Tullow writes off $2.3 billion

Africa-focused oil and gas explorer Tullow Oil has written off $2.3 billion in relation to exploration work and a number of its assets after the oil price rout.

Markets welcomed a cut to expenditure this year and details of hedged oil sales for 2015, with Tullow shares initially trading 3.3 percent higher before paring gains.

The London-listed company, under pressure to slash costs amid a collapse in oil prices, cut its losses on exploration work in French Guyana, Mauritania and Norway, and trimmed group investments for 2015 by around $200 million to $1.9 billion.

Oil companies across the globe have been hit by a 60 percent drop in crude prices in seven months, putting them under pressure to find new areas of their businesses where costs can be trimmed.

Tullow, which reports full-year 2014 results on February 11, said it expected to make a gross profit of $0.6 billion in 2014, with revenue of $2.2 billion, slightly below estimates.

However, analysts welcomed the firm’s cut in exploration costs and the fact that 60 percent of its 2015 oil sales had been pre-sold at a floor price of $86 per barrel. The company also has hedges in place for the following two years.

Tullow, Britain’s fourth largest oil and gas firm and a FTSE 100 company, is continuing to review how it can further reduce operational expenses, which will include a reduction of its 2,000-strong headcount. The oil company’s key new production asset, its TEN oil field in Ghana, is on track for a mid-2016 start-up.