15th Jan 2015 08:13
LONDON (Alliance News) - Tullow Oil PLC Thursday said it is set to write off around USD1.6 billion of value on exploration activities and unsuccessful drilling and said impairment charges for the year will reach around USD600 million alongside an additional USD500 million loss on a disposal charge on two gas fields in the UK.
For 2014, the company is expecting revenue to reach USD2.2 billion, resulting in a gross profit of USD600 million and pre-tax operating cashflow of USD1.5 billion. In November, Tullow said it expected its pretax operating cashflow for 2014 to reach USD1.7 billion.
"These results, versus the prior year, have been impacted by the oil price decline and lower gas production following asset sales in Europe and Asia," it said in a statement.
In November, Tullow said it was expecting substantial non-cash write-offs and impairments for 2014. The company is expecting to write off USD400 million pretax, in relation to exploration activities mainly in Norway, Mauritania and Ethiopia.
Non-cash write-offs relating to drilling and license costs from prior years of USD1.2 billion pretax, mainly related to unsuccessful drilling in French Guiana, Mauritania and Norway, bringing the total exploration write off for 2014 of USD1.6 billion pretax.
Impairment charges for 2014 are expected to total USD600 million as a result of weak commodity prices and the impairment of goodwill related to the acquisition of Spring Energy, said Tullow.
In addition, a loss on a disposal charge of USD500 million is expected related to an updated assessment of the recoverable contingent resource and partial sale of the UK Schooner and Ketch gas fields.
Tullow exited 2014 with net debt of USD3.1 billion, with around USD2.4 billion available in its facility.
Tullow has hedged around 60% of its 2015 entitlement sales at an average floor price of around USD86 per barrel, with further hedges in place for 2016 and 2017. In 2014, the company said its hedging programme resulted in an average post-hedge oil price of USD97 per barrel for the year.
In 2015, Tullow is to focus its capital expenditure on producing and near-producing assets which can generate value in the short-term. It has budgeted a total of USD1.9 billion for 2015, which includes a USD200 million reduction in its exploration budget.
In November, Tullow said it was expecting to spend around USD2 billion on capital expenditure during 2015.
"The reduced exploration programme will predominately focus on a number of high-impact, low-cost exploration opportunities in East Africa," said Chief executive Aidan Heavey.
"There is further scope for capital expenditure reductions going forward as Tullow enters discussions with partners and suppliers regarding potential savings as industry costs decline," it said in a statement.
Tullow shares were up 2.5% to 367.00 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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