Analysts predict that without action oil could fall to $10 per barrel
With oil prices hitting new twelve-year lows of close to $30 per barrel yesterday, Tullow Oil has issued a scheduled trading statement, the day after its share price hit a new low of 123p – a fall of about 50% over the past three months alone.
There have been suggestions that Tullow may have to start selling assets or to look for an overall buyer soon as plummeting oil prices put pressure on its indebted balance sheet – the company has net debts of close to $4bn.
In as bullish a statement as it probably could muster, Tullow says it has financial headroom of $1.9bn and expects to maintain sufficient financial liquidity during 2016.
It also points out that more than half of its current daily production is hedged at around $75 per barrel and confirms that the TEN project in Ghana is more than 80% complete and remains on track for first oil in July or August this year.
Investors will also take some comfort from its continued reduction in capital expenditure and exploration costs, but with some commentators predicting oil as low as $10 a barrel, 2016 could be a rocky year for the Irish firm.
Standard Chartered has warned that oil could fall as low as $10 per barrel - yesterday Brent crude fell by 1.4% to $31.12.
"We think prices could fall as low as $10 before most money managers concede that matters had gone too far," the bank stated.
This is the lowest price since 2004 - Nigeria's oil minister Emmanuel Ibe Kachikwu indicated yesterday that some members of OPEC are calling for an emergency meeting in March.