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Tullow OilAnnouncement

26/01/2022 07:05

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RNS Number : 6202Z  Tullow Oil PLC  26 January 2022

TULLOW OIL PLC
JANUARY trading STATEMENT & Operational Update

26 JANUARY 2022 - Tullow Oil plc (Tullow) issues this update and guidance in
advance of the Group's 2021 Full Year Results scheduled for 9 March 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:

"2021 was a year of positive change and transformation for Tullow, and we
ended the year on a firm financial and operational footing. The delivery of
our long-term Business Plan is progressing well with significant improvements
in safety, operating efficiency and drilling performance. In 2022, we will
build on these firm foundations and focus on investing in our producing assets
in West Africa. Our plans in Ghana, where we are in the process of increasing
our stakes in both the Jubilee and TEN fields, will position us to deliver the
free cash flow to reduce gearing to less than 1.5x by 2025. Elsewhere, our
Gabon near-field non-operated exploration opportunities, our revised Kenya
development project and the Beebei-Potaro commitment well in Guyana also have
the potential to be significant value drivers for Tullow. There is much to
look forward to this year."

2021 Performance

·    Group working interest oil production averaged 59.2 kboepd, in line
with guidance, with notable production growth from the Jubilee field in Ghana
and Simba field in Gabon but lower production than expected from TEN and
Espoir.

·    In Ghana, ongoing improvements in operating performance resulted in
uptime of >97% on both operated FPSOs and an increase in water injection
rates and gas processing capacity.

·    Drilling in Ghana restarted in April with four new wells and a
workover successfully completed, ahead of plan.

·    Revenue is expected to be c.$1.3 billion with a realised oil price of
$63/bbl, including hedge costs of c.$150 million.

·    Capital and decommissioning expenditure were c.$265 million and c.$70
million respectively.

·    Underlying operating cash flow(1) is expected to be c.$700 million
and free cash flow is expected to be c.$250 million, ahead of guidance, driven
by continued focus on costs, supportive oil prices in the latter parts of 2021
and favourable working capital movements.

·    Year-end net debt reduced to c.$2.1 billion (2020: $2.4 billion),
with liquidity headroom of c.$0.9 billion at the start of 2022.

2022 Outlook

·    Group working interest oil production guidance is 55 to 61 kboepd.
This forecast is based on Tullow's existing equity interests in TEN (47.125%)
and Jubilee (35.48%) and will be adjusted following completion of the
pre-emption of the sale of Occidental Petroleum's interest in Ghana to Kosmos
Energy. The estimated full year impact of the completed pre-emption would be
an addition of c.5 kboepd (net) to the Group's 2022 production forecast,
adjusted for completion timing.

·    Tullow is prioritising investment in high return opportunities in its
producing assets, whilst ensuring the business remains self-funded at
c.$65/bbl(2) this year. Capital expenditure is forecast to be c.$350 million,
split c.$270 million in Ghana, c.$30 million on the non-operated portfolio,
c.$5 million in Kenya and c.$45 million on exploration and appraisal.
Decommissioning expenditure is expected to be c.$100 million.

·    Increased year-on-year spend in Ghana is primarily due to investment
in infrastructure for the Jubilee North East and South East areas that will
lead to meaningful growth in production as these undeveloped parts of Jubilee
are brought on stream from 2023 onwards.

·    At $75/bbl, underlying operating cash flow(1) is expected to be
c.$750 million with free cash flow(2) of c.$100 million.

·    Debt reduction remains a key priority and the Group remains on track
to materially reduce net debt and achieve gearing of less than 1.5x net debt
to EBITDAX by 2025.

·    A material hedge portfolio protects c.75% of forecast sales volumes
to May 2023 and 50% from May 2023 to May 2024.

 

(1) Cash flow from operating activities including lease payments, before
capital investment, decommissioning expenditure and debt service

(2) Free cash flow before debt amortisation and including an expected $75
million payment from Total following Ugandan parliamentary approval of the
Uganda Final Investment Decision (FID)

 

 Oil hedge portfolio as of 31 December 2021  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

 

 Group average working interest production  FY 2021 actuals (kboepd)  FY 2022 range (kboepd)
 Ghana(3)                                   42.1                      39-42
     Jubilee                                26.6                      28-30
     TEN                                    15.5                      11-12
 Non-operated portfolio(4)                  17.2                      16-19
 Oil production                             59.2                      55-61

 

(3) Ghana production represented before impact of pre-emption on Deep Water
Tano (DWT) Block

(4) Tullow divested its assets in Equatorial Guinea and the Dussafu Marin
Permit in Gabon, in 2021

Operational Update
Ghana
Jubilee - 2021 performance

·    Oil production from Jubilee averaged 74.9 kbopd (net 26.6 kbopd),
ahead of guidance set at the start of the year.

·    Average daily production grew from c.70 kbopd at the beginning of
2021 to exceed 90 kbopd by the end of the year, achieved through a combination
of new wells brought on stream and improved operational performance.

·    The drilling programme delivered two producers (J56-P online in July,
J57-P online in December), one water injector (J55-WI online in September) and
a work over (J12-WI online early in January 2022).

·    Strong drilling performance over the period achieved both cost and
efficiency improvements compared to previous drilling campaigns.

·    FPSO uptime averaged c.98%; gas offtake rates averaged >100
mmscfpd; and water injection rates averaged >200 kbwpd.

Jubilee - 2022 outlook

·    Jubilee production is expected to average between 80 to 84 kbopd
(net: 28 to 30 kbopd). This includes the impact of a planned maintenance
shutdown of approximately two weeks, scheduled to take place in the second
quarter.

·    Three new wells are planned to be drilled at Jubilee in 2022. A water
injector is due onstream in the first quarter, which will provide pressure
support to existing producers. This will be followed by a producer and a
second water injector.

·    The work programme is focused on delivering reliable in-year
production through continued infill drilling as well as investment in projects
that will access undeveloped resources and lead to meaningful production
growth in subsequent years.

·    This investment will focus on new infrastructure to support the
development of over 170 mmbbls gross estimated ultimate recovery (EUR) in
previously undeveloped areas in the eastern parts of the field.

·    As part of a longer-term operational transformation plan, Tullow,
supported by its Joint Venture (JV) Partners, has taken the decision to
self-operate the Jubilee FPSO and will take over all operations and
maintenance (O&M) from MODEC when the current O&M contract comes to a
scheduled end in 2022. This presents an opportunity to realise further
efficiency improvements whilst sustaining top quartile production operating
performance in terms of safety, emissions, reliability, costs and local
content.

·    As part of Tullow's commitment to becoming a Net Zero Company by 2030
on its Scope 1 and 2 emissions, the scheduled shutdown on the Jubilee FPSO
will help facilitate increased gas handling capacity. Planned facility
modifications will support increased gas export capability and help towards
the target of eliminating routine flaring in Ghana by 2025. Other activities
planned during the shutdown will focus on maintenance, integrity and
reliability of the FPSO for the long-term.

TEN - 2021 performance

·    Oil production from TEN in 2021 averaged 32.8 kbopd (net 15.5 kbopd),
below guidance at the start of the year. This was primarily due to higher
production decline rates than expected at some wells.

·    A gas injector at the Ntomme field, (Nt06-GI), was brought on stream
in the fourth quarter to provide pressure support to existing production
wells. Nt06-GI also encountered oil at the base of the well, de-risking the
development potential of areas further to the north of Ntomme.

·    In 2021, uptime on the TEN FPSO was c.97%, water injection was c.90
kbwpd and gas injection was c.100 mmscfpd.

TEN - 2022 outlook

·    TEN oil production is expected to average between 22 to 26 kbopd (net
11 to 12 kbopd), driven by natural decline in the existing wells.

·    The JV Partners have identified material potential across TEN and a
coordinated effort to improve field performance is under way with plans to
accelerate production from undeveloped resources in the Greater Ntomme and
Tweneboa (GNT) areas.

·    Drilling in 2022 will focus on further defining future development
plans to maximise production and the fields' value potential. Two strategic
development wells are to be drilled in the Ntomme riser base area and an
additional well is planned in the Enyenra area in the second half of the year.
The JV is also investing in the infrastructure required to allow these wells
to be brought on stream from 2023.

Pre-emption of Occidental Petroleum/Kosmos Energy transaction

·    As previously announced, in November 2021, Tullow exercised its right
of pre-emption related to the sale of Occidental Petroleum's interests in the
Jubilee and TEN fields to Kosmos Energy for an expected consideration of
c.$150 million. Consequently, Tullow's equity interests are expected to
increase to 38.9% in the Jubilee field and 54.8% in the TEN fields upon
completion of the transaction. Completion of the transaction remains subject
to finalising definitive agreements with Kosmos Energy/Anadarko WCTP Company,
and securing approval from the Government of Ghana.

Non-operated

·    Production from Tullow's non-operated portfolio was 17.2 kboepd in
2021. Production in 2022 is expected to average between 16 to 19 kboepd.

·    During 2021, Tullow divested its interests in the Ceiba and Okume
fields in Equatorial Guinea and the Ruche field in the Dussafu Marin permit in
Gabon, receiving a total consideration of $133 million following completion of
the sales in March and June respectively.

·    In Gabon, the Simba expansion project progressed well in 2021, with a
successful infill well drilled and a new 10-inch offtake pipeline installed at
the end of the year. Consequently, net production for the Simba field in 2022
is expected to average c.6kbopd, 40% higher than in 2021.

·    In the fourth quarter of 2021, the Tchatamba JV Partners made a near
field discovery with the TCTB-14 well in the Tchatamba South licence in Gabon.
This discovery will undergo a long-term production test during 2022.

·    The Espoir field in Côte d'Ivoire had to be shut down twice in 2021
following a major incident in January 2021 and required maintenance works on
the FPSO's cargo tanks. The field is now back onstream and Tullow continues to
engage with the operator (CNR International) on further remediation plans for
the FPSO and on identifying development drilling opportunities.

Kenya

·    In December 2021, as per the licence extension obligations provided
by the Government of Kenya in September 2020, the Project Oil Kenya JV
Partners submitted a Field Development Plan for the 10BB and 13T licences,
including the additional exploration and appraisal (E&A) opportunities
within the 10BB and 13T licences. The E&A plan for 10BA was also
submitted.

·    The JV Partners continue to seek a strategic partner for this project
and constructive discussions continue with interested parties.

Exploration

·    Tullow exited 11 exploration blocks in 2021, including all of its
licences in Suriname and Peru, reorienting its exploration effort towards
near-field and infrastructure-led exploration activities to enhance value in
core areas. In January 2022, Tullow also exited the PEL 90 licence in Namibia,
further optimising its portfolio.

·    Exploration capex in 2022 is expected to be c.$45 million, which
includes capital exposure to historic commitments in Guyana and Argentina.
Tullow continues to seek strategic partners to unlock value and reduce its
capital exposure in these emerging basins.

·    In Côte d'Ivoire, Tullow, together with its JV Partner PetroCi, has
elected to proceed into the second exploration phase in Block CI-524, adjacent
to the TEN fields in Ghana.

·    In Guyana, the Kanuku JV (Repsol operated) is planning to spud the
Beebei-Potaro commitment well during the second quarter of 2022, targeting the
Cretaceous light oil play of the Guyana-Suriname Basin.

Reserves and Resources

·    2021 year-end reserves and resources audits are ongoing and the final
position will be provided at the Group's Full Year Results on 9 March 2022.

Conference call - 09:00 GMT

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 from 09:00 GMT on 26 January 2022
 All participants                        +44 (0) 2071 928338
 UK freephone                            0800 279 6619
 Passcode                                2664526

 

 Replay available from 13:30 GMT on 26 January 2022
 All participants                                    +44 (0) 3333 009785
 Passcode                                            2664526

 CONTACTS
 Tullow Oil plc                                Murrays

 (London)                                      (Dublin)

 (+44 20 3249 9000)                            (+353 1 498 0300)

 George Cazenove (Media)                       Pat Walsh

 Nicola Rogers and Matthew Evans (Investors)   Joe Heron

 
Notes to editors

Tullow is an independent oil & gas, exploration and production group,
quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW). 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.

Follow Tullow on:

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

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