TULLOW Oil plc (Tullow), which has interests in two blocks offshore Guyana, has taken a $1.5 billion write-off due to a reduction in the Group’s long-term oil price assumption, disappointing drilling results in Guyana and the licence costs and write-down of value in other countries.

In a release on Wednesday, Tullow’s Executive Chair, Dorothy Thompson said that the company’s Board and Senior Management are nonetheless confident that the opportunities exist to improve operational performance, reduce our cost base, deliver sustainable free cash flow and reduce its debt.

“Tullow expects to report pre-tax impairments and exploration write-offs of c.$1.5 billion (c.$1.3 billion post tax) primarily due to a $10/bbl reduction in the Group’s long-term accounting oil price assumption to $65/bbl and a reduction in TEN 2P reserves,” the company stated.

“Exploration costs written off are predominately 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/bbl to $65/bbl. The remaining write-offs include Jethro, Joe and Carapa well costs in Guyana as a result of drilling results and Kenya Block 12A, Mauritania C3, PEL37 Namibia and Jamaica licence costs due to the levels of planned future activity or licence exits.”

On Guyana’s end, earlier in January, the UK-based company made another oil discovery offshore Guyana at the Carapa – 1 well in the Kanuku Block but the find was below pre-drilled estimates.

The Carapa prospect was initially estimated as a 200-million-barrel cretaceous target but the well drilled encountered approximately four metres of “good quality oil”.
It marked the company’s third oil find in Guyana — after the Jethro-1 well and the Joe-1 well — but the company said that would plug the well and abandon it.

“Expectations were high going into this,” David Round, an analyst at BMO Capital Markets had stated. “There will be a level of disappointment about the size.”
Tullow’s shares fell as much as 20 per cent as the news added to the doubt surrounding the company’s commercial viability of previous discoveries in Guyana which were found to contain heavy oil.

An initial analysis of the oil at the Jethro-1 well and Joe-1 well in the Orinduik block had showed that the finds are heavy crude with high sulphur content unlike the preferred light, low sulfur crude found in the Liza field operated by ExxonMobil and its partners.
However, on Wednesday, Thompson stated that “fundamentals of our business remain intact” noting that the Board and Senior Management remain confident of the long-term potential of its high-quality exploration portfolio.

Tullow has a 60 per cent operated interest in the Orinduik block and a 37.5 per cent non-operated interest in the Kanuku block