Tullow Oil has slashed its exploration and appraisal budget by 50 percent compared to 2015 to just $100 million as the company allocated $150 million to pre-development expenditure.
The reduction is an overall cut in the group’s capital expenditure associated with operating activities which has reduced from $1.7 billion in 2015 to $1.1 billion in 2016.
The reduction is also as a result of the near end of the drilling campaign with one well (Cheptuket) currently in drilling in the undrilled Kerio Valley Basin after which the last rig the PR Marriott Rig-46 will demobilise, marking the end of the current drilling campaign.
Tullow says it is now making development plans in Kenya where the recent successful Etom-2 appraisal well in the north South Lokichar basin supports an upside potential of over one billion barrels. Plans for further exploration drilling will be evaluated during the first half of 2016.
The company has already submitted the draft Field Development Plan to the Government of Kenya in December which will inform discussions as it progresses towards potential final investment decision (FID) of both the Kenya and Uganda upstream development projects in 2017.
“In East Africa, steady progress has been made towards a potential development sanction in 2017. Our appraisal programme in Kenya has proved up commercial resources with further significant upside identified,” says CEO Aidan Heavey.
Meanwhile the explorer has reported it expects to deliver revenue of $1.6 billion, gross profit of 600 million and pre-tax operating cash flow of $1.0 billion in 2015 largely due to the current low oil price and a number of accounting charges incurred in the 2015 including: a post-tax exploration write-off of $0.4 billion, a post-tax impairment charge of $0.3 billion and an onerous rig contract charge of $0.2 billion.
The Group expects to write-off of prior year expenditure in the Netherlands, Gabon, Ethiopia, Greenland and Madagascar as a result of licence relinquishments, and a review of future work programmes in the context of current oil and gas prices.