Tullow Oil Plc, a U.K. explorer focused on Africa, reported a wider-than-expected full-year loss as tumbling crude prices forced the company to record writedowns.
The net loss was $1.03 billion in 2015, the London-based company said Wednesday in a statement. That compares with the $787.9 million average estimate of seven analysts surveyed by Bloomberg, and a loss of $1.56 billion a year earlier. The board recommended no dividend be paid.
Tullow wrote off $749 million in exploration costs and took an impairment charge of $406 million and a service-contract charge of $186 million. The company, like its peers, has cut spending and jobs to weather a prolonged decline in prices amid a global oversupply. Its shares have lost almost two-thirds of their value in the past year.
Tullow reiterated its intention to cut capital spending to $900 million this year from an original forecast of $1.1 billion. The company is able to reduce that to $300 million next year should low oil prices persist, it said. Its hedging program was valued at $668 million as of Jan. 31, according to the statement.
The oil producer “significantly cut costs across the group and benefited from our strong hedging position,” Chief Executive Officer Aidan Heavey said. “Our challenge in 2016 is to be equally robust in responding to the uncertainties that remain in the sector.”
Chief executive Aidan Heavey said: “Today’s results demonstrate that Tullow adjusted well to low oil prices in 2015. We secured current and future cash flow through good operational delivery in West Africa, continued to build our resource base in East Africa, significantly cut costs across the Group and benefitted from our strong hedging position. Our challenge in 2016 is to be equally robust in responding to the uncertainties that remain in the sector. In the year ahead, we have three key priorities: ensuring continued low cost production from West Africa – including the start-up of production from TEN between July and August 2016; driving further reductions in operating costs and capital expenditure; and focusing on deleveraging the balance sheet through free cash flow generation and strategic portfolio management.
“As we look ahead, we have a portfolio of world class, low cost oil assets which will produce around 100,000 bopd in 2017 and a major position in one of the world’s newest, low cost, oil provinces in East Africa, both enabling us to create substantial value.”
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