Monday 24 July 2017

New Tullow CEO named as company reports revenue and gross profit behind expectations

Tullow Oil boss Aidan Heavey
Tullow Oil boss Aidan Heavey
Louise Kelly

Louise Kelly

Tullow have appointed Paul McDade to the position of Chief Executive Officer (CEO) at the oil exploration firm.

Mr McDade is currently chief operating officer (COO) at the company and his appointment will come into effect on April 26 this year.

The decision follows an internal and external process led by Tullow’s Nominations Committee.

Mr Paul McDade said he was "deeply honoured that the Board has appointed me to succeed Aidan as Chief Executive Officer of Tullow".

"We have a world class business with high quality assets and strong relationships across Africa that underpin our business," he said.

"We have begun the vital process of deleveraging our balance sheet and our focus will now move to returning the business to growth as the recovery in the sector develops.”

Meanwhile, Chairman Simon Thompson has announced that he will step down from the role he has filled for five years. He was a member of Tullow’s Board for a total of six years.

Tullow founder and CEO Aidan Heavey will succeed Mr Thompson as Chairman of the Group for a transition period of up to two years.

“The Board and I have long been aware of the need to plan carefully for Aidan's retirement from Tullow as our founder and after 31 years as CEO," Mr Thompson commented today.

"After careful consideration of the options, we are confident that this succession plan provides Tullow with the right combination of stability, continuity and fresh-thinking," he said.

"Paul has been an outstanding member of the Board and has served Tullow with great distinction for 12 years as COO. With Aidan as Chairman, Paul and Tullow will continue to benefit from the founder’s years of experience and deep understanding of the relationships that underpin our business in Africa.”

Tullow also reported revenue and gross profit $1.3bn and $500m respectively on Wednesday morning, figures that fell behind expectations.

A number of incurred accounting charges were highlighted by management that negatively impacted the 2016 income statement.

These include a goodwill impairment of $0.2bn, a post-tax exploration write-off of $0.3bn, a post-tax impairment charge of $0.1bn and an onerous service contract charge of $0.1bn.

The firm reported production levels in line with their most recent update in November as their West African assets averaged 65,500 bopd in 2016 and their small European assets averaged 6,200 boepd.

The trading update stated that the Jubliee turret remediation work is on track and Tullow expect 2017 production from Jubliee to average 24,300 bopd net to Tullow, taking into account a 12 week shutdown to allow for scheduled repairment work.

Production at TEN is progressing well, according to management, with gross annualised working interest production in 2016 estimated to be 6,900 bopd net to Tullow, slightly behind guidance set in November. Tullow expects production from TEN to average 23,600 bopd net to Tullow in 2017.

The other West African assets are expected to produce 27,800 bopd in 2016 which is slightly behind expectations of 28,000. Tullow expect production to average 22,200 bopd in 2017 which is also behind expectations.

"Management also gave guidance on capex for the forthcoming year of $500m, a significant reduction versus the $900m spent this year," Equity Analyst Dylan Simmonds said.

"Subsequently, due to the first oil from TEN we would expect Tullow to generate over $500m in free cash flow next year and begin to pay down their large debt burden.  Net debt is estimated to be $4.8bn for 2016 which is slightly ahead of the $4.9bn figure expected, due to reduced capex and improved cost management."

"Additionally, there has been several key management changes in Tullow which we are concerned about," he said.

"All of these changes in quick succession may suggest some instability amongst the executive ranks in Tullow which we feel adds additional risk to the investment case now."

Senior Independent Director,  Ann Grant, will retire at the AGM after nine years’ service on the board.

Chairman of the Remuneration Committee Jeremy Wilson will succeed Ms Grant as Senior Independent Director

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