On Friday 19 March, Tullow Oil issued 466.9mn shares at GDP£1.30 (US$1.61), 45.2 per cent lower than the previous day's closing share price, causing share prices to fall by 15 per cent
Tullow Oil, the London-based oil company, has issued millions of shares in an attempt to raise GDP£607mn (US$7.5mn) to contribute towards its US$4.8bn debts.
The debt accumulated after the 2014 oil price crash while Tullow was investing heavily in a project in offshore Ghana. According to The Telegraph, "The strain has propelled the company’s ratio of debt to more than five times its annual earnings before interest tax, depreciation, and amortisation. Tullow hopes to drive down debt to two and a half times its annual earnings."
"Tullow has taken a number of significant steps since 2014 to reset and restructure the business to ensure the group is well positioned to meet the challenge of lower oil prices," said Paul McDade, chief operating officer.
"As a result, we are now producing positive free cash flow and have begun the process of reducing our debt. Tullow has a strong set of low cost production, development and exploration assets in Africa and South America and, by accelerating the reduction of our gearing through this Rights Issue, we will be able to focus on growing our business by investing more across our portfolio and taking advantage of opportunities that industry conditions present."