Tullow suspends divi and cuts costs in response to oil crisis

With no final dividend payment being made, shareholders only received the 4p-per-share interim payout for the whole financial year, compared with 12p per share in 2013.

Tullow also announced plans to deliver cash savings of $500m over the next three years which will be realised through reductions in capital expenditure, operating costs and administrative expenses.

“2014 was a difficult year for our industry and a challenging one for Tullow as our results today demonstrate,” said chief executive Aidan Heavey.

“In response to this, and the fall in the oil price, we have reset our business and are focusing our capital expenditure on high-quality, low-cost oil production in West Africa,” he said.

The company recorded a pre-tax loss of $2.05bn last year, compared with a profit of $313m in 2013, after taking impairments of $729m and exploration cost write-offs of $1.66bn.

Meanwhile, as previously announced, revenues declined by 16% to $2.21bn.

Hedging provided Tullow with revenue protection during the second half of the year as spot crude prices crashed, with the full-year post-hedge price for oil averaging $97.50 a barrel. This compared with current prices on the market of around $50-60.

The company also said 60% of its 2015 entitlement oil sales are currently hedged with an average floor price of $86, with further hedges already in place for 2016, 2017 and 2018.

While the suspension of the dividend will disappoint many, analysts at Barclays said the decision was “pragmatic given Tullow’s current capital commitments”.

Meanwhile, they said that the $500m cost savings target “is material and represents a statement of intent from management focused on ensuring Tullow remains a low-cost oil producer, developer and explorer”.

The bank maintained an ‘overweight’ rating for the stock.