Oil price drop denies tullow shareholders dividends

The fall in world oil prices in 2015 has compelled the Board of Tullow Oil Plc to suspend the payment of dividends to shareholders in early 2015 after earning four pence per share in 2014.

On average, oil prices in 2015 were lower than in 2014 due to the significant fall in oil prices since the third quarter 2014.

Tullow is currently focusing on capital allocation, financial flexibility and cost reductions.

The board believes that Tullow and its shareholders would be better served by investing these funds into the business.

The loss after tax from continuing activities for the year amounted to $1,037 million compared to $1,640 million loss in 2014, while basic loss per share was 113.6 cents in relation to 170.9 cents loss the year before.

Aidan Heavey, CEO of Tullow Oil, told shareholders on Tuesday in Accra at the company’s Annual General Meeting (AGM) that the company’s operating cash flow before working capital movements decreased by 37 percent to $1.0 billion (2014: $1.5 billion) as a result of reduced sales volumes and lower realized commodity prices partially offset by lower cash operating costs.

In 2015, the cash flow together with increased debt facilities helped fund the Group’s $1.7 billion of capital expenditure in exploration and development activities and $232 million servicing the Group’s debt facilities.

“In our operated assets in Ghana, we are starting to see our underlying operating costs (opex) reduce due to the impact of both market deflation and increased efficiency post the implementation of MSP. The market deflation is industry wide as service providers adjust to the low oil price environment we are currently in and this will lead to continued downward pressure on opex in our operated and non-operated assets. We are taking the opportunity to renegotiate many of our contracts, where appropriate to take advantage of this market deflation.

“In addition, as we start up production from the TEN fields, we will benefit from the significant synergies from the shared resources that will service the increased production volume.

In addition to the reduction in operating costs, we are seeing very significant deflation in development costs. Independent studies indicate that our East African development could benefit from an overall capital cost reduction of over 20 per cent, further reducing the development cost of this attractive development.”

The drop in world crude prices is also expected to dissipate a chunk of the Ghana’s oil revenue, as industry watchers have warned the figures would be much lower this year than 2015.

Gas output from the field could also be affected from the cut in production.

Ghana’s 2016 budget total oil revenue from January to September 2015 amounted to GHC1,260.2 million as against a target of GHC1,353.7 million, and for the whole year, total oil revenue was estimated at GHC1,740.1 million, 1.5 percent lower than the revised budget estimate.