered its prediction for oil prices by $10 to $65 a barrel, with underwhelming exploration wells and a reduction in reserves in Ghana also contributing to the write-down.

“Tullow expects to report pretax impairments and exploration write-offs of circa $1.5 billion ($1.3bn post tax),” the company said.

“Write-offs include Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica licence costs due to the levels of planned future activity or licence exits.”

Tullow Oil has hedged 45,000 barrels per day of its 2020 output with an average floor price of $57.28 a barrel. For next year, it has hedged 22,000 barrels per day at $52.80 each.

The company also expects to generate cash flow of at least $150 million from 75,000 barrels per day at $60.

Tullow is searching for a new chief executive after its share price dropped 70 per cent in December following the resignation of Pat McDade due to poor production in Ghana, the oil quality found in a well in the Orinduik block offshore Guyana and the disappointing size of a well in its Guyanese Kanuku block.

Additionally, Tullow has suspended Turkana’s early oil pilot scheme (EOPS) due to severe damage to roads caused by adverse weather in the fourth quarter of 2019.

The transfer of stored crude oil from Turkana to Mombasa by road commenced on 3 June 2018.

Tullow Oil’s share price slipped 1.6 per cent in early trading to 58.2p. It’s full-year results are due on March 12 and will include updates on its assets and management structure.

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