Tullow cuts capital expenditure, trims production forecast

Tullow Oil has said it expects to generate $1 billion (€93m) in pre-tax operating cash this year and for net debt to be at $4.2 billion (€3.9bn).

The Irish-founded oil and gas explorer said it expected full-year 2015 capital expenditure to be in line with its current guidance of $1.9 billion and for 2016 capex to be approximately $1.2 billion. This compares to a previous forecast of of between $1.2billion and $1.4billion for next year.

Tullow's chief executive Aidan Heavey said the group had taken appropriate steps to meet the challenges presented by lower oil prices and was focusing resources on its west African oil assets which are expected to produce around 100,000 barrels of oil per day (bopd) by 2017.

The producer said it expected full-year west African average oil production for 2015 to be between 66,000 and 67,000 bopd. This is lower than the previous guidance of between 66,000 to 70,000 bopd.

The group’s Ten development project in Ghana is about 75 per cent complete and on schedule to deliver first oil by mid-2016, Tullow said. Jubilee field production for 2015 is unchanged at 100,000 bopd.

“We are also focused on managing our costs and ensuring that we have sufficient funding to meet all our commitments. We expect to begin deleveraging our balance sheet with production from TEN and this project remains on time and on budget for mid-2016,” said Mr Heavey.

“As we approach the end of the year, we are focused on our priorities of generating steady cashflow from our operations, completing TEN on schedule and on budget, ensuring we retain appropriate liquidity and building on our exciting exploration prospect inventory for the future,” he added.

Tullow said the business remained well funded with unutilised debt capacity and free cash expected to be approximately $1.7 billion at the year end.

Tullow has seen its shares in London surge this week after its partner, Africa Oil sold 50 per cent of its holding in a series of oil fields in Kenya and Ethiopia to Maersk for $365 million up-front and a potential further pay out of $480 million.

Tullow's stock had its "sell" rating reaffirmed by Investec in a research note published on Wednesday.