REG - Tullow Oil PLC Tullow Oil PLC - FP Tullow Oil PLC - NP - Trading Statement & Operational Update

Tullow OilAnnouncement

13/07/2022 07:00

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RNS Number : 2431S  Tullow Oil PLC  13 July 2022

TULLOW OIL PLC
July Trading Statement & Operational Update

13 JULY 2022 - Tullow Oil plc (Tullow) issues this update and guidance in
advance of the Group's 2022 Half Year Results scheduled for 14 September 2022.
The information contained herein has not been audited and may be subject to
further review and amendment. Tullow will host a call at 9am this morning,
details of which can be found at the end of this statement.

Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented today:

"It is two years since I joined Tullow and today, we are in a very different
place. A relentless focus on costs, capital discipline and operating
performance is ensuring delivery of our business plan. We have also added
unhedged production through the pre-emption in Ghana.

Our current business plan is underpinned by assets that yield a deep portfolio
of compelling investment opportunities. A continuing and comprehensive review
of our resource base has identified additional opportunities to unlock
material value, these include:

·      Work on the TEN Enhancement Plan, which has identified
significant upside to the current 2025 production target of c.50 kbopd
(gross). A development concept is currently being finalised for the project,
with detailed engineering expected to start later this year.

·      Ghana's gas demand is expected to continue growing strongly,
supporting economic development and growth of industry. We have identified
approximately 2 TCF of gas resources in Jubilee and TEN. This indigenous
resource has the potential to provide energy security for Ghana, while
reducing dependence on the highly competitive global LNG market. We are
preparing an integrated plan for the rapid development of this material
resource.

We also continue to make progress on securing a strategic partner for Project
Oil Kenya, which has the potential to be a key driver of growth, value and
diversification for Tullow.

Each of these projects has the potential to deliver material returns on
capital and further enhance our production and cashflow generation. The
proposed merger with Capricorn is an important enabler for a new business plan
of the combined group, leveraging the combined resources of both companies and
underpinned in part by the accelerated implementation of these projects. With
a new business plan, pre-tax cost synergies of $50 million per year, the
opportunity to drive down cost of capital and further optimise capital
allocation, the combined group will be well positioned to play a leading role
in the African energy sector, delivering material value for all shareholders
and our host nations. We are preparing a circular and prospectus for
shareholders in connection with the proposed merger with Capricorn which we
expect will be available in the fourth quarter ahead of a shareholder vote on
this proposed merger expected towards the end of the year."

MERGER WITH CAPRICORN ENERGY

On 1 June 2022 Tullow announced that it had reached agreement with Capricorn
Energy on the terms of an all-share merger to create a leading African energy
company with a material and diversified asset base and a portfolio of
investment opportunities delivering visible production growth. This proposed
merger will realise meaningful cost synergies and deliver a combined group
with robust cash generation and a resilient balance sheet. It will also have a
sustainable capital returns programme and a deep commitment to environmental
stewardship, social investment, development of local content and its national
workforces.

STRATEGIC UPDATE

Tullow has performed well in the first half of the year and has built on the
progress that the Group made in 2021. Production in the first half of the year
was in line with expectations and drilling performance across the portfolio
was strong.

Tullow outlined a number of critical actions for 2022 in its recent Annual
Report, and is pleased to report that it has made significant progress on
these:

·      The pre-emption of the sale by Occidental Petroleum to Kosmos
Energy of its interests in the Jubilee and TEN fields in Ghana was completed
successfully in March, adding c.4 kbopd of unhedged production.

·      On 1 July 2022 Tullow took over the Operation & Maintenance
(O&M) of the Jubilee FPSO from MODEC. This is part of a major
transformation plan to make the assets in Ghana more efficient and
cost-effective, notably sustaining strong FPSO uptimes and targeting further
operating cost reductions.

·      Tullow and its Partners are in discussions with the Government of
Ghana regarding the development of the material resources of c.2 TCF of
associated and non-associated gas located in Jubilee and TEN. This will be an
important contributor to the long-term energy security of the country.

·      A confidential process to secure a strategic partner for the
material development project in Kenya continues and Tullow is confident that
it will make substantial progress in the second half of the year.

OPERATIONAL UPDATE

Full year Group production guidance has been maintained at 59-65 kboepd,
inclusive of incremental production from the successful pre-emption in Ghana.

In Ghana, the ongoing drilling programme, that started in April 2021 has
delivered seven new wells, six at Jubilee and one at TEN, at an average cost
of less than $50 million per well, more than 10% below the average expected
cost for these wells. In addition, two existing wells have been completed, one
at Jubilee (J12-WI) and one at TEN (En16-WI).

The Jubilee field has performed well with production of c.82.4 kbopd gross
(c.30.8 kbopd net) in the first half of the year, in line with expectations.
This year two new water injection wells and one new producer well have been
drilled and brought onstream in the Jubilee field, helping to offset natural
decline. The current pace of drilling in Ghana is expected to result in an
acceleration of the next phase of drilling at Jubilee into the fourth quarter
of 2022. These wells will be tied into the Jubilee South East infrastructure
in 2023.

The TEN fields produced c.24.3 kbopd (c.12.5 kbopd net) in the first half of
the year. No new wells were drilled in TEN in the first half of 2022, however
active reservoir management has helped slow the natural decline. A previously
drilled water injection well at Enyenra (En16-WI) has been completed and will
come onstream later this year to provide pressure support for existing
producers. A further Enyenra producer is planned to be drilled and completed
later this year. The rig is currently drilling the first of the two strategic
Ntomme Riser Base producer wells, which are due to be tied in and brought
onstream in the second half of 2023, following installation of a Riser Base
manifold.

Production performance has also been supported by strong FPSO uptime of c.99%
at TEN and c.95% at Jubilee, including a planned maintenance shutdown of the
Jubilee FPSO, which was successfully completed in May. On 1 July 2022, Tullow
took over Operations and Maintenance (O&M) of the Jubilee FPSO from MODEC.

In Gabon the Simba expansion project has resulted in increased production from
the Simba field of c.6.0 kbopd net to Tullow in the first half of the year. A
long-term appraisal well test at the Tchatamba field is on track to start in
August, and infill drilling campaigns at the Ezanga and Oba fields are
progressing to plan.

In Côte d'Ivoire, production from the Espoir field averaged c.2.1 kboepd in
the first half of the year. A two-month shutdown which had been planned for
March has been postponed to August. Required cargo tank maintenance work is
progressing well and Tullow continues to engage with the operator, CNR
International, on identifying development drilling opportunities.

Total net production from the non-operated portfolio in Gabon and Côte
d'Ivoire averaged c.17.6 kboepd in the first half of the year, in line with
expectations.

In Kenya, as reported above, the Joint Venture Partners continue to make good
progress with the farm-down to a strategic partner and the approval of the
Field Development Plan (FDP) for Project Oil Kenya. The project is expected to
be a key driver of growth, value and diversification for Tullow.

In Guyana, our partner Repsol is currently drilling the c.200mmbbls
Beebei-Potaro prospect on the Kanuku Block, in which Tullow has a 37.5%
equity, with results expected in the third quarter of 2022.

Financial update

In February, Tullow received $75 million in contingent consideration in
relation to Tullow's sale of its assets in Uganda to TotalEnergies, which
completed in November 2020. Tullow will continue to have exposure to the
Tilenga Project through additional cash consideration which may be received in
the form of contingent payments if the average annual Brent price exceeds
$62/bbl once production commences.

Also in February, a panel of arbitrators delivered an award in favour of HiTec
Vision (HiTec), judging that discoveries made in the PL-537 Licence (Offshore
Norway) between 2013 and 2016 had triggered a further payment under the SPA
between Tullow and HiTec regarding the purchase of Spring Energy in 2013. As a
result, Tullow made a payment of c.$76 million to HiTec.

In March, Tullow completed the pre-emption related to the sale of Occidental
Petroleum's interests in the Jubilee and TEN fields in Ghana to Kosmos Energy
for a total consideration of $126 million, consisting of $118 million upfront
and a subsequent post-completion adjustment payment of $8 million. The
transaction took Tullow's equity interests to 39.0% in the Jubilee field and
to 54.8% in the TEN fields and added c.4 kbopd of annualised unhedged
production to Tullow's portfolio for 2022. At current oil prices it is
expected that this acquisition of additional equity in the Jubilee and TEN
fields will have paid for itself by the end of the year.

The Group generated revenue, including the cost of hedging, of c.$0.8 billion
in the first half of the year, with a realised oil price of c.$106/bbl before
hedging and c.$87/bbl after hedging. Capital expenditure in the first half of
the year was c.$155 million.

Taking into account the contingent consideration ($75 million inflow), the
arbitration payment ($76 million outflow) and the pre-emption payment ($126
million outflow), and after adjusting for revenues of over $200 million
relating to two Ghana liftings which took place in early June but for which
cash was received shortly after 30 June 2022, on 1 and 5 July respectively,
free cash flow 1  (#_ftn1) in the first half of the year was neutral.

Full year capital expenditure is expected to be c.$380 million, including
c.$30 million related to the additional equity interests in Ghana. Full year
free cash flow(1) guidance remains c.$200 million assuming an average oil
price of $95/bbl.

The mandatory prepayment of $100 million of Senior Secured Notes due 2026 in
May reduced total debt to $2.5 billion.

 1  Free cash flow before debt amortisation and including a $75 million
payment from TotalEnergies following Ugandan parliamentary approval of the
Uganda Final Investment Decision (FID), a payment of $76 million to HiTec
Vision in relation to the purchase of Spring Energy in 2013 and total
consideration of $126 million for the pre-emption related to the sale of
Occidental Petroleum's interest in the Jubilee and TEN fields in Ghana to
Kosmos Energy.

 

 Group average working interest production  1H 2022 actuals (kboepd)  FY 2022 range (kboepd)
 Ghana                                      43.3                      43-46
     Jubilee                                30.8                      30-32
     TEN                                    12.5                      13-14
 Non-operated portfolio                     17.6                      16-19
 Oil production                             60.9                      59-65

 

 Oil hedge portfolio as of 30 June 2022  2022      2023      2024
 Hedged volume (kbopd)                   42.5      33.1      11.3
 Weighted average floor protected        $51/bbl   $55/bbl   $55/bbl
 Weighted average sold call              $78/bbl   $75/bbl   $75/bbl
 Premium spend                           $1.6/bbl  $2.0/bbl  $2.0/bbl

 

CONFERENCE CALL - 9:00 BST

To access the call please use the following link and follow the instructions
provided: https://web.lumiconnect.com/194-116-602
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fweb.lumiconnect.com%2F194-116-602&data=05%7C01%7Cmatthew.evans%40tullowoil.com%7Cd4a0eef6760d4be9c0fa08da60f1a55e%7C9d5a858ee6c746a7a63cda2023c57cf8%7C1%7C0%7C637928888240139095%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=1xbBMKu0BXVzQ9RmvepchgS94%2BiBCUIkNoeuoP2somY%3D&reserved=0)

A replay will be available on the website from midday on 13 July 2022:
https://www.tullowoil.com/investors/results-reports-and-presentations/
(https://www.tullowoil.com/investors/results-reports-and-presentations/)

CONTACTS
 Tullow Oil plc               Camarco

 (London)                     (London)

 (+44 20 3249 9000)           (+44 20 3781 9244)

 George Cazenove (Media)      Billy Clegg

 Robert Hellwig (Investors)   Georgia Edmonds

 Matthew Evans (Investors)    Rebecca Waterworth

 

Notes to editors

Tullow is an independent oil & gas, exploration and production group which
is quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW) and
is a constituent of the FTSE250 index. The Group has interests in over 30
exploration and production licences across eight countries. In March 2021,
Tullow committed to becoming Net Zero on its Scope 1 and 2 emissions by 2030.
For further information, please refer to our website at www.tullowoil.com
(http://www.tullowoil.com/) .

Follow Tullow on:

Twitter: www.twitter.com/TullowOilplc (http://www.twitter.com/TullowOilplc)

YouTube: www.youtube.com/TullowOilplc (http://www.youtube.com/TullowOilplc)

Facebook: www.facebook.com/TullowOilplc (http://www.facebook.com/TullowOilplc)

LinkedIn: www.linkedin.com/company/Tullow-Oil
(http://www.linkedin.com/company/Tullow-Oil)

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