Tullow Oil plans to cut a third of its staff to save about $20 million, a source with direct knowledge of the matter said, after the firm was hit by weak output in Ghana, delays in East Africa and lower-than-hoped-for oil quality in Guyana.
The British energy firm’s shares rose by as much as 2.5 per cent following the news, after losing 75 per cent of their value since November. By 1142 GMT, the stock was up 2.1 per cent, compared with a 1.9 per cent gain for the broader energy index.
Industry sources have also said the Africa-focused firm aimed to sell its Kenya projects, once vaunted as an engine for growth.
The latest savings initiative would reduce administration costs by about a fifth to $80 million, shrinking Tullow’s workforce to about 650 people, and would be accompanied by hiring freezes, the source said.
Tullow’s annual net administration costs including costs to its partners equate to $100 million, less administration spending, the source said.
A spokesman for Tullow confirmed that the company had started a consultation process, which precedes any job cuts.
“Tullow estimates that the measures will deliver considerable savings and the group’s workforce may reduce by approximately a third globally with potential office closures in Dublin and Cape Town among a number of measures to reduce costs and overheads,” the spokesman said.
Its Cape Town and Dublin offices are focused on exploration, an area where Tullow is halving spending to around $75 million. It is also canceling its $100 million dividend plan.
Across the group, about a third of senior management jobs would be cut, the source added.
After a string of production downgrades, Tullow expects its production to shrink to 75,000 barrels per day (bpd) this year and to 70,000 bpd from 2021.
Tullow has yet to announce a new chief executive after CEO Paul McDade resigned in December.
The company’s market capitalisation stood at around $900 million as of Tuesday while its debt pile was around $2.8 billion at the end of 2019. It targets a free cash flow of $150 million this year at an oil price of $60 a barrel.
Benchmark Brent crude was trading around $55 on Wednesday.
Tullow has pushed back its full-year results to March 12, when further details of its restructuring are expected.
Executive Chair Dorothy Thompson has said the announcement of a new CEO might come after that date.