Tullow Oil said its exploration spend will be “significantly reduced” from $1billion to $300million.
Both the dip in oil prices and reduced commercial success in areas such as offshore drilling mean the company is now looking to re-allocate capital, its chief executive confirmed.
It will now focus the majority of its exploration and appraisal expenditure in its East and West African assets.
The TEN development project, Jubilee production and the non-operated West Africa portfolio are expected to generate “significant value”, attracting the greatest share capital in 2015.
Aidan Heavey, chief executive officer, said: “In light of current oil and gas sector challenges including the commodity price environment, we are reviewing our capital expenditure and our cost base to ensure that Tullow is well-positioned for future success.
“In 2015, we will be focusing our capital spend on producing and development assets, particularly in West Africa where, by 2017, the Group expects to be producing, net to Tullow, over 100,000 bpd of high quality, high margin oil.
“Our overall exploration spend will be significantly reduced and will focus primarily on East Africa where we have major basin-opening potential.
“Tullow remains exploration-led and will continue to add further high quality frontier acreage so that, as conditions allow, we can return to drilling the types of prospects that have given us the development portfolio we have today.”
The company expects to reduce net exploration and appraisal capital expenditure to around $300million.
Tullow said its financial performance was expected to be in line with expectation with production on track in West Africa.
However, it said its European production would be hit by under performance from the Schooner, Ketch and Katy fields.
A review is also taking place of its work in French Guiana, with the company assessing which licences to retain.
A company spokesperson said: “In light of the re-allocation of capital investment towards core producing and development assets, and away from exploration, the Board is in the process of reviewing the Group’s three year investment plan and past capitalised costs.
“The main focus of the review is on French Guiana, where we have significant costs booked for the Zaedyus discovery and subsequent appraisal wells; and on Mauritania where a decision will be made on which licences to retain and the future plans for the Fregate discovery.
“While significant upside potential exists, if the Board decides not to allocate near-term capital to these areas, substantial non-cash exploration write downs will be required for the Full Year.”
Earlier this year Tullow Oil sold off interests in two of its North Sea assets.