Despite losing $1bn, 2015 was a good year for Tullow whose focus is producing cheap oil in Africa

Africa-focused oil and gas exploration and production group, Tullow Oil Plc, plans to further its capital expenditure for 2016 as it responds to lower prices of oil. The British company is also focusing on improving efficiencies and lowering operating costs. Tullow already records one of the lowest operating cost per barrel in Africa.

Although the Group reported a loss after tax of $1.0 billion following write-downs compounded by lower oil prices, the 2015 Full Year Results published on Wednesday showed the British explorer has adapted well in the face of low oil prices. Tullow delivered revenue of $1.6 billion and operating cash flow $1.0 billion.

“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,” says Aidan Heavey, Tullow’s chief executive.

Heavey said the company’s challenge in 2016 would be to continue responding robustly to the uncertainties in the oil sector. Hence, the company would continue to ensure low cost production, reduction in operating costs and capital expenditure and deleveraging the balance sheet through free cash flow generation and strategic portfolio management.

Tullow
Tullow Oil in Ghana

The London-based company said it would cut spending to about $900 million this year from an original projection of $1.1 billion.

Following the continued slump in global oil prices at a time Tullow had invested heavily in exploration in East and West Africa, the company began a Major Simplification Project in 2014, which was completed in 2015. This is beginning to yield fruits and is on track to deliver cash capex, opex and corporate cost savings of $0.5 billion over three years.

Tullow recorded a strong production performance in West Africa in 2015, with working interest averaging 66,000 bopd, expected to increase to 73,000-80,000 bopd in 2016; to include production in the second half of 2016 from its TEN development in Ghana.

The company was also able to keep operating costs low in 2015, with each barrel averaging $10.0/bbl for Jubilee field and $15.0 bbl across the West Africa non-operated portfolio.

Tullow said it is working to maximise Jubilee and TEN operational synergies in Ghana where combined operating costs are expected to reduce to $8/bbl in 2018.

Heavey adds: “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.”

Tullow Oil 2015 Full Year Results Fact Book.