Tullow Oil plans to shave $20m off costs and close Dublin office

Future revenues expected to be lower than forecast as explorer cuts third of global staff

 

Tullow Oil is working on restructuring plans to shave $20 million (€18.2 million) of annual costs, which is set to involve the explorer cutting a third of its global workforce and closing its office in Dublin, which has about 55 staff.

“Tullow confirms that it has begun a re-structuring of its global business and will enter into a consultation process with affected staff,” a spokesman for the company said on Wednesday.

“The re-structuring follows Tullow’s announcement in December that its oil production and associated revenues in 2020 and beyond would be lower than forecast.”

Tullow estimates that the measures will deliver “considerable savings” and the group’s workforce may reduce by approximately a third globally with potential office closures in Dublin and Cape Town among a number of measures to reduce costs and overheads, said the spokesman.

Slump

While he declined to say how much the company planned to save, sources said the plan would lower Tullow’s annual net administration costs by around about 20 per cent to $80 million.

The company has had a Dublin office since it was founded 3-1/2 decades ago by Irishman Aidan Heavey. Most of the employees based in Leopardstown, south Dublin, are geologists.

The wider blueprint would reduce the embattled oil explorer’s total workforce to around 650 people, according to sources. Reuters first reported key details of the plan on Wednesday.

Tullow Oil saw its shares slump 64 per cent in 2019 as a result of exploration, production disappointments and the exit of its chief executive and exploration director.

The company said in November that oil discovered months earlier off the coast of Guyana in South America was found to be heavy and high in sulphur, making it costly, and possibly commercially unviable, to extract.

Weeks later, Tullow cut its oil production forecasts for the coming years due to issues at its key Ghana projects, suspended its dividend, and announced that its chief executive Paul McDade and its exploration director Angus McCoss had quit.

It emerged last month that Tullow is seeking to sell down its stake in Kenyan oil exploration blocks.

Charge

The group, which saw chairman Dorothy Thompson step in to take temporary executive charge in December, warned last month that it expects to report a $1.5 billion impairment charge for 2019 as it cut its long-term oil price assumptions and a reduced its reserves estimates.

Still, African oil executive Samuel Dossou-Aworet has used market nervousness around the company to build up an 11 per cent stake in the past two months.

The 75-year-old Benin native previously had a stake below the 3 per cent level that must be disclosed to the market, having received stock as part payment for the sale of a company called Energy Africa to Tullow Oil for $500 million in 2004. The transformational deal doubled the size of Tullow Oil at the time, giving it assets along the west coast of Africa, including Ghana, where the company would find its two largest oil fields: Jubilee and TEN.