European Energy Firms Post Billion Dollar Losses in 2015
Tullow Oil plc and Maersk Oil both registered billion dollar losses in 2015, amid an ever-declining low oil price.
London-headquartered Tullow, which was founded in Ireland, revealed an operating loss of $1.09 billion in 2015 (2014 operating loss: $1.96 billion). Gross profit was 46 percent lower than last year, coming in at $591 million (2014 gross profit: $1.09 billion), and the company’s revenue was $1.60 billion, which was 27 percent lower than 2014’s figure of $2.21 billion. During the year, Tullow wrote off $749 million in exploration costs and incurred impairment charges in excess of $400 million.
Following its 2015 capital expenditure of $1.7 billion, Tullow has reduced its CAPEX in 2016 to $1.1 billion and is currently working to decrease this figure even further to $900 million. The energy firm warned that it could cut its annual CAPEX to as low as $300 million from 2017 onwards if the low oil price persists. In addition to its planned cost-cuts, Tullow also revealed that the TEN Project in Ghana is now over 85 percent complete and on-track and on-budget for first oil between July and August 2016.
Commenting on the company’s results, Tullow’s Chief Executive Aidan Heavey said in a company statement:
“Today’s results demonstrate that Tullow adjusted well to low oil prices in 2015. We secured current and future cash flow through good operational delivery in West Africa, continued to build our resource base in East Africa, significantly cut costs across the group and benefitted from our strong hedging position. Our challenge in 2016 is to be equally robust in responding to the uncertainties that remain in the sector.
“In the year ahead, we have three key priorities: ensuring continued low cost production from West Africa - including the start-up of production from TEN between July and August 2016; driving further reductions in operating costs and capital expenditure; and focusing on deleveraging the balance sheet through free cash flow generation and strategic portfolio management. As we look ahead, we have a portfolio of world class, low cost oil assets which will produce around 100,000 bopd in 2017 and a major position in one of the world’s newest, low cost, oil provinces in East Africa, both enabling us to create substantial value.”
Maersk Oil slumped to an operating loss of $2.14 billion in 2015 (2014 loss: $861 million), incurring impairment losses of $3.13 billion during the year. The Danish company’s capital expenditure in 2015 was $2 billion, which was 8.2 percent lower than its $2.2 billion CAPEX spend in 2014, and its operating expenses, excluding exploration costs, reduced by 12 percent to $2.5 billion in the year. This reduction is in line with the firm’s targeted 20 percent reduction by the end of 2016, compared to the 2014 baseline. As a consequence, the total number of positions in the company was reduced by approximately 1,250 during 2015.
Maersk Group’s CEO Nils Smedegaard Andersen commented in a company statement:
"Despite the very challenging market conditions in our industries, all business units delivered positive underlying profits and the Maersk Group achieved an underlying result of $3.1 billion. Given our expectation that the oil price will remain at a low level for a longer period, we have impaired the value of a number of Maersk Oil's assets by $2.6 billion. We will continue to strengthen the group's position through strong operational performance and growth investments."
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