9th Dec 2019 08:19
(Alliance News) - Tullow Oil PLC on Monday suspended its dividend, "reset" its future production guidance, and said that Chief Executive Officer Paul McDade and Exploration Director Angus McCoss have resigned with immediate effect by mutual agreement.
Shares in Tullow fell 47% to 81.79 pence each at the London open on the news, by far the worst performer in the FTSE 250 index on mid-cap stocks.
The oil & gas firm said Dorothy Thompson will move from non-executive chair to executive chair role on a temporary basis, and it has started the search for a new CEO. In addition, Mark MacFarlane, the company's executive vice president for east Africa and non-operated, has been appointed as chief operating officer.
Following underperformance from its main oil producing assets - the TEN and Jubilee fields in Ghana - Tullow said it needs to reset its forward-looking guidance. For 2020, group production is forecast to average between 70,000 and 80,000 barrels of oil per day and group production for the following three years is expected to average around 70,000 bopd.
"A number of factors have been identified that have caused this reduction in production guidance. On the Jubilee field, these factors include significantly reduced offtake of gas by the Ghana National Gas Co, 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 on this field," the company said.
Further, in 2020, the company expects to generate underlying free cash flow of at least USD150 million at USD60 a barrel after a capital investment of USD350 million. Considering the level of expected free cash flow, Tullow has decided to suspend its dividend.
Back in July, Tullow declared a 2.35 US cent interim dividend, in line with a plan to return USD100 million to shareholders in 2019. The interim payout was worth USD33 million.
Tullow provided no further details about its dividend plans in Monday's announcement.
For 2019, Tullow continues to predict net production to average 87,000 barrels of oil per day and free cash flow of around USD350 million.
Thompson said: "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."
"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."
By Tapan Panchal; [email protected]
Copyright 2019 Alliance News Limited. All Rights Reserved.
Related Shares:
Tullow Oil