Tullow Oil plunges into period of uncertainty as CEO McDade resigns

It is still unclear how the London departures will impact on Uganda’s oil project

Kampala, Uganda | RONALD MUSOKE | On Dec. 09, Paul McDade, Tullow Oil Plc’s Chief Executive Officer, and Angus McCoss, the company’s Exploration Director stepped down from their positions by “mutual agreement and with immediate effect,” sending the company’s shares on the London Stock Exchange on a downward spiral.

Dorothy Thompson immediately replaced McDade in an acting capacity while Mark MacFarlane, the executive vice-president, East Africa, was appointed as Tullow’s Chief Operating Officer. Thompson thanked McDade and McCoss “for all their hard work and dedication to Tullow over many years.”

“They leave behind a business that has delivered two major offshore developments in Ghana, made significant oil discoveries in Kenya and Uganda,” Thompson said, “These remain the key building blocks of our business today.”

The oil firm, however, said in a statement that the board “has been disappointed by the performance of Tullow’s business and now needs time to complete its thorough review of operations.”

“Whilst financial performance has been solid, production performance has been significantly below expectations from the group’s main producing assets, the TEN and Jubilee fields in Ghana,” added the statement issued on the same day.

Tullow which has a strong presence on the African continent also scrapped its dividend after failing to meet production targets due to what analysts say is weak performance by the company’s flagship assets in Ghana. Following a pile of debt, Tullow had since 2015 suspended paying dividends to its shareholders only reinstating it this year.

“Despite today’s (Dec. 09) announcement, the Board strongly believes that Tullow has good assets and excellent people capable of delivering value for shareholders. We are taking decisive action to restore performance, reduce our cost base and deliver sustainable free cash flow.”

McDade and McCoss’ resignations marked the exit of Tullow’s old guard after the company’s founder Aidan Heavey departed last year. McDade replaced Heavey as Tullow Oil Plc’s chief executive in April, 2017. Both men were at the forefront of the company’s rapid expansion in Africa overseeing discoveries from West Africa to Guyana in South America.

Analysts say Tullow has been plagued by technical problems at its Jubilee field in Ghana while a delay in completing a well at the TEN offshore fields still in Ghana worsened Tullow’s woes.

But the Irish wildcatter has also suffered setbacks in East Africa as final investment decisions for its projects in Uganda and Kenya have dragged on.   In August this year, Tullow Oil Plc announced the collapse of a US$ 900 million farm down to its local partners Total E&P Uganda and China National Offshore Oil Corporation (CNOOC) and the local industry has been in disarray.

It is still unclear how the London departures will impact on Uganda’s oil commercialization project which has been dragging on for over a decade.

Tullow which had a market cap of around US$ 2.6bn after the slump in it share on Dec. 09, expects its net debt to stand at around US$ 2.8bn at the end of 2019, and US$ 2.6bn at the end of 2020. The group also slashed its capital expenditure programme and cut costs at its operating fields. Tullow has US$ 300 million in debt due in 2021 and a further US$ 650 million in 2022.

Going forward, Tullow said in light of these new production forecasts, there will be a thorough re-assessment of the Group’s cost base and future investment plans in order to allocate appropriate capital to the Group’s core production assets, development projects and continued exploration.

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