Following the drop in global crude oil prices Tullow Oil says I will be reducing on exploration cost as well as focus on high margin oil and its major basin-opening potential.
“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 Oil Chief Executive Officer Aidan Heavey says in the latest interim statement
The reduction in exploration expenditure according to the company will impact more on offshore drilling where there is reduced commercial success and also faces the lack of asset transactions while returns from drilling complex, deepwater wells are currently less attractive.
As a result Tullow says it will now focus the majority of its exploration and appraisal expenditure on its operated onshore East Africa portfolio where significant value can be created by adding further resources and appraising existing discoveries to progress development in both Uganda and Kenya.
“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,” Aidan says.
Tullow Oil has 6 licenses in Kenya (10BA, 10BB, 10A, 12A, 13T and L8) of which the last is offshore where the company holds a 15% equity position with a 5% additional equity option and is likely to be affected by the latest decision by the company.
The company adds that it will also continue focus on the Jubilee production and the non-operated West Africa portfolio where it expects to generate significant value and cash flow in 2015.
“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,” adds Aidan.
Tullow says it will continue to seek new low cost and highly prospective exploration acreage in its core areas of Africa and the Atlantic Margins to ensure that the business continues to have an industry-leading exploration position.