Tullow sees almost $1bn in writedowns for 2016; more capex cuts

Tullow Oil said it expects to report 2015 revenue of $1.6bn (£1.1bn) and gross profits of $600m (£416m) although it warned that the low oil price would result in almost $1bn in writedowns.

It added that capital expenditure had been cut to $1.1bn from $1.7bn and its looking for extra cuts. Operating cash flow is expected to be around $1bn.

Tullow said despite current low oil prices it expects to maintain sufficient liquidity throughout 2016 and had started the year with financial headroom of $1.9bn.

The writedowns would be made up of a post-tax exploration write-off of $400m, post-tax impairment charge of $300m and an onerous rig contract charge of $200m as a result of much lower levels of exploration and appraisal drilling activity planned for 2016.

Chief executive Aiden Heavey said he expected the Ten field off the coast of Ghana to begin producing oil in the middle of the year and expected the group to be producing around 100,000 barrels of oil a day in West Africa in 2017.

“In East Africa, steady progress has been made towards a potential development sanction in 2017. Our appraisal programme in Kenya has proved up commercial resources with further significant upside identified,” he said

We continue to focus on driving down our costs and capital expenditure and, at the beginning of 2016...accordingly, we have a diversified balance sheet which supports our planned activities for the year ahead."