Tullow Oil expects to report a $1.5 billion writedown after lowering its long-term oil price assumptions by $10 to $65 a barrel, an announced reduction in reserves in Ghana and disappointing exploration wells, it said on Wednesday.
"Tullow expects to report pretax impairments and exploration write-offs of (around) $1.5 billion (c. $1.3 billion post-tax)," it said.
"Write-offs include Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica license costs due to the levels of planned future activity or license exits."
After repeated delays for its East African projects, Tullow said that its scheme to truck oil from its Kenyan inland fields to the coast has been suspended due to damaged roads and that there was no breakthrough in Uganda, where it is looking to reduce its stake. To shield against oil price fluctuations, Tullow has hedged 45,000 barrels per day (bpd) of its 2020 output with an average floor price of $57.28 a barrel.
For next year, it hedged 22,000 bpd at an average floor price of $52.80 a barrel. Tullow shares shed 70% in the fourth quarter of 2019 on production downgrades in Ghana, the oil quality found in a well in the Orinduik block offshore Guyana and the disappointing size of a well in its Guyanese Kanuku block.
Tullow, a partner of French oil major Total in several projects, has forecast 2020 output to shrink to a maximum of 80,000 bpd and fall again to around 70,000 bpd in 2021-2023.
It is still looking for a replacement for its former Chief Paul McDade, who stepped down last month. Tullow's full-year results are due on March 12 and will include updates on the review of its assets and management structure.
(Reporting by Shadia Nasralla, editing by Louise Heavens)