Tullow Oil, oil and gas exploration company focused on Africa, will significantly reduce spending on exploration activities in 2015. The company has said that it will focus its expenditure on its producing assets and on development of existing discoveries.
Explaining the reasons for cuts in its budget for offshore exploration, Tullow said that given the current expectations for the oil price, reduced commercial success from offshore drilling and the lack of asset transactions, deepwater wells are currently less attractive. Therefore, Tullow will reduce its net exploration and appraisal capital expenditure to around $300 million.
According to an Interim Management Statement issued today, the company’s core oil assets in West Africa, the Tweneboa-Enyenra-Ntomme (TEN) development project, Jubilee production in Ghana and the non-operated West Africa portfolio – will generate significant value and cash flow for the Group and will attract the greatest share of capital in 2015.
Focus on East Africa
The majority of the company’s exploration and appraisal activities next year will be based in Tullow’s onshore portfolio in Kenya and Uganda, “where significant value can be created by adding further resources and appraising existing discoveries to progress development.”
Aidan Heavey, Tullow CEO said: “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. In 2015, we will be focusing our capital spend on producing and development assets, particularly in West Africa where, by 2017, the Group expects to be producing, net to Tullow, over 100,000 bpd of high quality, high margin oil.
“Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin-opening potential. Tullow remains exploration-led and will continue to add further high quality frontier acreage so that, as conditions allow, we can return to drilling the types of prospects that have given us the development portfolio we have today.”
Tullow Board has yet to approve the final Group capital expenditure budget for 2015 but, the company’s statement reads, it is likely to be in the region of $2 billion and will include TEN expenditure of $900 million. The TEN project cost of $4.9 has not changed and the project is on track for first oil in mid-2016.