TIDMTLW
RNS Number : 1613L
Tullow Oil PLC
02 July 2014
Tullow Oil plc - Trading Statement & Operational Update
Continued E&A success in Kenya further de-risks 600mmbo
discovered resources
Good progress with developments in Ghana, Kenya and Uganda
Well-funded balance sheet following second bond issue raising
$650m
2 July 2014 - Tullow Oil plc (Tullow) issues this statement to
summarise recent operational activities and to provide trading
guidance in respect of the financial year to 30 June 2014. This is
in advance of the Group's Half Year Results, which are scheduled
for release on Wednesday 30 July 2014. The information contained
herein has not been audited and may be subject to further
review.
Operational Update
Tullow's 2014 half-yearly financial results are expected to
deliver strong revenue and gross profit in line with expectations
of approximately $1.3bn and $650m respectively. Following a second
$650m bond issue in April 2014 and successful re-financings of our
corporate revolving credit facility of US$750m and our NOK 3bn
Norwegian exploration loan facility, Tullow's balance sheet is
extremely well-funded and the Group has unutilised debt capacity at
the end of June 2014 of approximately $2.3 billion.
Tullow's exploration programme over the past six months has
focused mainly on Kenya, Norway, Ethiopia, Mauritania and Gabon.
There have been a number of successful exploration, appraisal and
testing results from the South Lokichar Basin onshore Kenya.
Activity will continue during the second half of the year to refine
and extend the basin potential including the Etom and Ekosowan
exploration wells. Four new basins in Kenya and Ethiopia are being
tested during the second half of the year and five further basins
will be tested in Kenya and Ethiopia during 2015.
In Norway, results from the Hanssen well are expected shortly
and the Tullow-operated Lupus well commenced drilling this week. In
Gabon, results from the onshore Igongo well are expected in the
next few weeks and the high impact pre-salt Sputnik-1 offshore
exploration well is expected to spud in late July/early August
2014.
After mixed frontier exploration results in Mauritania, Ethiopia
and Norway, combined with licence relinquishments as part of the
Group's continual high-grading of acreage, Tullow expects a net
exploration write off of $415 million for the first half of the
year. Post-tax, this will amount to $305 million of which $150
million relates directly to 2014 wells. In addition, Tullow will
also record a loss on disposal in the first half 2014 of $115
million primarily due to contingent consideration adjustments in
relation to the Uganda farm-down.
In West Africa, Jubilee gross production averaged approximately
100,000 bopd for the first half 2014 and the Group expects to
maintain this level of production for the full year. The deepwater
TEN project in Ghana is progressing well and is on track for first
oil in mid-2016.
Tullow continues to make good progress with its future
developments in Kenya and Uganda, particularly around cost
optimisation for Uganda and the recognition by both Governments of
the benefits to their projects of a shared pipeline.
Following the re-structuring of our UK and Dutch assets sales
last year, Tullow signed an agreement to sell 53.1% of its Schooner
unit interest and 60% of its Ketch asset in the UK Southern North
Sea to Faroe Petroleum (U.K.) Limited. Tullow is also making good
progress with selling the remainder of its UK and Dutch North Sea
assets. In Asia, having completed the sale of its Bangladesh assets
last year, Tullow is awaiting Government consent to complete the
sale of its assets in Pakistan to Ocean Pakistan Ltd. The process
for reducing Tullow's stake and capital commitments in the TEN
Project in Ghana is ongoing.
Group working interest production for the first half 2014
averaged 78,100 boepd, impacted by underperformance at Schooner-11
in the UK and non-operated assets in Gabon. In addition, certain
non-operated production in Gabon has not been booked in the first
half of 2014 due to ongoing licence discussions which are expected
to be resolved in the second half of 2014. Production guidance
remains unchanged for the full year at 79,000 to 85,000 boepd.
COMMENTING TODAY, AIDAN HEAVEY, CHIEF EXECUTIVE SAID:
"Tullow has continued to move the business forward over the last
six months. Exploration and appraisal success in Kenya has further
de-risked the 600mmbo discovered resources. We are also making good
progress towards developing the oil that our exploration team has
found in Ghana, Kenya and Uganda and in assessing the significant
upside potential in each of these areas. We are well funded
following our second bond issue and we are making steady progress
with our asset disposal programme. With potential basin-opening
wells across the portfolio coming up in the second half of the year
and strong revenue and cash flow, Tullow is in a strong position
for the remainder of this year and into 2015."
Trading Statement Guidance
Guidance is provided in relation to Tullow's financial half year
to 30 June 2014 in advance of the Group's Half Year Results release
on 30 July 2014.
SALES, REVENUE AND GROSS PROFIT
1H 2014 1H 2013
================================ ========================= ================
Working interest production
(boepd) 78,100 88,600
-------------------------------- ------------------------- ----------------
Sales volumes (boepd) 73,200 79,000
-------------------------------- ------------------------- ----------------
Total revenue ($ bn) 1.3 1.3
-------------------------------- ------------------------- ----------------
Gross Profit ($ bn) 0.65 0.8
-------------------------------- ------------------------- ----------------
Note 1: Working interest production volumes do not equate to sales
volumes. This is due to variations in lifting schedules and because
a portion of the production is delivered to host governments under
the terms of Production Sharing Contracts.
Note 2: 1H 2013 production included 3,900 boepd from Bangladesh
gas assets sold in 2H 2013.
REALISED PRICES
pre hedge post hedge
---------------------------- ----------------------------- ----------------
1H 2014 Realised oil price
($/bl) 108.7 106.7
--------------------------------- ------------------------ ----------------
1H 2014 Realised UK gas
price (p/therm) 55 55
================================= ======================== ================
COST OF SALES ADJUSTMENTS
1H 2014
=========================== ========
Overlift charge ($m) 60
--------------------------- --------
LOSS ON DISPOSAL
1H 2014
==================================== ================================================
Loss on disposal ($m) 115
==================================== ================================================
Note 3: The $115m loss on disposal is in relation to the partial
impairment ($79m) of contingent consideration recoverable from CNOOC
and Total (the amount to be recovered is dependent upon the timing
and receipt of certain project approvals as set out in the Group's
2013 Annual Report and Accounts) and a one-off payment ($36m) in
relation to licence extensions that were not received in Uganda.
EXPLORATION WRITE OFF
Norway Tax
Pre-tax write off effect Net write off
============================= ==================== ============ ===================
1H 2014 activity ($m) 200 (50) 150
----------------------------- -------------------- ------------ -------------------
Prior years activity
($m) 215 (60) 155
============================= ==================== ============ ===================
1H 2014 total exploration
write off 415 (110) 305
============================= ==================== ============ ===================
Note 4: During 1H 2014 the Group spent $500 million, including Norway
exploration costs on a post tax cash basis, on exploration and appraisal
activities, and expects a net write off of approximately $150 million
in relation to this expenditure. In addition the Group expects a
net write off of approximately $155 million in relation to prior
years' expenditure following decisions not to renew certain licences.
Therefore, the total net exploration write-offs for 1H 2014 are
expected to be approximately $305 million. This will be shown in
the income statement as a $415 million exploration write-off and
an income tax credit of $110 million in relation to tax received
in respect of Norwegian expenditure.
======================================================================================
CAPITAL EXPENDITURE
1H 2014 2014
================================== ============================= =================
Capital expenditure ($m) 1,000 2,100
---------------------------------- ----------------------------- -----------------
E&A/D&O split (%) 50/50 45/55
================================== ============================= =================
Note 5: Capital expenditure includes Norway exploration costs on
a post tax cash basis
DEBT SUMMARY
As at 30 June 2014 As at 30 June 2013
============================ =============================== =====================
Net Debt ($m) 2,800 1,700
---------------------------- ------------------------------- ---------------------
Headroom ($m) 2,300 1,700
---------------------------- ------------------------------- ---------------------
Committed Bank Facilities
($m) 4,750 4,000
---------------------------- ------------------------------- ---------------------
Corporate Bonds ($m) 1,300 -
============================ =============================== =====================
Note 6: On 8 April 2014 Tullow completed an offering of $650 million
of 6.25% senior notes due in 2022. The net proceeds have been used
to repay existing indebtedness under the Company's credit facilities
but not cancel commitments under such facilities.
Note 7: Committed bank facilities include an Exploration Finance
Facility of $500m, a working capital facility relating to exploration
expenditure on our Norwegian exploration licences.
GROUP WORKING INTEREST PRODUCTION (1)
WEST & NORTH AFRICA 1H 2014 Average 2014 Forecast
(kboepd) (kboepd)
============================ ======================= =============
Ghana 35.9 35.5
============================ ======================= =============
Equatorial Guinea
---------------------------- ----------------------- -------------
Ceiba 3.5 3.2
---------------------------- ----------------------- -------------
Okume 6.2 6.3
============================ ======================= =============
Total Equatorial Guinea 9.7 9.5
============================ ======================= =============
Gabon
---------------------------- ----------------------- -------------
Tchatamba 3.7 4.4
---------------------------- ----------------------- -------------
Limande 2.5 2.4
---------------------------- ----------------------- -------------
Etame Complex 1.3 1.2
---------------------------- ----------------------- -------------
Other Gabon 3.2 6.4
============================ ======================= =============
Total Gabon 10.7 14.4
============================ ======================= =============
Côte d'Ivoire 3.1 2.8
============================ ======================= =============
Congo (Brazzaville) 2.6 2.6
============================ ======================= =============
Mauritania 1.2 1.1
============================ ======================= =============
WEST & NORTH AFRICA TOTAL 63.2 65.9
============================ ======================= =============
EUROPE
============================ ======================= =============
UK 9.5 9.0
---------------------------- ----------------------- -------------
Netherlands 5.2 4.9
============================ ======================= =============
Norway 0.2 0.2
============================ ======================= =============
EUROPE TOTAL 14.9 14.1
============================ ======================= =============
GROUP TOTAL 78.1 80.0
============================ ======================= =============
(1) Includes condensate
CURRENTLY PLANNED 18 MONTH EXPLORATION AND APPRAISAL
ACTIVITY
Country Block/Licence Prospect/Well Interest Spud Date
------------ ---------------- -------------------- ---------- -------------
WEST & NORTH AFRICA
============================== ==================== ========== =============
Gabon Arouwe Sputnik East 35% Q3 2014
------------ ---------------- -------------------- ---------- -------------
Nziembou Igongo 40% In progress
============ ================ ==================== ========== =============
59.15%
Mauritania C-10 Kibaro/Lamina (op) 1H 2015
---------------- -------------------- ---------- -------------
Ghana DW Tano Wawa-2A 49.95% 2H 2015
------------ ---------------- -------------------- ---------- -------------
Guinea Guinea Offshore Fatala 40% (op) 1H 2015
============ ================ ==================== ========== =============
SOUTH & EAST AFRICA
------------------------------ -------------------- ---------- -------------
Ethiopia Omo Gardim 50% (op) In progress
------------ ---------------- -------------------- ---------- -------------
Kenya 13T Etom 50% (op) Q3 2014
------------ ---------------- -------------------- ---------- -------------
13T Ekales appraisal 50% (op) Q4 2014-2015
------------ ---------------- -------------------- ---------- -------------
13T Tausi 50% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
10BA Engomo (formally 50% (op) Q4 2014
Kiboko)
------------ ---------------- -------------------- ---------- -------------
North Turkana Basin
10BA well 50% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
10BB Amosing-2 50% (op) In progress
------------ ---------------- -------------------- ---------- -------------
10BB Kodos 50% (op) Q3 2014
------------ ---------------- -------------------- ---------- -------------
10BB Epir (formally 50% (op) Q4 2014
Aze)
------------ ---------------- -------------------- ---------- -------------
South Kerio Basin
10BB well 50% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
10BB Dyepa 50% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
10BB Ekosowan 50% (op) Q4 2014
------------ ---------------- -------------------- ---------- -------------
10BB Ngamia appraisal 50% (op) Q2 2014 -
Q2 2015
------------ ---------------- -------------------- ---------- -------------
10BB Amosing appraisal 50% (op) Q4 2014 -
Q1 2015
------------ ---------------- -------------------- ---------- -------------
12A Lead 12A-1 65% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
12B Lead 12B-1 50% (op) 2H 2015
------------ ---------------- -------------------- ---------- -------------
Madagascar Block 3111 Berenty 100% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
EUROPE, SOUTH AMERICA
& ASIA
============================== ==================== ========== =============
Norway PL 405 Butch SW 15% In progress
------------ ---------------- -------------------- ---------- -------------
PL 591 Zumba 80% (op) 1H 2015
------------ ---------------- -------------------- ---------- -------------
PL 537 Hanssen 20% In progress
------------ ---------------- -------------------- ---------- -------------
PL 494 Heimdalshø 15% Q3 2014
------------ ---------------- -------------------- ---------- -------------
PL 642 Hagar 20% H1 2015
------------ ---------------- -------------------- ---------- -------------
PL 507 Lupus 70% (op) In progress
------------ ---------------- -------------------- ---------- -------------
Hassel (Wisting
PL537 East N) 20% 1H 2015
------------ ---------------- -------------------- ---------- -------------
Bjaaland (Wisting
PL537 East S) 20% 1H 2015
------------ ---------------- -------------------- ---------- -------------
PL626 Rovarkula 30% 1H 2015
------------ ---------------- -------------------- ---------- -------------
Suriname Block 47 Goliathberg 100% (op) 2H 2015
------------ ---------------- -------------------- ---------- -------------
Block 31 Kaiman 30% 1H 2015
============ ================ ==================== ========== =============
FOR FURTHER INFORMATION CONTACT:
Tullow Oil plc Citigate Dewe Rogerson Murray Consultants
(London) (London) (Dublin)
(+44 20 3249 9000) (+44 207 638 9571) (+353 1 498 0300)
Chris Perry (Investor Martin Jackson Ed Micheau
Relations) Shabnam Bashir Pat Walsh
James Arnold (Investor
Relations)
George Cazenove (Media
Relations)
======================== ======================= ===================
Notes to Editors
Tullow Oil plc
Tullow is a leading independent oil & gas, exploration and
production group, quoted on the London, Irish and Ghanaian stock
exchanges (symbol: TLW) and is a constituent of the FTSE 100 Index.
The Group has interests in over 140 exploration and production
licences across 23 countries which are managed as three regional
business units: West & North Africa, South & East Africa
and Europe, South America and Asia.
Follow Tullow on:
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You Tube: www.youtube.com/TullowOilplc
Facebook: www.facebook.com/TullowOilplc
LinkedIn: www.linkedin.com/company/Tullow-Oil
IR App: bit.ly/TullowApp
Website: www.tullowoil.com
This information is provided by RNS
The company news service from the London Stock Exchange
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