Page 4 - LatAmOil Week 02 2020

LatAmOil COMMENTARY LatAmOil
Tullow has discovered sour crude offshore Guyana (Image: Eco Atlantic Oil & Gas)
Tullow prepares for write-down
Setbacks in South America and Africa will continue to pose problems for the company in 2020
WHAT:
The UK-Irish independent has said it will take a charge of $1.5bn.
WHY:
After a series of disap- pointments in 2019, the company is eager to regroup.
WHAT NEXT:
Tullow will face more challenges in 2020, including delays in Kenya.
TULLOW Oil (UK/Ireland) has had a string of bad luck in Africa and South America over the past year, and earlier this week it had more grim news for shareholders.
In a trading update released in advance of its report on performance in 2019, Tullow said that it would have to take a charge of $1.5bn. The company “expects to report pre-tax impair- ments and exploration write-offs of about $1.5bn (about $1.3bn post tax), primarily due to a $10 per barrel reduction in [its] long-term accounting oil price assumption to $65 per bar- relandareductioninTEN2Preserves.”
The latter was a reference to one of Tullow’s largest productive assets, the TEN (Twene- boa-Enyenra-Ntomme) fields offshore Ghana. The company has had to revise its production forecast for the 2020-2023 period downward in light of mechanical problems and rapid falls in output at TEN.
Additionally, it has slashed its reserve esti- mate for the Enyenra field by 30%.
Reactions
Tullow’s announcement was not exactly a shock, given that it came slightly more than a month after the resignation of two top executives, CEO Paul McDade and exploration director Angus McCoss, and after a string of disappointments on both sides of the Atlantic Ocean.
Nevertheless, analysts at Davy Research said that the write-down had the potential to put the company on a steadier footing, Bloomberg reported. “The news today reaffirms the out- look for 2020 and should increase certainty,” the analysts wrote in a note. “Tullow has taken the opportunity to reset the balance sheet.”
Citigroup’s team took a similar stance, according to Bloomberg. It commented that the charge served to “[highlight] the [company’s] disappointing track record of capital allocation
over the past few years” but would also “[clear] another negative out of the way” before the scheduled release of the 2019 annual report in March 
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w w w. N E W S B A S E . c o m Week 02 16•January•2020