Tullow too complicated to be takeover target - CEO

Corporate News

Tullow CEO says the involvement of several African governments in its projects would make it too complicated to buy. PHOTO | FILE 

By REUTERS

In Summary

• London-listed Tullow has oil assets spread across the African continent, including Ghana, Kenya and Uganda, where state oil companies require an involvement in energy projects.

The chief executive of Africa-focused Tullow Oil has ruled out a takeover of the company, saying the involvement of several African governments in its projects would make it too complicated to buy.

The oil industry, hit by a collapse in crude prices on the back of a global supply glut, is ripe for takeover deals as cash-rich players can target smaller firms, a reality highlighted by Shell's $70 billion move for BG.

But Tullow CEO Aidan Heavey said he had not received any offers for his company, which reported first-quarter trading in line with expectations on Thursday after making its first loss in 15 years in 2014.

"You will be negotiating with every country in Africa. It's a monumental task, it's a distraction, we don't even think about it," he said.

London-listed Tullow has oil assets spread across the African continent, including Ghana, Kenya and Uganda, where state oil companies require an involvement in energy projects.

READ: Oil explorers retain bet on Kenya despite falling global prices

The company is in the process of making cost cuts of around $500 million over the coming three years, a process which is expected to come at a one-off $45 million cost in the first half of 2015 to cover redundancies and closures.

ALSO READ: Tullow stock drops further on job fears

Oil production from Tullow's fields was in line with expectations in the first quarter, as were revenue and cost of sales.

"Incremental positives within the release are a strong Q1 production performance and encouraging appraisal results from Kenya's South Lokichar basin," said analysts at Barclays, who rate Tullow's stock as overweight.

Shares in Tullow were up 0.1 per cent at 0844 GMT.

Tullow shares reached a five-month high earlier this week following a favourable ruling by an international maritime tribunal that allowed it to continue development of its TEN oil field off the coast of Ghana, removing a major uncertainty obstacle.

Heavey, an oil industry veteran with over 30 years experience, said he expected oil prices to recover to around $90 per barrel within the next couple of years.

"Supply won't meet demand in a couple of years," he said, referring to growing demand and an emerging supply gap due to the lack of major exploration over the past years.