Tullow cans final dividend

The market had to some extent priced in the bad news, as the charges were heavily foreshadowed in a January trading update. But they still underline the company's exposure to falling crude prices. Tullow is an exploration and production pure-play, without mid- and downstream operations such as marketing and refining that can partially offset the effects of a deteriorating market. Even if you disregard the write-downs (together with a $482m loss on disposal), Tullow's gross profits were still down 27 per cent.

In common with industry peers, Tullow is now focused on reducing its capital commitments and exploiting its higher-margin assets. The company revealed that it is moving ahead with a major internal review designed to identify substantial long-term cost savings. Tullow's management are confident of implementing savings of $500m over the next three years, including a reduction in headcount across the group. Capital expenditure in 2015 will be reduced by around $100m from last year's outlay of $2bn.

Exploration and appraisal budgets have also been pared back for basin-opening wells in Kenya, Norway and Suriname. But Tullow certainly isn't pulling back the reins on its Ten project in Ghana, which is on track to increase the group's net West African oil production to over 100,000 barrels of oil per day (bopd) by the end of 2016. To put that in context, Tullow’s total net production for last year was 75,200 bopd.

Tullow's realised oil price (post hedging) came in at $97.50 a barrel, down from $105.70 in 2013. We expect further contraction in the first half of this year, although around 60 per cent of Tullow's 2015 oil sales are currently hedged, with an average floor price of around $86 per barrel. Arrangements are also in place for 2016, 2017 and 2018.

Goodbody anticipates adjusted EPS for 2015 of 11.2 cents.