*To cut costs as oil prices tumble
14 November 2014, LONDON – Africa-focused oil and gas explorer Tullow Oil has placed some of its African offshore drilling projects under review as it plans to cut exploration costs to deal with the consequences of tumbling oil prices.
The company is reviewing operations in French Guiana and Mauritania and said it would cut exploration spending by $1.4 billion over the next two years, refocusing on existing assets and discoveries in Africa where it can produce oil more cheaply.
“We’re concentrating our firepower on our major developments and producing assets,” Chief Executive Aidan Heavey told Reuters.
Among these are Tullow’s Jubilee project in Ghana, where it expects to reach production of 120,000 barrels per day in the fourth quarter of 2015.
Tullow’s project review in French Guiana and Mauritania could result in a non-cash impairment charge of $850 million, according to Barclays analysts who added that the writedown would not affect their evaluation of Tullow at a price target of 482.2 pence at overweight/neutral.
Shares in Tullow were up 1.8 percent at 491.3 pence by 0821 GMT, the highest riser on the FTSE 100 index. Tullow is under pressure to restore its reputation after a string of disappointing exploration results this year.
The oil explorer has hedged 35,500 barrels per day of its output in 2014 at an average price of $87.18 a barrel, it said in its third-quarter results.
Brent crude prices have fallen 40 percent since early July and dropped close to a four-year low of $81 a barrel on Wednesday, eating into oil producers’ margins.
*Karolin Schaps; David Goodman – Reuters