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RNS Number : 1869N
Tullow Oil PLC
16 January 2019
Tullow Oil plc - Trading Statement & Operational Update
16 January 2019 - Tullow Oil plc (Tullow) issues this statement
to summarise recent operational activities and to provide trading
guidance in respect of the financial year to 31 December 2018. This
is in advance of the Group's Full Year Results, which are scheduled
for release on Wednesday 13 February 2019. The information
contained herein has not been audited and may be subject to further
review and amendment.
PAUL MCDADE, CHIEF EXECUTIVE OFFICER, TULLOW OIL PLC, COMMENTED
TODAY:
"Tullow is well-placed to deliver on its growth ambitions. In
2019, we will increase oil production in West Africa, target Final
Investment Decisions in East Africa and drill the first wells in an
exciting exploration campaign in Guyana. Despite a volatile oil
price, Tullow's improved balance sheet, low cost production and
strong cash flow generation, even at lower oil prices, will allow
us to both invest for growth and pay a sustainable dividend."
Trading Update summary
-- 2018 full year oil production of 88,200 bopd; 2019 oil
production forecast of 93,000-101,000 bopd
-- Full year revenue of c.$1.8 billion, additional proceeds of
c.$0.2 billion from Corporate Business Interruption insurance
-- Strong 2018 free cash flow of c.$410 million, net debt at
year-end of c.$3.1 billion and gearing of c.1.9x
-- Seven wells to be drilled and completed in Ghana in 2019
delivering annual gross production of c.180,000 bopd
-- Targeting FIDs for Uganda and Kenya developments in 2019;
Uganda farm-down negotiations ongoing
-- Guyana drilling to commence in mid-2019 with three wells
planned to test this high potential acreage
Operational Update
GROUP PRODUCTION
In 2018, Tullow's West Africa oil assets performed solidly and
delivered net production of 88,200 bopd in line with expectations.
This includes production-equivalent insurance payments of 8,600
bopd from Tullow's Corporate Business Interruption insurance.
Working interest gas production averaged 1,800 boepd for the full
year resulting in overall Group net production of 90,000 boepd.
In 2019, overall working interest oil production, including
production-equivalent insurance payments, is expected to average
between 93,000 and 101,000 bopd. Working interest gas production
exported from TEN is expected to average 1,000 boepd. Overall Group
net production is therefore expected to be in the range of 94,000
to 102,000 boepd.
WEST AFRICA
Ghana
Jubilee
Gross production from Jubilee in 2018 averaged 78,000 bopd (net:
27,700 bopd) slightly below the Group's November forecast. This was
due to minor operational issues in December, which have now been
resolved. Tullow's net production from Jubilee in 2018, including
estimated production-equivalent insurance payments of 8,600 bopd,
was 36,300 bopd.
Tullow expects 2019 average gross oil production from the
Jubilee field to increase to around 96,000 bopd (net: 34,000 bopd).
Tullow's Corporate Business Interruption insurance is expected to
provide around 1,000 bopd of net production-equivalent insurance
payments, resulting in expected total 2019 Jubilee full year
average net production of 35,000 bopd.
TEN
The TEN fields performed well throughout 2018 with gross
production averaging 64,500 bopd (net: 30,400 bopd) in line with
expectations.
Tullow expects gross oil production from the TEN fields in 2019
to step up significantly to around 83,000 bopd (net: 39,000 bopd).
Gross gas production is expected to be around 2,100 boepd (net:
1,000 boepd).
Ghana Drilling
The 2018 drilling programme was successfully executed with two
drilling rigs operating in tandem across both fields. The results
from drilling were in line with, or exceeded, pre-drill
expectations. Two new producer wells were drilled and completed at
Jubilee and an existing water injection well was completed. At TEN,
two new producing wells and one water injection well were drilled.
The first new producer well, NT05-P, was brought online in August
2018 and is performing very well. The second new producer, EN10-P,
is currently being completed and is expected to be online in
February.
In 2019, Tullow expects to drill and complete seven new wells
across the TEN and Jubilee fields allowing gross oil production
from Ghana to rise to approximately 180,000 bopd in line with the
2019 production forecast.
Non-Operated Portfolio
2018 West Africa non-operated production was 21,500 bopd, well
ahead of the Group's initial 2018 forecast of 19,000 bopd. Gas
production from the UK in 2018 was 1,700 boepd with production
ceasing as planned in September 2018.
Net production from the non-operated portfolio is expected to
increase in 2019 and average between 22,000 and 24,000 bopd.
EAST AFRICA
Kenya
Tullow made substantial progress in Kenya in 2018 and continues
to target FID in late 2019 and First Oil in 2022. This will require
several key milestones to be achieved throughout 2019 including
land acquisition, commercial frameworks and contract awards.
The transfer of stored crude oil from Turkana to Mombasa by road
continues as part of the Early Oil Pilot Scheme with an average of
eight trucks being dispatched every two days, transporting
approximately 600 bopd. This is expected to increase to 2,000 bopd
from April 2019. Currently, there are 60,000 barrels of oil stored
in Mombasa with a maiden lifting expected in the first half
of 2019.
Uganda
Tullow and its partners in Uganda, Total and CNOOC Ltd, continue
to work with the Government of Uganda to finalise the farm-down
which is now expected to complete in the first half of 2019.
Negotiations with the Government are ongoing. The Operators of the
Uganda development continue to target FID in the first half of this
year once agreements with the Governments of Uganda and Tanzania
have been completed.
NEW VENTURES
In 2018, Tullow acquired new licences in Côte d'Ivoire,
Suriname, Comoros and Peru - the latter two are subject to
Government approval. The Cormorant wildcat well, which did not
encounter hydrocarbons, was drilled offshore Namibia in September
2018, at a net cost to Tullow of less than $3 million. Geophysical
surveys were completed in Mauritania, Jamaica and Côte
d'Ivoire.
Guyana will be the focus for Tullow's exploration drilling
programme in 2019 and the Group will drill the Jethro prospect in
the second quarter of 2019 as the first of two planned wells on the
Orinduik block. The Carapa prospect will be tested on the Kanuku
licence in the third quarter of 2019. Elsewhere, Tullow will
undertake geophysical surveys in Côte d'Ivoire, Comoros and around
its current assets in West Africa. Tullow will high-grade other
prospects in the portfolio for consideration for drilling in 2020
and seek to add further exploration acreage to the Group's
portfolio.
Financial Update
Solid production performance, sustained cost discipline and
higher oil prices during periods of the year resulted in strong
revenues and cash flow generation in 2018. With a realised
post-hedge oil price of $68/barrel, Tullow expects full year total
revenue to be c.$1.8 billion (excluding Corporate Business
Interruption insurance proceeds of c.$0.2 billion).
For the full year 2018, the Group is expected to deliver strong
free cash flow of c.$410 million. This includes the exceptional
payment of approximately $200 million associated with the Seadrill
litigation in July 2018 but excludes certain positive working
capital items forecast for late 2018 which moved into early 2019.
In addition, the receipt of $208 million of Uganda farm-down
proceeds is now expected in the first half of 2019.
Net debt reduced from $3.5 billion at the beginning of the year
to c.$3.1 billion at the end of 2018 with gearing expected to be
1.9x, in line with the operating range of 1-2x as set out in the
Group's capital allocation framework.
Capital expenditure in 2018 associated with operating activities
is expected to be c.$425 million, $35 million lower than forecast
in January 2018 following savings, farm-downs and some work
programme deferrals. The Group's 2019 capital expenditure is
expected to total approximately $570 million, comprising Ghana
capex of c.$250 million, Exploration and Appraisal spend of c.$140
million, West Africa non-operated capex of c.$100 million, Kenya
pre-development expenditure of c.$70 million and Uganda
post-completion Tullow costs of c.$10 million.
In November 2018, the Board established a capital returns policy
to start from the 2019 financial year and expects to pay an annual
dividend of no less than $100 million.
Trading Statement Guidance
Guidance is provided in relation to Tullow's full year reporting
to 31 December 2018 in advance of the Group's Full Year Results
release on 13 February 2019. Guidance figures are subject to
change.
SALES, REVENUE AND GROSS PROFIT
2018
================================ =====
Total revenue ($bn) 1.8
-------------------------------- -----
Gross profit ($bn) 1.1
-------------------------------- -----
Administrative expenses ($bn) 0.1
-------------------------------- -----
Free cash flow ($bn) 0.4
================================ =====
Note 1: Total revenue does not include receipts for Tullow's
Corporate Business Interruption insurance proceeds of c.$0.2
billion. This is included in Other Operating Income which is a
component of Gross Profit.
HEDGING INSTRUMENTS
2018
=========================================== =====
Fair Value of derivative instruments ($m) 128
------------------------------------------- -----
Gain on hedging instruments ($m) 2
=========================================== =====
2019 Hedging position
Hedge structure Bopd Bought put (floor) Sold call Bought call
---------------------------------- ------- ------------------- ---------- ------------
Collars 22,244 $56.80 $81.68 -
---------------------------------- ------- ------------------- ---------- ------------
Three-way collars (call spread) 29,488 $54.06 $73.60 $79.81
---------------------------------- ------- ------------------- ---------- ------------
Straight puts 4,000 $69.24 - -
---------------------------------- ------- ------------------- ---------- ------------
Total / weighted average 55,732 $56.24 - -
---------------------------------- ------- ------------------- ---------- ------------
Note 2: 2020 hedging position at 31 Dec 2018: 25,000 bopd hedged
with an average floor price protected of $59.00/bbl
IMPAIRMENTS and Exploration write offs
Pre-tax write off Tax effect Net write off
==================================== ================== =========== ==============
Impairment of PP&E, net ($m) - - -
------------------------------------ ------------------ ----------- --------------
Exploration costs written-off ($m) 300 (50) 250
==================================== ================== =========== ==============
Note 3: Exploration costs written off include c.$140m from Ghana
(Akasa & Wawa areas), c.$75m from Uganda (capitalised interest
on assets held for sale) and various New Ventures activities.
CAPITAL AND OTHER EXPENDITURE
2018 2019
============================================================================= =========== ===========
Capital expenditure ($m) 425 570
----------------------------------------------------------------------------- ----------- -----------
Decommissioning expenditure ($m) 99 125
============================================================================= =========== ===========
Note 4: Capital expenditure excludes Ugandan expenditure of c.$50 million in 2018 and any
pre-completion expenditure in 2019 that will, subject to completion of the farm-down, be offset
by either capex reimbursements or deferred consideration.
Note 5: Decommissioning expenditure is gross of any tax relief and relates to UK and Mauritania
decommissioning activities.
GROUP AVERAGE WORKING INTEREST PRODUCTION (1)
FY 2018 Actuals FY 2019 Forecast
Oil Production (bopd) (bopd)
================================================== ================ ==================
Ghana 58,100 73,000
================================================== ================ ==================
Jubilee 27,700 34,000
================================================== ================ ==================
TEN 30,400 39,000
================================================== ================ ==================
Ghana Jubilee production-equivalent insurance
payments 8,600 1,000
================================================== ================ ==================
Equatorial Guinea 6,300 6,000
================================================== ================ ==================
Gabon 12,100 14,500
================================================== ================ ==================
Côte d'Ivoire (1) 3,100 2,500
================================================== ================ ==================
OIL PRODUCTION SUB-TOTAL (inc. Jubilee
production-equivalent) 88,200 97,000
================================================== ================ ==================
Gas Production (boepd) (boepd)
================================================== ================ ==================
Ghana (TEN) 100 1,000
================================================== ================ ==================
UK 1,700 -
================================================== ================ ==================
GROUP TOTAL (inc. Jubilee production-equivalent) 90,000 98,000
================================================== ================ ==================
(1) Includes condensate
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.
FOR FURTHER INFORMATION, CONTACT:
Tullow Oil plc Murrays
(London) (Dublin)
(+44 20 3249 9000) (+353 1 498 0300)
Chris Perry, Nicola Rogers Pat Walsh
(Investors) Joe Heron
George Cazenove (Media)
For further information, please refer to our website at
www.tullowoil.com.
Follow Tullow on:
Twitter: www.twitter.com/TullowOilplc
You Tube: www.youtube.com/TullowOilplc
Facebook: www.facebook.com/TullowOilplc
LinkedIn: www.linkedin.com/company/Tullow-Oil
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END
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