The scale of the difficulties facing independent exploration companies has been underlined by Tullow Oil, which has crashed to a $2bn (£1.3bn) annual pre-tax loss.
The London-based group said it planned to cut operating expenses by $500m over the next three years. It has also suspended the dividend, leaving a final payout for 2014 financial year of 4p – almost 70% lower than in 2013.
Tullow said it had taken a series of writedowns as a result of lower crude prices and unsuccessful exploration drilling. Aidan Heavey, the chief executive, said: “2014 was a difficult year for our industry and a challenging one for Tullow as our results today demonstrate. In response to this, and the fall in the oil price, we have reset our business and are focusing our capital expenditure on high-quality, low-cost oil production in west Africa.”
Large oil companies such as Shell and BP have announced plans to reduce expenditure after a halving of the oil price since the middle of last year. Companies such as Tullow, however, are more vulnerable to swings in crude prices because of their smaller balance sheets and higher comparative borrowing.
Tullow had borrowings of $3.1bn at the end of 2014, but said it also had free cash reserves of $2.4bn. Heavey said the core oil production in west Africa was continuing positively and generating “significant” amounts of money.
