Tullow Oil sees 8% of investors vote against Heavey chairmanship

Tullow Oil's outgoing chief executive, Aidan Heavey, has said he was "confident" the exploration group had the ability to prosper as he handed over the reins to his successor on Wednesday after raising $750 million (€688 million) of equity to bolster its balance sheet.

However, almost 8 per cent of shareholders voting at the company's annual general meeting (agm) in London on Wednesday objected to his re-election to the board as chairman, a role he will have for up to two years. Royal London Asset Management, which owns almost 1 per cent of the company, had openly pledged this week to vote against Mr Heavey's elevation from chief executive to chairman, which goes against the Financial Reporting Council's UK corporate governance code.

The company’s remuneration report, which sees Mr Heavey (64) continue to receive his CEO remuneration and benefits for six months after stepping down, was rejected by 15.6 per cent of voting shareholders. His total remuneration amounted to £2.89 million (€3.41 million) last year.

Relationships based

Earlier on Wednesday, Mr Heavey's successor, Paul McDade, reiterated that while the move by Tullow Oil's founder and chief executive of more than three decades to the top non-executive director role may not be viewed as best corporate governance, it is the best decision for the group, given it was a "relationships"-based business, particularly in Africa.

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The agm took place a day after Tullow Oil completed a $750 million share sale offered to existing investors, known as a rights issue, which is designed to lower the group's net debt level. This stood at $4.6 billion at the end of March, down $200 million from December. The company also plans to refinance more than $3 billion of bank facilities in the second half of this year.

"This has been an exceptionally busy few months for Tullow as we agreed to farm down our assets to our partners in Uganda, made substantial changes to our board and launched a $750 million rights issue," Mr Heavey said in a trading update published before the agm.

“As I hand over my role as CEO to Paul McDade, I am confident that Tullow has the financial and operational flexibility to prosper in 2017 and beyond.”

Tullow agreed earlier this year to sell 21.6 percentage points of its 33 per cent stake in the so-called Lake Albert Development Project in Uganda to French group Total and Chinese oil giant CNOOC for a total consideration of $900 million.

Flagship

Last year, Tullow's TEN project off Ghana begin to pump oil for the first time, while its flagship Jubilee project, also off Ghana's coast, suffered technical issues on its floating production, storage and off-loading vessel.

The trading statement said that Tullow’s west Africa oil assets produced 85,700 barrels of oil per day (bopd) in the first quarter, including payments it received, equating to 8,000 bopd, under an insurance policy in relation to the Jubilee field. The rate of production was slightly ahead of the group’s full-year guidance of between 78,000 and 85,000 bopd for the assets.

Analysts at Investec expect the rate of production seen in the first three months of the year to ease as 2017 progresses.

Meanwhile, Tullow hopes to start drilling more wells next year in its TEN field, where production averaged 50,000 bopd in the first quarter. This is subject to the outcome of an international sea tribunal assessing a border dispute between Ghana and neighbouring Ivory Coast, which has affected drilling in the region.

Tullow said that the final ruling on the matter is expected around the end of September.