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* Impairment also due to reduced Ghana reserves
* Kenya early production scheme suspended due to bad roads
* Business review update due with FY results on March 12
(Adds exec chair and analyst comments, share price)
By Shadia Nasralla
LONDON, Jan 15 (Reuters) - Tullow Oil is to take a
$1.5 billion writedown after cutting its long-term oil price
assumptions by $10 to $65 a barrel, a downgrade to reserves in
Ghana and disappointing exploration wells, the company said on
Wednesday.
The writedown at Africa-focused Tullow comes after the exit
of CEO Paul McDade in December and the scrapping of the group's
dividend after the group failed to meet production targets due
to a weak performance at its assets in Ghana.
Tullow's shares fell 70% in the fourth quarter of 2019.
After an initial slump on Wednesday, the shares were up around
4% at 61.60 pence by 0900 GMT.
The reduction in oil price assumptions brings Tullow
more in line with peers' expectations, Chief Financial Officer
Les Wood told a conference call.
Tullow said the write-offs included 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.
"Tullow expects to report pretax impairments and exploration
writeoffs of (around) $1.5 billion (c. $1.3 billion post tax),"
the company said.
Tullow, a partner of French oil group Total in
several projects, has forecast that its 2020 output will shrink
to a maximum of 80,000 bpd and fall again to around 70,000 bpd
in 2021-2023.
Full-year results have been pushed back to March 12 and will
include updates on the review of its assets and management
structure. Executive Chair Dorothy Thompson told Reuters the
announcement of a new CEO might come after that date.
Tullow said after repeated delays to its East African
projects, its scheme to truck oil from its Kenyan inland fields
to the coast had been suspended due to damaged roads and that
there was no breakthrough in Uganda, where it is looking to
reduce its stake in its oilfields.
A final investment decision for Kenya is still pencilled in
for the end of this year, but that target is "challenging",
Chief Operating Officer Mark MacFarlane said.
JPMorgan analysts said in a note: "Looking forward,
alongside the CEO and other organisational changes we anticipate
through 2020, we look for greater clarity on realistic
timeframes to progress in both Uganda and Kenya, which hold the
key to medium term growth potential."
To shield against oil price fluctuations, Tullow has hedged
45,000 barrels per day (bpd) of its 2020 output with an average
floor price of $57.28 a barrel. For next year, it hedged 22,000
bpd at an average floor price of $52.80 a barrel.
In the fourth quarter Tullow's shares were hit by production
downgrades in Ghana, the oil quality found in a well in the
Orinduik block offshore Guyana and the disappointing size of a
well in its Guyanese Kanuku block.
(Reporting by Shadia Nasralla, editing by Louise Heavens and
Jane Merriman)
