Last month, Tullow Oil set its 2020 capex at $350m, which marked a 30% cut compared to the previous year


COVID-19 and low oil prices force Tullow Oil to further reduce its 2020 capex. (Credit: Wonita Janzen from Pixabay)

Tullow Oil has revised its 2020 capital expenditure (capex) to about $300m following the identification of additional cost savings in response to the challenging external factors.

Last month, the UK-based oil and gas company announced its 2020 capex at $350m, which marks a 30% cut compared to the previous year. The company had also announced a budget of about $100m on decommissioning activities, which has now been brought down to $65m.

The company, currently has interests in more than 70 exploration and production licences, that are spread across 15 countries in the African and South American continents.

Tullow Oil claimed that it has identified savings mainly through the postponment of activities across its portfolio and by cost cutting that can be achieved by ongoing farm-down actions.

In Ghana, the company is said to generate savings through the early termination of the Maersk Venturer rig and the postponement of certain well activity along with the removal of any non-critical operations which do not focus on safety and asset reliability.

However, the UK oil and gas firm will continue to make investments in projects that will provide good returns with its board of directors agreeing to advance the next phase of the Simba development in Gabon which is expected to pay back by the end of next year at $30/bbl.

Preparations made by Tullow Oil to handle coronavirus outbreak

The company said that its production activities in West Africa have not been impacted by COVID-19 as of now. Apart from implementing existing infectious disease mitigation plans, the company said that all its personnel in West Africa will self-isolate in Ghana for two weeks prior to their transfer to its floating production storage and offloading units (FPSOs) so that that the risk of a COVID-19 outbreak offshore is kept under a check.

Additionally, the company has completed a redetermination of its reserves based lending (RBL) facility to confirm a debt capacity of $1.9bn and a headroom of about $700m.

Tullow Oil chief financial officer Les Wood said: “Today’s positive news verifies the strength of our producing assets and robust hedging strategy which underpin the RBL and, combined with the further cost savings we have identified, confirms the strength of our liquidity in the medium-term.

“Nevertheless, strengthening the balance sheet continues to be a key priority with the Group seeking to raise proceeds in excess of $1 billion through portfolio management.

“Elsewhere in the business, Tullow is responding well to the challenges presented by the Coronavirus pandemic with strong controls and processes in place to allow the business to operate as close to normal as possible in spite of these difficult times.”