Delivered: An employee stands near the turret of Tullow Oil’s vessel in Singapore. Picture: REUTERS
Delivered: An employee stands near the turret of Tullow Oil’s vessel in Singapore. Picture: REUTERS

Tullow Oil’s long-serving CEO and founder Aidan Heavey is to step down in April and retire within two years, the company said on Wednesday as it announced lower than expected production for 2017 due to teething issues at a new field.

The disappointing trading update sent the shares down about 3% in early dealings, erasing all the gains the stock had made earlier this week on a $900m deal to sell a stake in a Ugandan oil field to Total.

Heavey, who founded Tullow in 1985 and named it after the Irish town where it was set up, will be replaced as CEO by chief operating officer Paul McDade after the annual general meeting on April 26, when Heavey will become chairman.

"When you’re somebody who starts a business it is obviously hard to pull back from it, but you know yourself when you reach a stage when it has to be done," Heavey said, adding he would have left sooner if the oil market had not tanked.

Analysts largely welcomed McDade’s appointment, saying it cleared up uncertainty.

"I’ll bring a fresh approach to our strategy but you shouldn’t expect the whole strategy to change," McDade said. He will take over at a crucial time for Tullow, which brought its multibillion-dollar TEN oil fields in Ghana on stream five months ago and now needs to turn costly investments into profits.

The oil producer, like its peers, was hit hard by a collapse in oil prices that was at its worst a year ago. Tullow said 2016 full-year revenue is expected to have fallen 19% year on year to $1.3bn, with net debt at $4.8bn.

The company will publish full 2016 results on February 8.

This year’s West African production estimate has already been scaled down to 78,000-85,000 barrels per day (bpd), with the flagship TEN fields expected to contribute a lower than forecast 50,000 bpd due to problems with managing pressure in one of the reservoirs.

Once at full capacity, the fields will produce 80,000 bpd.

Tullow is also battling production issues at its
Jubilee oil field, which will have to close for up to 12 weeks
for modification.

Fundamentally, an exploration company, it will bolster exploration again in 2017, drilling in Kenya and Suriname.

"It’s about us getting back to bold, exciting and big exploration," McDade said.

Reuters

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