UK-based Tullow Oil warned Wednesday that it may be forced to take “substantial” writedowns on exploration activities for some of its West African campaigns as falling oil prices force the company to trim expenditures.
Tullow’s exploration programs in offshore French Guinea and Mauritania are the main focuses of the review as the company looks to refocus its efforts on East Africa.
The board is currently reviewing Tullow’s three year investment plan and past capitalized costs for its programs in both west African countries.
The company said it has booked “significant costs” for the Zaedyus discovery and subsequent appraisal wells in French Guinea.
Tullow is also reviewing its offshore holdings in Maurtiania and signaled that it may drop an undisclosed number of licenses in the area.
“While significant upside potential exists, if the board decides not to allocate near-term capital to these areas, substantial non-cash exploration write downs will be required for the full year,” Tullow said.
The majority of Tullow’s future exploration dollars will go towards its operated onshore East Africa portfolio including bringing projects in Uganda and Kenya into development.
“Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin-opening potential,” CEO Aidan Heavey said.
The company expects to reduce net exploration and appraisal capital expenditure to around $300 million after it receives its Norway tax rebate in 2015.
While the board has yet to approve a 2015 capital expenditure budget Tullow said it is looking to spend about $2 billion next year including a $900 million exploration expenditure for the Tweneboa-Enyenra-Ntomme (TEN) project in offshore West Africa.
