Tullow Oil will axe a third of its staff after plunging to a $1.7bn (£1.3bn) pre-tax loss amid a “perfect storm” of oil market woes, which have fuelled doubts over the company’s future.
The Africa-focused oil exploration company lost almost a third of its market value on Thursday after issuing a grim warning that material uncertainties in the market may cast significant doubt over its ability to keep operating.
The warning comes months after Tullow surprised investors by slashing its production forecast, scrapping its dividend and announcing that its chief executive and exploration director had left.
The embattled oil explorer, worth £15bn in 2012, is expected to crash out of the FTSE 250 next week after the value of the company plunged to 16-year lows in 2019 and has tumbled another 80% already this year.
Shares in Tullow closed down 31% on Thursday to trade just below 12.5p a share, valuing the company at about £175m, down from 200p a share last November.
“Fate seems to have it in for Tullow,” said Nicholas Hyett, an analyst at Hargreaves Lansdown. “If oil prices remain at this level for a sustained period Tullow could end up reliant on asset sales for its survival but the current environment is hardly ideal for securing the best price.”
The company emerged from the oil price crash of 2016 with plans to explore for oil off the coast of Africa and Guyana. It restarted investor payouts late last year despite disappointing results and the collapse of a deal to sell a stake in a major project in Uganda.
Hyett said: “There’s no getting away from the fact that the next few months will be tough for Tullow. In the current conditions we don’t think there’s much the company can do but batten down the hatches and try to weather the storm.”
If Tullow is successful its share price could recover but with its market value trading only slightly higher than the value of its assets the market is clearly pessimistic, he added.
Dorothy Thompson, Tullow’s executive chair, said after an intense period”for Tullow the company’s oil assets remain robust due to the company’s low costs, a strong hedging position and substantial oil reserves.