Tullow open to offers as shares tank, CEO quits
Tullow Oil’s acting chief has said the company is open to takeover offers in light of its shares plummeting by nearly 72% on it cutting its production outlook, suspending dividend payments, and parting company with its CEO and exploration director.
The Irish-founded exploration company said chief executive Paul McDade and exploration director Angus McCoss have left the company “by mutual agreement and with immediate effect”.
The 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. 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 around the bottom of that range.
It is understood that the official position of the Tullow board is that the company is not for sale. However, the collapse of the company’s share value has prompted speculation that Tullow could be a takeover target.
Executive chairwoman Dorothy Thompson told analysts the board would always be open to offers that were attractive to shareholders and at the proper price.
However, she said that, despite the latest news, the board “strongly believes that Tullow has good assets and excellent people capable of delivering value for shareholders”.
She said:
We are taking decisive action to restore performance, reduce our cost base and deliver sustainable free cash flow
Ms Thompson said the board has been disappointed with the performance of Tullow’s business and now needs time to complete its “thorough review of operations”.
This will reassess the company’s cost base and future investment plans and allocate “appropriate” capital to core production assets and development projects and continued exploration. The company has suspended dividend payments, having only resumed them this year after a five-year absence.
Chief financial officer Les Wood said the company remains in a strong financial position and a reduction in its debt pile will continue to be its priority. Ms Thompson said Tullow’s board has formally begun the process of finding a new CEO and will consider internal and external candidates.
Mark MacFarlane, the executive vice-president of Tullow’s East Africa operations, has been appointed chief operating officer in a non-board role.
The surprise CEO resignation, dividend suspension, and revision of production guidance has cast a “dark shadow over the company’s outlook,” according to Bloomberg analyst Will Hares, while the start of a strategic review “increases the likelihood of an eventual sale of the company”, he said.
The departures of Mr McDade and Mr McCoss — who had both been with the company for more than 10 years — mark the final exit of Tullow’s old guard, after founder and long-time chief executive Aidan Heavey left last year.
