REG - Tullow Oil PLC Tullow Oil PLC - FP Tullow Oil PLC - NP - Half Year Results <Origin Href="QuoteRef">TLW.L</Origin> - Part 3
26/07/2017 07:06
- Part 3: For the preceding part double click ID:nRSZ0804Mb
297.4 864.4 276.2
Unallocated - - - 79.1 90.4 80.3
Total 787.5 540.6 1,269.9 6,667.8 9,516.0 7,565.4
*Excludes derivative financial instruments and deferred tax assets.
7. Operating (loss)/profit
6 months ended 30.06.17Unaudited$m 6 monthsended 30.06.16 Unaudited$m Year ended 31.12.16Audited$m
Cost of sales
Operating costs* 166.3 189.8 377.2
Operating lease payments 53.4 - 21.0
Depletion and amortisation of oil and gas assets 263.4 182.1 448.5
Underlift, overlift and oil inventory movement 36.0 (29.5) (76.5)
Share-based payment charge included in cost of sales 1.3 0.4 2.7
Other cost of sales 18.2 16.1 40.2
Total cost of sales 538.6 358.9 813.1
Administrative expenses
Share-based payment charge included in administrative expenses 5.8 6.4 41.2
Depreciation of other fixed assets 8.7 11.7 18.4
Relocation costs associated with Major Simplification Project 0.2 - (0.5)
Cash administrative costs 36.7 50.3 57.3
Total administrative expenses 51.4 68.4 116.4
Restructuring costs
Total restructuring costs 1.4 7.4 12.3
*Operating costs for 1H 2017 are presented net of insurance proceeds of $18m.
8. Net financing costs
6 months ended 30.06.17Unaudited$m 6 monthsended 30.06.16 Unaudited$m Year ended 31.12.16Audited$m
Interest on bank overdrafts and borrowings 151.0 142.2 304.7
Interest on obligations under finances leases 0.8 0.9 1.8
Total borrowing costs 151.8 143.1 306.5
Less amounts included in the cost of qualifying assets (31.9) (89.0) (138.8)
119.9 54.1 167.7
Finance and arrangement fees 1.8 3.1 5.4
Foreign exchange losses* 47.2 - -
Unwinding of discount on decommissioning provisions 10.2 12.6 25.1
Total finance costs 179.1 69.6 198.2
Total finance revenue* (12.9) (36.9) (26.4)
Net financing costs 166.2 32.7 171.8
*A foreign exchange gain of $37.7 million was derived for 1H 2016, and is
included within finance revenue. Finance revenue for 1H 2017 includes interest
due from Joint Venture Partners.
9. Taxation on loss on ordinary activities
The overall net tax credit of $210 million (1H 2016: $6 million credit)
includes credits in respect of the Group's North Sea production activities,
Norwegian exploration and non-recurring deferred tax credits associated with
exploration write-offs and impairments offset by a tax charge on hedging
profits. After adjusting for the non-recurring amounts related to exploration
write-offs, impairments, disposals and onerous lease provisions and their
associated deferred tax benefit, the Group's underlying effective tax rate is
18% (1H 2016: 20%). The decrease in the underlying effective tax rate is
primarily a result of lower hedging profits taxed at the UK corporate tax rate
and the utilisation of tax losses not previously recognised.
10. Intangible exploration and evaluation assets
6 months ended 30.06.17Unaudited 6 months ended 30.06.16Unaudited Year ended 31.12.16Audited
$m $m $m
At 1 January 2,025.8 3,400.0 3,400.0
Additions 144.7 139.6 291.4
Disposals (0.4) - -
Amounts written-off (3.9) (59.0) (723.0)
Write-off associated with Norway contingent consideration provision - - (36.5)
Net transfer to assets held for sale (67.6) - (912.3)
Currency translation adjustments 2.0 9.0 6.2
At 30 June/31 December 2,100.6 3,489.6 2,025.8
Exploration costs written off/(reversed) CGU Rationale for write-off 6 months ended 30.06.17 Write off/(reversal)30.06.17Unaudited Remaining recoverable amount30.06.17Unaudited
$m $m
Netherlands a 4.4 -
Other b,c 5.2 -
New ventures d 7.3 -
Mauritania e (13.0) 13.0
Exploration costs written off 3.9
a. Disposal agreed at a value less than carrying value
b. Current year expenditure on assets previously written off
c. Licence relinquishments
d. New ventures expenditure is written off as incurred
e. Reversal due to extension of a licence, previously considered not likely to
be granted
11. Property, plant and equipment
Oil and gas assets 6 months ended 30.06.17Unaudited Other fixed Total6 months ended 30.06.17Unaudited Oil and gas assets 6 months ended 30.06.16Unaudited Other fixed Total6 months ended 30.06.16Unaudited Oil and gas assetsYear ended 31.12.16Audited Other fixed assetsYear ended 31.12.16Audited Total Year ended 31.12.16Audited
$m assets $m $m assets $m $m $m $m
6 months ended 30.06.17Unaudited 6 months ended 30.06.16Unaudited
$m $m
Cost
At 1 January 10,772.5 251.9 11,024.4 10,439.9 289.5 10,729.4 10,439.9 289.5 10,729.4
Additions* (27.6) 1.0 (26.6) 562.9 0.5 563.4 816.9 1.6 818.5
Disposals - (0.7) (0.7) (276.0) (0.1) (276.1) (276.1) (2.7) (278.8)
Transfer to assets held for sale (345.9) - (345.9) - - - - - -
Currency translation adjustments 61.1 12.8 73.9 (99.7) (19.7) (119.4) (208.2) (36.5) (244.7)
At 30 June/31 December 10,460.1 265.0 10,725.1 10,627.1 270.2 10,897.3 10,772.5 251.9 11,024.4
Depreciation, depletion and amortisation
At 1 January (5,500.8) (160.7) (5,661.5) (5,360.0) (165.0) (5,525.0) (5,360.0) (165.0) (5,525.0)
Charge for the year (263.4) (8.7) (272.1) (182.1) (11.7) (193.8) (448.5) (18.4) (466.9)
Impairment loss (643.8) - (643.8) - - - (184.3) (0.4) (184.7)
Transfer to assets held for sale 285.5 - 285.5 - - - - - -
Impairment reversal - - - - - - 10.9 - 10.9
Disposal - 0.8 0.8 276.0 0.1 276.1 276.1 2.6 278.7
Currency translation adjustments (59.3) (8.8) (68.1) 100.1 10.7 110.8 205.0 20.5 225.5
At 30 June/31 December (6,181.8) (177.4) (6,359.2) (5,166.0) (165.9) (5,331.9) (5,500.8) (160.7) (5,661.5)
Net book value at 30 June/31 December 4,278.3 87.6 4,365.9 5,461.1 104.3 5,565.4 5,271.7 91.2 5,362.9
*Additions to property, plant and equipment for 1H 2017 are presented net of
$13m of insurance proceeds and $69m of reversals of prior year accruals as a
result of changes to estimates.
Trigger for 2017 6 months ended 30.06.17 Pre-tax
impairment Impairment Unaudited discount rate assumption
$m
Limande CGU (Gabon) a,e 17.7 13%
Turnix CGU (Gabon) a,e 0.5 13%
Echira CGU (Gabon) a,e 6.8 15%
Igongo CGU (Gabon) a,e 5.8 15%
Oba CGU (Gabon) a,e 1.9 15%
Middle Oba (Gabon) a,e 1.9 15%
Ceiba and Okume (Equatorial Guinea) a 15.5 10%
Espoir (Côte d'Ivoire) a 16.1 10%
TEN (Ghana) a, b 572.0 10%
Jubilee (Ghana) c (2.1) n/a
Netherlands CGU (Netherlands) d 5.6 n/a
Impairment 641.7
a. Decrease to oil price assumptions (see discussion below)
b. Increase to cost estimates
c. The 2017 income statement charge is presented net of $2.1 million of
insurance proceeds related to Jubilee
d. Disposal agreed at a value less than carrying value
e. The Limande, Turnix, Echria, Igongo, Middle Oba, and Oba CGU comprise a
number of fields which share export infrastructure
During 2017 the Group revised its mid-term and long-term nominal oil price
assumptions in its impairment models. The oil price was revised to $60/bbl in
2019, gradually increasing to $80/bbl in 2023. The oil price is then assumed
to increase by an inflation rate of 2% per annum from 2024 onwards. The Group
continues to use the Dated Brent forward curve as its short-term price
assumption, which was also noted to decrease between 31 December 2016 and 30
June 2017.
Other assets
30.06.17Unaudited$m 30.06.16Unaudited$m 31.12.16Audited$m
Non-current
Amounts due from joint venture partners 147.4 164.8 127.3
Uganda VAT recoverable 35.9 50.3 35.9
Norwegian tax receivable 0.3 76.4 -
Other non-current assets 16.7 4.5 12.5
200.3 296.0 175.7
Current
Amounts due from joint venture partners 299.8 522.9 560.4
Underlifts 25.3 30.0 34.9
Prepayments 26.9 34.3 26.3
VAT & WHT recoverable 5.3 9.1 5.7
Other current assets 168.1 99.7 211.6
525.4 696.0 838.9
12. Assets and liabilities classified as held for sale
On 16 March 2017 CNOOC Uganda exercised its right of pre-emption in respect of
the Sale Assets and the Group is working with CNOOC Uganda and Total Uganda to
conclude definitive sale documentation in relation to the farm-down. The
Government's review of the deal is ongoing, as expected. The Government will
need to review a re-submitted SPA following CNOOC exercising its pre-emption
right. The assets held for sale increased by $20.6 million as a result of
additional capitalised interest.
In April 2017, Tullow signed a Sales and Purchase Agreement with Hague and
London Oil plc (HALO) for the entire Netherlands portfolio with an effective
date of 1 January 2017. The transaction had yet to complete at 30 June 2017,
and as such the assets and liabilities associated with the sale have been
classified as held for sale.
13. Trade and other payables
30.06.17Unaudited$m 30.06.16Unaudited$m 31.12.16Audited$m
Current
Trade payables 24.4 44.8 46.9
Other payables 126.4 71.4 124.6
Overlifts 25.4 13.4 6.9
Accruals 427.7 754.0 721.2
VAT and other similar taxes 18.0 26.7 14.6
Current portion of finance lease 2.1 1.7 1.9
624.0 912.0 916.1
Non-current
Other non-current liabilities 82.0 74.0 87.7
Non-current portion of finance lease 23.6 25.6 24.6
105.6 99.6 112.3
14. Provisions
30.06.17Unaudited$m 30.06.16Unaudited$m 31.12.16Audited$m
Current
Decommissioning 88.1 140.1 49.0
Other - 2.9 2.9
88.1 143.0 51.9
Non-current
Decommissioning 823.2 989.7 965.4
Other 139.5 52.6 141.3
962.7 1,042.3 1,106.7
15. Called up share capital and share premium
In the six months ended 30 June 2017, the Group issued 1.8 million (1H 2016:
0.7 million) new shares in respect of employee share options and 466.9 million
new shares in relation to the Rights Issue (1H 2016: nil), which completed on
25 April 2017. As a result of the Rights Issue share capital increased by
$60.0m and share premium increased by $692.5m (net of $25.9m of expenses).
As at 30 June 2017, the Group had in issue 1,383.2 million allotted and fully
paid ordinary shares of Stg 10 pence each (1H 2016: 912.3 million).
16. Contingencies
30.06.17Unaudited$m 30.06.16Unaudited$m 31.12.16Audited$m
Contingent liabilities
Performance guarantees 89.6 93.4 85.1
Other contingent liabilities 185.3 23.2 156.6
274.9 116.6 241.7
Performance guarantees are in respect of abandonment obligations, committed
work programmes and certain
financial obligations.
Other contingent liabilities include amounts for ongoing legal disputes with
third parties where we consider the likelihood of a cash outflow to be higher
than remote but not probable.
The Group has a contract with a supplier for the lease of an FPSO in relation
to the TEN field in Ghana. Judgement is required in the determination of
whether the contract should be recognised as a finance lease at the balance
sheet date in accordance with IAS 17. The key factors considered included an
assessment of key contractual clauses associated with the ongoing delays in
commissioning the vessel, and consideration of whether the criteria for the
issuance of the Certificate of Offshore Completion had not been met at 30 June
2017, which meant that the non-cancellable lease period had not commenced and
the Group had not obtained the right of use of the vessel in its intended
form. Therefore, the finance lease asset and liability have not been
recognised at the balance sheet date. If management had concluded the
recognition criteria had been met then a $1.6 billion, gross, finance lease
would have been recognised on the balance sheet.
17. Events since 30 June 2017
There has not been any event since 30 June 2017 that has resulted in a
material impact on the half year results.
18. Commercial Reserves and Contingent Resources summary (unaudited) working
interest basis
West Africa East Africa New Ventures TOTAL
Oilmmbbl Gasbcf Oilmmbbl Gasbcf Oilmmbbl Gasbcf Oilmmbbl Gasbcf Petroleummmboe
COMMERCIAL RESERVES
1 January 2017 272.0 190.0 - - - - 272.0 190.0 303.7
Revisions 2.3 13.8 - - - - 2.3 13.8 4.6
Production (13.7) (7.3) - - - - (13.7) (7.3) (14.9)
30 June 2017 260.6 196.5 - - - - 260.6 196.5 293.4
CONTINGENT RESOURCES
1 January 2017 128.4 729.7 632.4 42.7 - 4.2 760.8 776.6 890.2
Revisions (3.0) (42.9) - - - - (3.0) (42.9) (10.1)
Additions - - 5.4 - - - 5.4 - 5.4
30 June 2017 125.4 686.8 637.8 42.7 - 4.2 763.2 733.7 885.5
TOTAL
30 June 2017 386.0 883.3 637.8 42.7 - 4.2 1,023.8 930.2 1,178.9
1. Proven and Probable Commercial Reserves are based on a Group reserves
report produced by an independent engineer. Reserves estimates for each field
are reviewed by the independent engineer based on significant new data or a
material change with a review of each field undertaken at least every two
years.
2. Proven and Probable Contingent Resources are based on both Tullow's
estimates and the Group reserves report produced by an independent engineer.
The Group provides for depletion and amortisation of tangible fixed assets on
a net entitlements basis, which reflects the terms of the Production Sharing
Contracts related to each field. Total net entitlement reserves were 280.4
mmboe at 30 June 2017 (31 December 2016: 283.2 mmboe).
Contingent Resources relate to resources in respect of which development plans
are in the course of preparation or further
evaluation is under way with a view to development within the foreseeable
future.
Notes to Editors
Tullow is a leading independent oil & gas, exploration and production group,
quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW). The
Group has interests in over 85 exploration and production licences across 17
countries which are managed as three Business Delivery Teams: West Africa,
East Africa and New Ventures.
EVENTS ON THE DAY
In conjunction with these results, Tullow is conducting a London Presentation
and a number of events for the financial community.
09.00 GMT - UK/European conference call
To access the call please dial the appropriate number below shortly before the
call and ask for the Tullow Oil plc conference call. The telephone numbers and
access codes are:
Live event
All participants +44 (0)330 336 9412
UK freephone 0800 279 7204
Access Code 9821298
Webcast
To join the live video webcast or play the on-demand version, please use this
link:https://edge.media-server.com/m6/p/bu3gf8yc. You will need to have either
Real Player or Windows Media Player installed on your computer.
The replay will be available from around noon on 26 July 2017.
FOR FURTHER INFORMATION CONTACT:
Tullow Oil plc (London) (+44 20 3249 9000)Chris PerryGeorge CazenoveNicola Rogers Murray Consultants (Dublin) (+353 1 498 0300) Pat WalshJoe Heron
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This information is provided by RNS
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