Aidan Heavey is the longest-serving chief executive on the FTSE 100 index, having been at the helm of Tullow Oil since 1985. It would be a touch ironic if he were to lose that mantle if Tullow were catapulted out of the FTSE 100 due to the fall in oil prices.
Heavey, one of the most capable and genial executives in the global oil business, was phlegmatic yesterday about posting its first loss, $2 billion.
The truth, however, is that Tullow’s share price went over a cliff long before oil started to fall last summer. Over the two previous years, Tullow’s share price fell by 50 per cent after the wildcatter hit a series of dry wells, the worst run in its history. It has halved once more since the summer.
Last May, on the fringes of a meeting of shareholders in Dublin, Heavey brushed off its share price woes and said he believed the sector was about to “enter a new, upwards cycle”. It did not, and just weeks later, the price of oil began to sink.
These days, Tullow’s main nerve centre is in London and it retains about 140 staff in Dublin. As part of a resizing of its cost base due to cope with a long-term oil price of $50 per barrel, Tullow plans to shave $500 million of its expenses over the next three years. Heavey would not be drawn on Wednesday on the potential ramifications for this of its Irish operations, but the mood music sounds pretty depressing.
Many of its Irish-based staff are geologists, the type of rock-studying scientists that exploration companies love to have on the payroll.
The company, however, is scaling back its exploration activities to save cash, and will focus on developing what it has already discovered, particularly in west Africa where Heavey says it can extract the black stuff for less than $12 a barrel.
That means Tullow will need fewer geologists. The Dublin office will not close – Heavey volunteered this, unprompted, which says something in itself – but it is clearly going to be hit hard.
One wonders whether Heavey regrets not selling Tullow a few years ago when it was reputedly coveted by Chinese rivals. Back then, it might have fetched more than four times its now sub-£4 share price. It is still sitting on huge reserves of oil. Might it now be more vulnerable than ever to an opportunistic takeover approach?
