Africa-focused oil and gas explorer Tullow Oil has reported a $2 billion pretax loss, its first in 15 years, and became one of the only companies in the sector to sacrifice its dividend to deal with a sharp decline in oil prices.
The London-listed FTSE 100 company will also cut costs by $500 million over the coming three years, half of which is expected to come from capital expenditure (capex), while the remainder will include job cuts, Tullow said.
Oil companies across the globe have been hit by a 50 percent drop in crude prices in eight months, putting them under pressure to slim down their businesses.
Yet major oil producers including Statoil STL.OL, BP , Chevron and ExxonMobil have made a point of continuing to reward shareholders, making Tullow an exception in the industry by scrapping its final 2014 payout.
“We think that is the sensible thing to do to create financial flexibility. We will look at the dividend again as market conditions allow,” Tullow Chief Financial Officer Ian Springett told Reuters.
He added the company will save around $180 million a year by not paying the final dividend.
Tullow had already announced a $200 million reduction in 2015 capex last month. Analysts at Morgan Stanley said they expected Tullow to cut capex by another $200 million by the end of the year.
The oil producer’s full-year sales revenue fell 16 percent to $2.2 billion, while writeoffs of $2.3 billion, announced last month, resulted in a full-year pretax loss of $2.05 billion.
“We see the results on the positive side … Tullow has options and it is already using some of them to protect its balance sheet,” said analysts at Oriel Securities who recommend buying Tullow’s stock.
Shares in Tullow were trading 2 percent lower at 0809 GMT.