Tullow may lay off staff in Ireland after first pre-tax loss in 15 years
The scale of the difficulties facing Tullow Oil were laid bare yesterday when it announced it was scrapping its final dividend payment and cutting jobs on the back of a $2bn pre-tax loss.
The oil exploration company said it was planning to save $500m over the next three years through cuts in staff, capital expenditure, operating costs and administrative expenses.
The company has about 140 staff in Dublin, and chief executive Aidan Heavey told the Irish Independent all of its offices will suffer cuts to varying degrees.
Analysts said yesterday's results announcement provided evidence of the company's determination to reset its cost base and retain financial flexibility.
"While restructuring will be challenging and take time, guidance and targets demonstrate a bias to action," said Davy analyst Caren Crowley. Barclays struck a more upbeat tone, saying the cost target represented a statement of intent from management focused on ensuring Tullow "remains a low-cost oil producer, developer and explorer".
"The FY14 results announcement provides some concrete evidence of Tullow's determination to reset its cost base and retain financial flexibility," Barclays analyst James Hosie said.
The company reported a net loss of $1.56bn for last year, following a profit of $169m a year before, after writing down assets, Tullow said.
Oil companies across the globe have been hit by a 50pc drop in crude prices in eight months, putting them under pressure to slim down their businesses.
Yet major oil producers including Statoil, Chevron and ExxonMobil have made a point of continuing to reward shareholders, making Tullow an exception in the industry by scrapping its final 2014 payout.
Mr Heavey said last year was a challenging one for the company, but he said the scrapping of the dividend had been supported by shareholders.
"We have reset our business and are focusing our capital expenditure on high-quality, low-cost oil production in West Africa," Mr Heavey said.
He said job cuts were on the horizon, but didn't give specifics.
"Every office will have some affected. Some offices will be less than others, it depends on the workload," he said.
"There will be job cuts around the organisation. We've got a lot of offices throughout the world.
"Some of those job cuts will be consultants, some of those will be areas where we don't have activity in the next few years and some will just be savings in relation to streamlining the business. That'll happen over the coming months."
The company, among the most active explorers in Africa, said in January it wouldn't drill any offshore exploration wells there this year.
Tullow also cut its exploration budget to $200m from $1bn and said it expected to write off $1.2bn for exploration in French Guiana, Mauritania and Norway.
Tullow will focus exploration on "basin-opening wells" in Kenya, Norway and Suriname, it said. The Jubilee field off Ghana is expected to produce about 100,000 barrels of oil a day this year. (Additional reporting agencies)