This archive report was first published on 9 December 2019.
December 9, 2019 - Tullow Oil, a British-based oil exploration firm, has made a significant change in leadership following a review of its production performance in West Africa.
The company's Chief Executive Officer, Paul McDade, has been dropped by mutual consent, citing the executive's poor showing in the key West African market.
According to an operational update issued by Tullow, production has fallen below the Group's expectations, warranting changes in stewardship.
"A review of the production performance issues in 2019 and its implications for the longer-term outlook of the fields has been undertaken and has shown that the Group needs to reset its forward-looking guidance," the company stated.
Tullow's net output is expected to lag at an estimated 70,000 barrels of oil per day (bopd) over the next three years, following notable operational headwinds in its Ghanaian operations.
Independent reserve audits have indicated flat output following the downward adjustment in reserve volumes.
"In light of these new production forecasts, there will be a thorough reassessment of the Group's cost base and future investment plans in order to allocate appropriate capital to the Group's core production assets, development projects and continued exploration," Tullow added.
The company's Board has resolved to fix its free cash flows to include the reduction of capital expenditure, operating costs, and corporate headwinds.
Despite posting a net profit of Ksh.10.5 billion ($103 million) in the half year to June, Tullow's revenues slid to Ksh.88.9 billion ($872 million), with free cash flows falling to Ksh.18.5 billion ($181 million) from Ksh.39.8 billion ($390 million) in the corresponding 2018 review.
The reassessment of existing projects is expected to affect the firm's future capital expenditure in exploration, including its domestic operations under Tullow Kenya, where the explorer has already sunk an estimated Ksh.200 billion ($2 billion) in collaboration with partners Africa Oil and Total.
However, the board of Tullow Oil has marked its discoveries in Kenya as significant, alongside those made in Uganda, hinting at the retention of full-scale exploration.
"These remain the key building blocks of our business today," noted Tullow executive chair Dorothy Thompson.
