Tullow oil has cut down its spending worldwide to focus its energies in Kenya, Uganda, Ethiopia and Ghana due to lower oil prices and poor offshore drilling results, as the company looks to rebuild investor confidence, the explorer said in a recent report.
The decision was taken to scale down on its operations in Europe and the Carribean in order to dedicate its resources in East Africa and only Ghana in West Africa. This follows the forecast of lower attention to exploration financing by multinationals due to declining fuel prices on the global market.
“In light of current oil and gas sector challenges including the commodity price environment, we are reviewing our capital expenditure and our cost base to ensure that Tullow is well-positioned for future success,” Tullow CEO Aidan Heavey said in interim management statement released on Wednesday.
Tullow will reduce capital spending by almost $300 million next year from $1 billion, limiting exploration to basin opening wells in Kenya and Ethiopia and offshore Norway.
“Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin-opening potential,” Heavey said.
Though the Tullow board has yet to approve next year’s capital spending, it is likely to be in the region of $2 billion and will include expenditure of $900 million in Ghana, Platt reported the company saying.
During 2015, in addition to significant appraisal and testing activity in the South Lokichar Basin, Tullow expects to drill a further five basin-testing exploration wells across its acreage in Kenya and Ethiopia.
The company is reviewing its operations in French Guiana, where it has significant costs booked for the Zaedyus discovery, and in Mauritania, where a decision will be made on which licenses to retain.
The company earlier this month said it was pulling out of the Kudu project in Namibia.
“This could be watershed moment for the company in its efforts to build investor’s confidence in the business outlook,” James Hosie, an analyst at Barclays Capital, said in a note. “Management has responded to the lower oil price outlook and concerns over the scale of its exploration ambitions.”
Tullow’s shares have lost more than 40 percent of their value since July largely due to a slew of disappointing well results.