London - Oil and gas producer Tullow Oil has cut its annual capital expenditure plans by $100 million to $1 billion and may reduce spending further as it adjusts its balance sheet to cope with weak oil prices.
The Africa-focused company also said its lenders had agreed to extend a revolving loan facility by a year and increase flexibility on another, showing banks were willing to support it during the oil market downturn.
Tullow said that as of the end of April, its net debt was about $4.5 billion and that it had unused debt facilities and free cash of roughly $1.3 billion.
Cutting costs has been the main defense of oil firms against a 60 percent drop in oil prices since mid-2014 with billions of dollars worth of projects being delayed or cancelled.
Tullow reported lower than expected output in the first quarter as a technical issue at its flagship Jubilee oil field in Ghana has interrupted production there.
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The company's West African production averaged 59 200 barrels per day (bpd) and, as previously stated, Tullow said it would have to reissue full-year production forecasts once the Jubilee issue had been resolved.
“I would like to think next week we can restart production,” Tullow COO Paul McDade told Reuters, adding that the resumption was subject to a new operating procedure running smoothly.
Tullow, which is venturing into oil and gas production in East Africa, said its appraisal programme in Kenya showed fields there could hold as much as 1 billion barrels, if more exploration is carried out.
“Today's announcement adds further value through the Kenya news and partially mitigates some of the risk associated with the balance sheet,” said analysts at Macquarie.
Shares in Tullow were trading up 4.8 percent at 0902 GMT.
REUTERS