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Comment: best Tullow shareholders can hope for is a bid, but that looks unlikely


AS Christmas presents go, Tullow Oil’s gift to shareholders today is a stinker.

In this annus horribilis, shareholders have endured problems in Uganda, Kenya and Guyana. So today’s disaster in Ghana (similar name, different continent), has rightly meant the end of the road for the chief executive and operations boss.

And to think, Tullow used to be the Santa Claus oil company that always delivered.

Its triplet of problems at Ghana’s Jubilee field and mechanical issues at two wells at another called TEN, point to serious shortcomings in operational prowess and a strong hint that management in London has not been kept abreast of what’s going on out at the drillface. Why else did all these issues only come to light now, a few days before markets snooze for the holidays?

Jubilee and TEN are Tullow’s two biggest earners. So the resulting shortfall in production, possibly as much as 15,000 barrels of oil a day for the next three years, is hugely significant. At $60 a barrel, it could be a back-of-a-fag packet daily cash shortfall of nearly a million dollars.

For a company with $2.7 billion of debt to repay, that is a major problem. Even with today’s axed dividend and spending cuts.

The best investors can hope for in the New Year is a takeover from a Total or an Exxon. With its equity priced at just £870 million today, Tullow would barely be a scratch on their balance sheets. Ex-boss Aidan Heavey, backed by private equity, may also be looking.

The question is, whether they feel Tullow’s accident-prone assets are worth the trouble.