Tullow Oil Is Not Up For Sale – George Cazenove

The Head of Corporate Affairs at Tullow Oil Plc, George Cazenove has denied reports suggesting the oil firm is actively looking for buyers.

“We are a listed company, people have shares in our company and so we are always open to offers and that is the fact of life. But we are not actively trying to sell the business,” he said in an interview with Citi Business. 

The company’s recent challenges which led to failure to meet production targets in both the Jubilee and TEN fields operations culminated in the departure of Chief Executive Paul Mcdade, who has been that position since 2017 and subsequently Head of Exploration, Angus McCoss.

Given Tullow Oil’s position as one of the foremost oil companies in the country, the change in leadership signals the dawn of a new beginning which could have a potential impact on jobs as the company, among other things, look to cost rationalization measures to remain profitable.

Executive Chairman of the company, Dorothy Thompson, earlier hinted that Tullow, which is listed on the London Stock Exchange, is open to buyers and would consider any offer at the “proper value”.

The company’s Head of Corporate Affairs explained that: “As a listed company; If someone makes an offer to the company we have to listen to it. It is a sort of a working answer you would expect the company to give. If someone makes an offer that is above our current share price then we are obliged to listen to it but it is not to say that we will accept it.”

Resignation

Mr Paul McDade and Exploration Director, Mr Angus McCoss have quit after the company cut its production outlook and suspended payment of dividend. The shares tumbled, deepening their loss for the year to more than 60 per cent.

The two resigned with immediate effect, marking the exit of Tullow’s old guard after founder Mr Aidan Heavey departed last year. Both had been stalwarts at the company for over a decade, presiding over discoveries from West Africa to Guyana, but also a slew of recent operational setbacks.

Dorothy Thompson has been appointed Executive Chair on a temporary basis and Mark MacFarlane, Executive Vice-President, East Africa and Non-Operated, has been appointed as Chief Operating Officer in a non-Board role.

Les Wood continues as an Executive Director and Chief Financial Officer. The Board has initiated a process to find a new Group Chief Executive.

Dorothy Thompson said,”I would like to thank Paul and Angus for all their hard work and dedication to Tullow over many years. They leave behind a business that has delivered two major offshore developments in Ghana, made significant oil discoveries in Kenya and Uganda and has a high-impact exploration portfolio. These remain the key building blocks of our business today.

“The Board has, however, been disappointed by the performance of Tullow’s business and now needs time to complete its thorough review of operations. A full financial and operational update will be provided at Tullow’s Full Year Results on 12 February 2020, with an update on progress to be given in the Group’s Trading Statement on 15 January 2020.”

She added, “Despite today’s announcement, the Board strongly believes that Tullow has good assets and excellent people capable of delivering value for shareholders. We are taking decisive action to restore performance, reduce our cost base and deliver sustainable free cash flow.”

Poor performance

A number of factors have been identified that have caused this reduction in the company’s production guidance.

On the Jubilee field, these factors include significantly reduced offtake of gas by the Ghana National Gas Company which Tullow makes available at no cost, increased water cut on some wells, and lower facility uptime.

At Enyenra (one of the TEN fields) mechanical issues on two new wells have limited the well stock available and there is faster than anticipated decline in this field. The company added that the non-operated portfolio is performing well, and production is expected to be sustained for the medium term.

Independent reserves audits carried out during the year indicate that oil reserves are likely to remain broadly flat at year-end 2019 compared to the previous year-end (excluding the impact of 2019 production).

The audits show increased oil reserves for Jubilee, Ntomme (one of the TEN fields) and the non-operated fields which are largely offset by a c.30% decrease in Enyenra reserves.