Wednesday 22 November 2017

Tullow Oil's Heavey to step down after 32 years

Tullow founder Aidan Heavey is quitting his ceo role
Tullow founder Aidan Heavey is quitting his ceo role
John Mulligan

John Mulligan

Aidan Heavey is to step down as chief executive of exploration firm Tullow Oil, ending a 32-year dynasty as the head of the company he founded in 1985.

Mr Heavey, who turns 64 in March, will remain as non-executive chairman for up to two years before leaving the company.

He is being succeeded as chief executive by chief operating officer Paul McDade. Current chairman Simon Thompson will quit the firm.

Analysts said the changes were not unexpected, while Mr Heavey said that he would have left the chief executive role earlier had oil prices not collapsed.

"For the last two decades, people have been asking me when I'm going to retire," an in-form Mr Heavey told the Irish Independent yesterday. "I think they'll be glad to see the end of me."

He added: "When the oil price collapsed, the thing was to stick around and see that through, which we have done. I'll never not be involved in the business. I still have a shareholding. It's the right thing to do. For the new team, it's good to start off with a period of growth."

A former Aer Lingus accountant, Mr Heavey set up Tullow Oil after learning of opportunities to exploit small fields that had been considered uneconomic by oil majors.

A native of Roscommon, he sold his collection of vintage cars and mortgaged his house to raise £1m and initially targeted Senegal in west Africa.

He has recalled some hair-raising experiences along the way, including visiting a somewhat worse-for-wear drilling rig off the Ghana coast in 1988 and being hauled up from a dug-out canoe to it in a net as sharks circled below.

But the slump in oil prices between 2014 and 2015 prompted huge turmoil for Tullow and other exploration and production firms as they grappled with a new economic environment.

Tullow moved quickly to shore up its position, axing its headcount by 37pc in 2015. Mr Heavey insisted yesterday that the company is now "in tremendous shape".

Tullow's 2016 revenue is expected to have fallen 19pc to $1.3bn (€1.24bn), and its gross profit will be 15pc lower at $500m (€477m).

Tullow is largely focused on Africa, where it has a 35pc stake in the huge Jubilee offshore oil field off Ghana. Tullow also has a 47pc stake in the massive TEN (Tweneboa-Enyenra-Ntomme) field close to Jubilee.

The TEN field came on stream this year, but has encountered problems that have hampered output. There have also been issues with the Jubilee field.

This year's West African production estimate has already been scaled down by the company to between 78,000 and 85,000 barrels per day (bpd), with the TEN fields expected to contribute a lower-than-expected 50,000 bpd due to a reservoir issue. At full capacity, the TEN fields should be producing about 80,000 barrels a day.

Earlier this week, Tullow sold most of its stake in Uganda's Lake Albert project for $900m (€859m) to French group Total.

The deal includes $200m in cash and $700m that will be used to fund the future development of the fields and associated infrastructure. Tullow is planning use the cash flow from TEN to deleverage its balance sheet. It has net debt of $4.8bn (€4.58bn). "Tullow is… now very well placed to take advantage of the opportunities that conditions in the sector offer," said Mr Heavey.

Davy Stockbrokers analyst Caren Crowley said issues at TEN have suppressed Tullow's shares. "We believe the uncertainty regarding TEN's production has kept a lid on Tullow's share price despite a good farm-out of equity in its Ugandan asset," she said.

Tullow's capital expenditure in 2017 will be $500m. The company will drill in Kenya and Suriname this year.

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