Page 11 - AfrOil Week 49 2019

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Les Wood will continue to function as the company’s chief financial officer and executive director.
Changing forecast
In its statement, Tullow indicated that the man- agement shake-up had occurred in response to the downward revision of the outlook for crude oil production, which is set to drop from about 87,000 barrels per day (bpd) in 2019 to 70,000- 80,000 bpd in 2020 and about 70,000 bpd in 2021-2023.
“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,” it said.
The company pointed specifically to problems concerning its main produc- tive assets, the Jubilee and TEN (Twene- boa-Enyenra-Ntomme) fields in Ghana. At Jubilee, it explained, Ghana National Gas Co. (GNGC) has reduced the amount of natural gas it receives from Tullow, which provides these volume at no cost, as well as “increased water cut [at] some wells and lower facility uptime.”
At the same time, it said, work on the TEN project has also been affected by issues at Enyenra. The field’s output is dropping more quickly than anticipated, and “mechanical issues [at] two new wells have limited the well stock available,” it said.
“Thorough reassessment”
Tullow stressed in its statement that its financial performance had remained “solid.” It also said that it expected its reserves to remain steady as of the end of 2019, with an independent audit showing that the increase in reserves at Jubilee and Ntomme was being offset by a 30% decline in reserves at Enyenra.
“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,” the state- ment said.
It continued: “The board believes that a series of actions will help deliver sustainable free cash flow. These actions include reducing capital expenditure, operating costs and corpo- rate overheads. In 2020, the board expects the group to generate underlying free cash flow of at least $150mn at $60 per barrel after a group capital investment of [about] $350mn. Consid- ering this level of expected free cash flow, the board has decided to suspend the dividend.”
Disappointment
Thompson, for her part, commented: “I would like to thank Paul and Angus for all their hard work and dedication to Tullow over many years. They leave behind a business that has delivered two major offshore developments in Ghana, made significant oil discoveries in Kenya and Uganda and has a high-impact exploration portfolio. These remain the key building blocks of our business today.
“The board has, however, been disappointed by the performance of Tullow’s business and now needs time to complete its thorough review of operations. A full financial and operational update will be provided at Tullow’s full-year results on February 12, 2020, with an update on progress to be given in the group’s trading statement on January 15, 2020.
“Despite today’s announcement, the Board strongly believes that Tullow has good assets and excellent people capable of delivering value for shareholders. We are taking decisive action to restore performance, reduce our cost base and deliver sustainable free cash flow.”
The resignations dealt a blow to Tullow’s stock prices, which have already fallen by more than 65% since the beginning of this year. Bloomberg quoted industry analysts as saying on December 9 that recent events had increased the likelihood that the company might eventu- ally be sold off. ™
Tullow’s offices in Uganda (Image: Tullow Oil)
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