Tullow Oil Sees $1.5B Write-Off As It Cuts Oil Price Outlook

Tullow Oil expects to book US$1.5 billion write-offs for 2019, due to slashing its oil price assumption by US$10 a barrel and to reducing reserves expectations for African assets, the London-listed company said on Wednesday, after more than a month of production and exploration setbacks that ousted its chief executive in December.

In its update on the 2019 performance and outlook for 2020, Tullow noted today that it expects to report pre-tax impairments and exploration write-offs of around US$1.5 billion for 2019, chiefly due to slashing its long-term accounting oil price assumption by US$10 to US$65 per barrel, as well as to reduction in 2P reserves at the TEN fields offshore Ghana.

Tullow Oil also flagged issues with its development plans in Kenya and Uganda, with Kenya’s early oil pilot scheme (EOPS) suspended due to severe damage to roads caused by bad weather in Q4 2019, and ongoing talks with the government for the Uganda development.

“Tullow remains committed to reducing its equity stake in the project ahead of FID,” the company said, referring to the Uganda project.

The firm saw a deal for an oil pipeline in Uganda fall through in September 2019, as Tullow Oil, France’s Total, and China’s CNOOC terminated an agreement to sell part of Tullow’s stake in the Lake Albert project because “the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers.” 

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Tullow warned then that this setback would likely delay the final investment decision on the Uganda pipeline project, initially expected for 2019.

Earlier this month, Tullow said that it found oil in the Carapa-1 exploration well offshore Guyana, but the volume was less than initially expected.

In early December, the firm flagged poor performance in its African assets, which led to a massive sell-off that halved Tullow Oil’s value and to CEO Paul McDade and Exploration Director Angus McCoss resigning.

“The recruitment of a new Chief Executive Officer is well under way with the assistance of an executive search firm,” Tullow Oil said today.

By Tsvetana Paraskova for Oilprice.com

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