Tullow Oil (TLW) has scrapped its dividend after reporting its first loss in 15 years as the tumbling oil price took its toll.
Tullow reported a $2 billion (£1.3 billion) pre-tax loss for 2014, and said it would cut costs by $500 million over the next three years, half from capital expenditure costs with the rest from job losses.
‘We have increased and diversified our sources of debt capital, reduced our exploration expenditure, implemented significant cost saving initiatives and we are suspending the dividend,’ said Tullow Oil chief executive Aidan Heavey.
‘These measures will provide us with substantial headroom and liquidity to deliver on our strategy.’
The lack of a final dividend means investors have been left with dividend payments of just 4p per share in 2014, compared to a 2013 payout of 12p. The shares fell 2.1% to 405.6p in the morning’s trading.
Tullow Oil is the first FTSE 100-listed oil company to react to the plunging oil price, which has halved in eight months, by cutting its dividend. The cut marks the first time in 12 years the company has not made a payout.
Shell last month announced a $15 billion cut in spending but maintained its dividend unchanged at $0.47 per share and pledged to pay the same amount in the first quarter of 2015. BP last week announced it would cut expenditure by 20% this year but maintained the dividend it reintroduced last year.
To find out more about the outlook for dividends from the oil majors, read the latest issue of Income Investor.
Markets dip ahead of crunch eurozone meeting
Markets have edged lower ahead of a crunch meeting of eurozone finance ministers to discuss a Greek debt deal.
Investors were wary ahead of the Brussels meeting at 4:30pm today, where Greek finance minister Yanis Varoufakis is expected to push for a six-month bridging loan to give the country more time to renegotiate its debt.
The FTSE fell 29 points, or 0.4% to 6,801 while European markets were down. Greece’s stock market fell 3.5%, while yields on 10-year Greek government bonds rose from 10.45% to 10.88%.
Spain’s Ibex fell 0.9%, France’s CAC 40 was down 0.7% and the German DAX 30 edged 0.4% lower.
‘Another muted open comes from persistent uncertainty about Greek debt negotiations with the new government rejecting any increase in debt load and new prime minister [Alexis] Tsipras easily surviving a parliamentary confidence vote after pledging to never allow Greece to return to the era of austerity and bailouts,’ said Michael van Dulken, head of research at Accendo Markets.
Michael Hewson, chief market analyst at CMC Markets UK, said it was ‘hard to be anything other than pessimistic’ about the outcome of negotiations.
‘The hope is that we may get some form of deal by next week, and hopefully before the end of the month, but after the events of the last few days it is hard to see any hope of a lasting solution given all the threats and the name calling, which suggests that any solution over the coming days could well be just a sticking plaster, or a case of Grexit deferred, and then markets will have to go through the whole tedious process of name calling again.’
Sky (SKYB) was the biggest FTSE 100 faller, down 4% at 915.5p, after agreeing to pay £4.2 billion for the rights to show Premier League football matches, a far higher fee than had been expected. BT (BT) shouldered a much more modest rise in the price for its roster of games, sending the shares 2.6% higher to 455.5p.
GKN (GKN) fell 2.5% to 367.1p after analysts at RBC downgraded the engineering group to ‘underperform’ from ‘sector perform’ and cut their target price to 340p from 390p after a strong run for the shares, which are up 27% in three months.
Royal Mail (RMG) continued to fall, down 2.5% at 421.4p, following its downgrade by analysts at JPMorgan yesterday.
Energy stocks were also down as the oil price edged lower to $55.76, down 1.2% on the day. BG (BG) fell 1.6% to 919p, Shell (RDSb) was 1% down at £22.24 and BP (BP) edged 0.2% lower to 445.4p.
The falling oil price supported airline stocks. British Airways owner International Consolidated Airlines Group (IAG) rose 2.2% to 550.7p while Easyjet (EZJ) was trading 1.1% higher at £17.56.