Tullow has posted $1.7 billion loss from $85 million profit in 2018, attributed to a meltdown on the value of Kenya and Uganda assets, plus reduced production in Ghana operations.
The company released its full year results for 2019 on Thursday, blaming the collapse of crude prices on igniting a “perfect storm” in its business, and in the process creating “material uncertainties” over its future operations.
“The total exploration cost write-offs for the year ended December 31, 2019 were $1.2 billion predominantly driven by a write-down of the value of the Kenya and Uganda assets due to a reduction in the group’s long-term accounting oil price assumption from $75 per barrel to $65 per barrel,” said the firm.
Although Tullow has avoided significant battering by the low prices due to its hedging policy, it fears for the worst in the future.
The firm has hedged 60 per cent of its 2020 production at a price of $57 per barrel and 40 per cent at $52 per barrel for 2021, a cushion that saw it realise oil prices averaging $60 per barrel for January and February 2020.
“If oil prices remain at or below their current levels for an extended period of time, this would adversely impact our future financial results,” said Tullow.
The collapse of crude oil prices, which sunk to historical levels of $34 per barrel this past week ignited by the Covid-19 pandemic and fuelled by supremacy battles between Saudi Arabia and Russia, has left Tullow in a deep hole of losses, write-offs, impairments and erosion of its share price on the London Stock Exchange.
By Thursday, the prices had sunk further to a low of $30 per barrel.