Tullow Oil (LON:TLW) are continuing their strategic review, as the firm updated shareholders on Wednesday.
The firm announced that they would be undergoing a strategic and operational review in December, and have faced troubles over the last few weeks.
Tullow today have said that progress is being made in this review and that the firm is still looking for a CEO.
Tullow said: “The Board’s business review covering all areas of Tullow’s operations, cost-base and reporting is progressing well. The Board is confident that the outcomes will deliver significant improvements to the Group’s organisational structure, major reductions in G&A and a more efficient and effective business. Actions taken in December included the implementation of a smaller, more focused interim Executive team and initial restructuring of the next level of leadership. Since then, work has focused on simplifying the structure of the organisation and these changes will be implemented in the coming months. The next phase of the review will focus on the investment plans for each of the Group’s major assets.”
“One of the decisions already made by the Board is to align the Group’s reporting calendar to that of its E&P peers and, going forward, the Group will report its Full Year Results in March and its Half Year Result in September. The 2019 Full Year Results will be released on 12 March 2020. The new timetable will enable Tullow to report on the key outcomes of the ongoing business review in its Full Year Results and its 2019 Annual Report and Accounts.”
“The recruitment of a new Chief Executive Officer is well under way with the assistance of an executive search firm.”
A few weeks back, Tullow reset their production guidance with regards to their operations in Ghana. Initially, it guided around 87,000 barrels of oil per day for 2019, and for between 70,000 barrels and 80,000 barrels in 2020.
However, the oil firm confirmed that production in 2019 was 86,700 barrels of oil per day, and it reaffirmed the 2020 guidance, which was something for shareholders to take as a positive in what has been a hectic few weeks for the firm.
Tullow guided for revenue in 2019 of approximately $1.7 billion, gross profit of around $700 million, and capital expenditure around $490 million.
Free cash flow is seen at approximately U$850 million, with net debt falling to $2.8 billion. As of June’s end, net debt was $2.9 billion.
Tullow expects to report pre-tax impairments and exploration write-offs of $1.5 billion primarily due to a $10/bbl reduction in the Group’s long-term accounting oil price assumption to $65/bbl and a reduction in TEN 2P reserves.
Dorothy Thompson, Executive Chair, commented today:
“Tullow has ended 2019 with average production of 86,700 bopd and free cash flow generation of c.$350 million. Since our December announcement, Tullow’s senior team has been working hard on a major review focused on delivering a more efficient and effective organisation. The fundamentals of our business remain intact: recent reserves audits demonstrate that we have a solid underlying reserves and resources base in West and East Africa, our producing assets continue to generate good cash flow and we retain a high-quality exploration portfolio. The Board and senior management are confident of the long-term potential of the portfolio and see meaningful opportunities to improve operational performance, reduce our cost base, deliver sustainable free cash flow and reduce our debt.”
United Oil Deal
Yesterday, both United Oil and Gas (LON:UOG) and Tullow confirmed that they would be extending a deal in Jamaica.
The two parties have furthered talks for the Walton Morant offshore asset in Jamaica.
United holds a 20% interest in Walton, and said that the initial exploration period with Tullow has been extended to July 31 as it was due to expire at the end of this month.
Tullow on the other hand hold the remaining 80% stake, and have the ultimatum as to whether they would “drill or drop” the asset.
At the Colibiri project, United Oil have expressed interest that the joint von sure will bring an additional partner to drill in 2021.
United Oil Chief Executive Brian Larkin said: “We are very pleased with the extension that has been granted. We have seen additional interest in the licence towards the end of 2019, and this extension will allow those parties to fully evaluate this excellent opportunity.”
Chief Executive Departure and Ugandan complications
The firm had started December in a dispute over their operations in Uganda.
The Ugandan Government had been in lockdown with firms such as Total (EPA: FP) and CNOOC (HKG: 0883) over the taxes assed on Tullow’s plans to sell part of its stakes in Ugandan oil fields, however the governmental disputes seem to have progressed last week.
Additionally, at the start of December, the firm saw their shares plummet as the Chief Executive announced his departure within a hectic week of trading for the firm.
Pat McDade, along with exploration director Angus McCoss, said they had quit the firm. The board said it was “disappointed by the performance of Tullow’s business”.
Tullow Oil saw more than £1.05 billion wiped off their market value on December 9, which left the company only valued at £801.7 million.
Certainly, Tullow will have tried to turn around fortunes in a busy few weeks for the firm.
Shareholders of Tullow can be optimistic with the update today, however the share price has not really recovered since that hectic Monday morning.
Shares in Tullow trade at 60p (+3.15%). 15/1/20 11:15BST.
