Aidan Heavey's calling card as the longest-serving FTSE 100 chief executive ended two years ago when Tullow Oil, the explorer he founded in 1985, fell out of the prestigious index as its value plummeted on tumbling oil prices.
At the time, the heavily-indebted company had to secure an amendment to its borrowing covenants to prevent a potential breach that may have allowed lenders to call in their loans. Its woes prompted many, including investment bank Goldman Sachs, to tip the company as a takeover target.
However, a 143 per cent surge in Tullow’s share price in the past year – driven largely by rebounding oil prices – has left the 63-year-old with a stake worth £20.2 million (€23.9 million) as he announced on Wednesday he will step down as chief executive this year. Still, it’s a far cry off the £102 million it peaked at in 2012.
Trajectory
"He's been at the helm of a company that's gone from nothing . . . through a combination of skill, good luck and some good acquisitions, in Africa in particular, to become a fantastic company," said Charlie Sharp, an analyst with Canaccord Genuity in London.
“Had he left two years or three years ago, the universal comment would have been he’d had an absolutely stellar trajectory. The last two years – through no fault of his – has dented that a little.”
Heavey's development of Tullow from humble origins is the stuff of Irish corporate lore. The former Aer Lingus accountant shook down 22 family and friends in the mid-1980s to invest in a business he know nothing about, after a friend in the World Bank told him about an opportunity to rework some old gas fields in Senegal on the west coast of Africa.
In late 2000, Tullow bought producing gas fields in the North Sea from BP, before doubling in size four years later with the takeover of South African-based Energy Africa, giving it assets in countries from Ghana to Namibia along the west coast of Africa. Tullow's $1.1 billion takeover in 2007 of Australia's Hardman Resources boosted its position in Uganda, a landlocked country in east Africa, and helped propel the group into the FTSE 100.
All was going well until the price of crude oil, which peaked at $115 a barrel in 2014, began to plummet.
"It was pretty dramatic time, if you imagine losing 70 per cent of your revenue at a time when you were doing a major development," Heavey told The Irish Times. "We didn't panic. We've come out of if with a stronger reputation than when we went in."
Debt
Net debt at the end of 2016 stood at $4.8 billion (€5.6 billion). Tullow faces talks this year with its lenders on refinancing more than $3 billion of facilities. A 90 per cent rally in oil prices from below $28 a barrel a year ago can’t hurt.
Negotiations will also benefit from some self-help measures at the firm.
Over a decade after Tullow first risked capital in finding oil in Lake Albert on the west of Uganda, it agreed on Monday to sell almost two-thirds of its 33 per cent interest of a large project to French energy giant Total. The $900 million deal, mainly made up of deferred payments, eases cash calls on Tullow ahead of a final investment decision being made on the project this year and first oil being targeted by the end of the decade.
Tullow’s two key fields off the coast of Ghana – Jubilee and TEN – face their own issues this year. These include a maritime border dispute between Ghana and neighbouring Ivory Coast affecting Tullow’s ability to drill new TEN wells, though that should be resolved in the fourth quarter.
TEN, which went into production in August, may reach 80,000 barrels a day next year, compared to 50,000 for this year – a figure that has disappointed many analysts.
Tullow is likely to sell down its 50 per cent stake in the project once production ramps up, according to Heavey.
As for ceding control for the first time, Heavey claims to relish the prospect.
“I’ve been looking forward to giving up the executive role for quite a while,” he said. “This is the perfect time.”
