A view of the main deck of Tullow Oil's Floating Production, Storage and Offloading vessel (FPSO). Picture: REUTERS
A view of the main deck of Tullow Oil's Floating Production, Storage and Offloading vessel (FPSO). Picture: REUTERS

London — Tullow Oil’s CEO Paul McDade and exploration director Angus McCoss quit after the company cut its production outlook and suspended the dividend, sending shares tumbling more than 60%.

McDade and McCoss resigned with immediate effect, marking the exit of Tullow’s old guard after founder Aidan Heavey departed in 2018. Both had been stalwarts at the company for over a decade, presiding over discoveries from West Africa to Guyana, but also a slew of recent operational setbacks.

“While 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 said Monday. Group output next year is forecast at 70,000 to 80,000 barrels a day — down from the 87,000 a day expected for this year — and production for the following three years will hover near the bottom of that range.

“This is likely to have a negative impact on the valuations of Tullow’s key assets,” Al Stanton, an analyst at RBC Europe, said in a note. “We expect the pace of exploration activity, and therefore news flow, to be reined in.”

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

The shares sank 61% to 55.28 pence as of 11.54am London time, the biggest decline since they started trading in the city 30 years ago. The stock has dropped more than 90% 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 chair Dorothy Thompson said by phone, insisting that the Jubilee development and Uganda reserves remain world-class oilfields. 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.

The surprise CEO resignation, dividend suspension and revision of production guidance cast a “dark shadow over the company’s outlook”, while the start of a strategic review “increases the likelihood of an eventual sale of the company,” said Will Hares, global energy analyst said.

Mark MacFarlane, executive vice-president of East Africa and non-operated, has been appointed COO in a nonboard role, according to a Tullow statement. Les Wood continues as CFO. The board has started a process to find a new CEO and is talking to internal and external candidates, Thompson said.

The company will reduce capital expenditure, operating costs and corporate overheads, it said. It sees underlying free cash flow next year of at least $150m at $60 a barrel after capital investment of about $350m.

CFO Wood said that Tullow is in a “strong financial position” and that “reducing our debt pile will continue to be our priority”. He conceded that “in the short-term, it will be going a little slower”.

With assistance from James Herron.

Bloomberg