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Tullow Oil to cut a third of staff after shares pummelled

By Shadia Nasralla
FILE PHOTO: A Tullow Oil exploration drilling site in Lokichar

By Shadia Nasralla

FLORENCE, Italy (Reuters) - Tullow Oil <TLW.L> plans to cut a third of its staff to save about $20 million (15.33 million pounds), a source with direct knowledge of the matter said, after the firm was hit by weak output in Ghana, delays in East Africa and lower-than-hoped-for oil quality in Guyana.

The British energy firm's shares rose by as much as 2.5% following the news, after losing 75% of their value since November. By 1142 GMT, the stock was up 2.1%, compared with a 1.9% gain for the broader energy index <.SXEP>.

Industry sources have also said the Africa-focused firm aimed to sell its Kenya projects, once vaunted as an engine for growth.

The latest savings initiative would reduce administration costs by about a fifth to $80 million, shrinking Tullow's workforce to about 650 people, and would be accompanied by hiring freezes, the source said.

Tullow's annual net administration costs including costs to its partners equate to $100 million, less administration spending, the source said.

A spokesman for Tullow confirmed that the company had started a consultation process, which precedes any job cuts.

"Tullow estimates that the measures will deliver considerable savings and the group's workforce may reduce by approximately a third globally with potential office closures in Dublin and Cape Town among a number of measures to reduce costs and overheads," the spokesman said.

Its Cape Town and Dublin offices are focused on exploration, an area where Tullow is halving spending to around $75 million. It is also cancelling its $100 million dividend plans.

Across the group, about a third of senior management jobs would be cut, the source added.

After a string of production downgrades, Tullow expects its production to shrink to 75,000 barrels per day (bpd) this year and to 70,000 bpd from 2021.

Tullow has yet to announce a new chief executive after CEO Paul McDade resigned in December.

The company's market capitalisation stood at around $900 million as of Tuesday while its debt pile was around $2.8 billion at the end of 2019. It targets free cash flow of $150 million this year at an oil price of $60 a barrel <LCoc1>.

Benchmark Brent crude was trading around $55 on Wednesday.

Tullow has pushed back its full-year results to March 12, when further details of its restructuring are expected.

Executive Chair Dorothy Thompson has said the announcement of a new CEO might come after that date.

(Reporting by Shadia Nasralla; Editing by Jason Neely and Edmund Blair)