A series of production setbacks from Tullow’s oil blocks in West Africa and Guyana have resulted in two top executives of the British oil company resigning with immediate effect; even as the company’s shares tumbled by more than 60 per cent on the stock market.
Chief Executive Officer, Paul McDade, and Exploration Director, Angus McCoss, both resigned after being stalwarts at the company for over a decade. The duo had presided over discoveries from West Africa to Guyana, but also encountered a slew of operational setbacks.
“Whilst financial performance has been solid, production performance has been significantly below expectations from the group’s main producing assets, the TEN and Jubilee fields in Ghana,” London-based Tullow noted in a statement on Monday.
Meanwhile, group output in 2020 is forecast at 70,000 to 80,000 barrels per day, which is a reduction from the 87,000 barrels a day expected for 2019.
Additionally, production for the following three years will hover around the bottom of that range.
According to British media outlets, the executive departures come after a year of disappointments at Tullow, where technical difficulties have hampered output in Ghana, projects in Uganda and Kenya have faced delays, and results from wells in Guyana missed expectations. The company reduced its 2019 production forecast several times as the glitches in Ghana dragged on.
Stock dive
It was reported that the shares sank 61 per cent to 55.28 pence as of 11:54h on Monday, London time. This is recorded as the biggest decline since the oil company started trading in the city 30 years ago.
The stock has dropped more than 90 per cent since 2012. Tullow’s dollar notes due 2025 declined the most since they were issued in March 2018.
“There is a risk that the market will lose sight of the true value of our underlying assets,” interim Chairman Dorothy Thompson said by phone to the media, insisting that the Jubilee development and Uganda reserves remain world-class oil fields. The company is conducting a review “to create a sustainable business, which we believe we can do,” she said.
Thompson declined to comment on whether Tullow is actively seeking buyers, but reiterated the standard position that the company would always be open to any offers that were attractive to shareholders.
Here in Guyana, just three months ago, Tullow announced its second oil discovery offshore the Stabroek Block.
At that time, Guyana’s Department of Energy Director, Dr Mark Bynoe, announced that UK-based Tullow Oil Plc’s (Tullow) Joe-1 exploration well had successfully opened a new Upper Tertiary oil play in the Guyana basin.
That was the second discovery of oil in two different wells operated by Tullow, in less than six weeks.
The Joe-1 exploration well was drilled by the Stena Forth drillship to a total depth of 2175 metres in a water depth of 780 metres. The evaluation of logging and sampling data confirms that Joe-1 has encountered 14 metres of net oil pay in high-quality oil-bearing sandstone reservoirs of Upper Tertiary age.
The Energy Director had explained that the Joe-1 well is the first oil discovery to be made in the Upper Tertiary play type, which further de-risks the petroleum system of the western area of the Orinduik Block, where a significant number of Tertiary and Cretaceous age prospects have been identified.
“Guyana’s future is bright but more importantly, the time is ripe for all Guyanese to focus on how they want to see their oil revenues spent and invested”, Dr Bynoe had said.
Meanwhile, the Repsol-operated Carapa-1 well on the Kanuku licence (Tullow 37.5 per cent) is scheduled to commence drilling in late September with the Rowan EXL II jack-up rig and will test the Cretaceous oil play with a result due in the fourth quarter of 2019.
Dr Bynoe had added that Tullow and its partners, at that time, would have evaluated data from the Joe-1 discovery alongside data from the Jethro-1 discovery announced in August 2019. It would have then awaited the outcome of the Carapa well to determine the optimal follow-on exploration and appraisal programme.
The well was drilled on the Orinduik licence, offshore Guyana by Tullow’s wholly-owned subsidiary Tullow Guyana BV. Tullow Guyana BV is the operator of the Orinduik Block with a 60 per cent stake. Total E&P Guyana BV holds 25 per cent with the remaining 15 per cent being held by Eco (Atlantic) Guyana Incorporated.
Meanwhile, according to the UK-oil company, Dorothy Thompson has been appointed Executive Chair on a temporary basis and Mark MacFarlane, Executive Vice-President, East Africa and Non-Operated, has been appointed as Chief Operating Officer in a non-Board role.
Les Wood continues as an Executive Director and Chief Financial Officer. The Board has initiated a process to find a new Group Chief Executive.
