Embattled Tullow Oil has slashed next year’s expenditure by a third to tackle plunging oil prices that continue to eat away its profits.
The oil and gas producer said it expected full-year pre-tax operating cash flow to land at $1bn, while net debt will hit $4.2bn.
Its capex forecast for 2015 remains unchanged at £1.9bn but for 2016 the company has lowered its outlook by a third to £1.2bn.
Tullow Oil's shares have fallen 46 per cent since the start of the year.
Why it’s interesting
Oil prices have plunged by half over the past year, with international benchmark Brent crude plummeting from over $100 in June last year to trade around $47 yesterday.
And it could be decades before anything changes, as the International Energy Agency predicted yesterday that oil prices would remain below $100 until 2040.
As the oil glut continues to weigh on prices, Tullow slashing its costs is another sign of the industry tightening its belt in preparation for a long, lean winter.
Tullow’s shares have been sliding over the year, but rallied on Monday on the news that Africa Oil will be selling assets Tullow also owns a significant stake in to Moeller-Maersk, providing a much-needed cash injection of $845m.
What they said
Tullow’s chief executive Aidan Heavey said:
While 2015 has been a difficult year across the industry, we have taken appropriate steps within our business to meet the challenges presented by lower oil prices.
We are also focused on managing our costs and ensuring that we have sufficient funding to meet all our commitments.