RNS Number : 6335Y
Tullow Oil PLC
09 July 2008
9 July 2008
News Release
Tullow Oil plc - Trading Statement and Operational Update
Tullow Oil plc ("Tullow") issues this Trading Statement in respect of the first half of
the 2008 financial year and this Operational
Update in respect of recent Production, Development and Exploration activities.
The Trading Statement is in advance of the Group's Interim Results, which are scheduled
for release on Wednesday, 27 August 2008. The
information contained herein has not been audited and is subject to further review.
HIGHLIGHTS
Exploration
* Mahogany-2 appraisal well on the Jubilee field in Ghana extends upside potential to
1.8 billion barrels.
* Jubilee and Odum have proved two new plays and de-risked substantial follow-up
prospects scheduled for drilling in Ghana and C
d'Ivoire within the next 12 months.
* Kingfisher-2 well in Uganda intersects zones encountered in Kingfisher-1, deep
target results expected in August.
* Ugandan Butiaba campaign yields three more discoveries and opens up a new geological
fairway.
* Four-well drilling campaign in India commenced in Block CB-ON/1 in late June.
* Production and Development
* Group working interest production averaged 70,550 boepd for the first half of 2008
and is expected to average between 70,000 and
72,000 boepd for the full year.
* Jubilee production facilities tender under way and on track to achieve first oil
target of 2010.
* Three deepwater rigs contracted for Ghana, next phase of drilling to commence in
September.
* Early Production System in Uganda is expected to be sanctioned in the third quarter
2008.
* Finance and Portfolio Management
* Successful portfolio rationalisation in the first half of 2008 will raise
approximately US$1 billion and a total anticipated
profit on disposal after tax of approximately £400 million on completion.
* Capital expenditure in first half was £170 million, planned expenditure for 2008 is
forecast to be £480 million.
* Net debt at 30 June 2008 was £420 million.
Commenting today, Aidan Heavey, Chief Executive, said:
"Tullow has performed exceptionally well over the first half of 2008. We have had solid
production performance, outstanding appraisal
results in Ghana, continued exploration success in Uganda and announced almost $1 billion
worth of non-core disposals to enhance our
financial and operational flexibility. These factors, combined with the unprecedented strength
in oil and gas pricing and our ongoing
exploration programmes mean that Tullow has never been in a better position to enhance
shareholder value."
Presentation, Webcast and Conference Calls: In conjunction with this announcement Tullow
has scheduled two conference calls. Details are
included at the end of the release.
Trading Statement
Production
Group working interest production for the first half of 2008 averaged 70,550 boepd, 1%
higher than the 2007 average. Sales volumes for
the first half of 2008 averaged 60,000 boepd. A further breakdown of these figures is provided
in the Operational Update for each core area.
Production figures remain subject to final reconciliation and 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.
Average working interest production for 2008 is expected to be between 70,000 and 72,000
boepd, before any adjustment in respect of
disposals.
Realised Prices and Oil Discount
Average prices realised during the first half of 2008 continued to be exceptionally
strong. Realised oil price was approximately
US$106/bbl (pre hedges) and US$80/bbl (post hedges) and realised UK gas price was
approximately 56p/therm (pre hedges) and 52p/therm (post
hedges).
The Group's oil production sold at an average discount of approximately 3% to Brent during
the first half of 2008, and this level of
discount is expected to continue for the remainder of 2008.
Overlift
At 30 June 2008, Tullow was in a net overlift position amounting to an estimated 7,000
barrels. Movements in overlift positions are
recorded at market value and, combined with stock movements during the period, give rise to a
credit of approximately £3 million to Cost of
Sales.
Exploration Write-Off
Tullow's exploration write-off for the first half of 2008 is expected to be of the order
of £25 million. This write-off is principally
associated with unsuccessful exploration activities in the UK and Mauritania, new ventures
activity and licence relinquishments.
Capital Expenditure
Capital expenditure for the first half of 2008 amounted to £170 million and anticipated
capital expenditure for 2008 is now forecast to
be £480 million. The increase in full year planned expenditure is principally due to the
acceleration of development activities on the
Jubilee field in Ghana. Investment will be split 45% on production and development and the
remainder on exploration and appraisal. Tullow's
activities in Africa will comprise 75% of the anticipated 2008 capital outlay, with the
principal expenditures being in Ghana and Uganda.
Portfolio Management
During the first half of 2008 Tullow announced the disposal of a number of non-core assets
for a combined consideration of approximately
$1 billion.
In Africa, Tullow announced the sale of its 11% interest in the M'Boundi field to the
Korea National Oil Company (KNOC) for a total cash
consideration of $435 million. The sale is subject to government approval and is expected to
complete in the third quarter of 2008. On 2
July 2008 Tullow completed the sale of its 40% interest in the Ngosso licence, offshore
Cameroon, to MOL.
In Europe, the sale of certain CMS assets to Venture Production for a consideration of
£35 million completed on 23 June 2008. Also in
June, Tullow announced the proposed sale of its 51.68% interest in the Hewett-Bacton complex
to Eni for a cash consideration of £210
million. This transaction, which is expected to complete in late 2008, will also involve the
assumption by Eni of approximately £45 million
of abandonment liabilities and will give rise to an anticipated profit on disposal after tax
of approximately £225 million.
The combined impact of these transactions will give rise to an overall profit on disposal
after tax of approximately £400 million in
2008, of which approximately £15 million will be reflected in the first half results.
Net Debt
Net debt at 30 June 2008 was approximately £420 million while unutilised debt capacity
was in excess of $400 million. The reduction in
the period reflects a greater weighting of capital programmes towards the second half of the
year and the positive impact of portfolio
management receipts which totalled £35 million during the period.
Derivative Instruments
At 30 June 2008 the Group's derivative instruments had a net negative mark to market value
of approximately £435 million. Approximately
£120 million of this valuation relates to hedges acquired as part of the Energy Africa
acquisition in 2004. The increase in the mark to
market position principally reflects the unprecedented rate of increase in commodity prices
during the first half of 2008.
Hedging - IAS 39
While all of the Group's commodity derivative instruments currently qualify for hedge
accounting, a credit of approximately £7 million
(£4 million after taxation charges) will be recognised in the income statement for the first
half of 2008. The IAS 39 credit comprises
approximately £10 million relating to the movement in the non-intrinsic (or time value)
component of both oil and gas hedges, partially
offset by a charge of approximately £3 million relating to the ineffectiveness of both oil
and gas hedges. The favourable movement in the
time value element is largely due to the movements in the oil and gas forward curves since the
beginning of the year. Brent forward oil
prices and natural gas prices in the UK have risen considerably and with prices now trading
significantly above the strike prices less time
value is associated with the mark to market value.
Commodity Hedging Summary
At 30 June 2008 the Group's hedge position to the end of 2011 was as follows:
Hedge Position 2H 2008 2009 2010 2011
Oil Hedges *
Volume - bopd 18,000 11,000 4,000 -
Current Price Hedge - US$/bbl 70.85 63.56 116.93 -
Gas Hedges
Volume - mmscfd 65.2 44.9 16.6 3.1
Current Price Hedge - p/therm 54.2 56.1 60.3 71.0
*Oil hedges include an Energy Africa legacy position of 4,000 bopd at $29.30 until end
2009.
Operational Update
AFRICA CORE AREA
Tullow's African interests are in Uganda, Ghana, Gabon, C d'Ivoire, Congo (Brazzaville),
Equatorial Guinea, Mauritania, Namibia,
Senegal, Angola, Tanzania, Madagascar and Congo (DRC).
In the first half of 2008 Tullow continued to invest in its African producing and
development assets, with production averaging 41,580
boepd, a 6% increase from the same period in 2007. Significant progress is being made across
the African portfolio, specifically on the
Jubilee development project and the Ugandan Early Production System. Exploration and appraisal
programmes have continued to be successful
with a significant upgrade in Jubilee field resources in Ghana, three further discoveries in
the Butiaba region of Block 2 in Uganda and
successful appraisal of the Banda gas discovery in Mauritania.
Working interest production 1H 2008 Average Current Production (boepd)
(boepd)
Congo (Brazzaville) 4,590 4,600
C d'Ivoire 6,540 6,200
Equatorial Guinea 15,450 15,700
Mauritania 1,900 1,700
Gabon
Tchatamba 4,420 4,900
Niungo 4,270 3,900
Other Gabon 4,410 4,800
Africa Total 41,580 41,800
Ghana
Significant progress has been made on our exploration, appraisal and development programmes in
Ghana in the first half of 2008. In
particular, the successful Mahogany-2 exploratory-appraisal well has led to a material upgrade
in the resource potential of the Jubilee
field while the Phase One development programme remains on track to deliver first oil in 2010.The next drilling phase is planned for
September 2008 with the arrival of the Blackford Dolphin. The Eirik Raude rig is expected in
October and the recently contracted Attwood
Hunter is scheduled to start work in the second quarter of 2009. These rigs will focus on
additional appraisal of the Jubilee field,
development drilling and a further phase of exploration. The overall programme has the
potential to deliver significant upside over the next
12 months across Tullow's acreage in both Ghana and C d'Ivoire.
Jubilee Field Appraisal Programme
The drilling of the Mahogany-2 exploratory-appraisal well completed in May indicates that
the Jubilee field is a continuous
stratigraphic trap extending at least 11 km to the Hyedua-1 discovery well in the adjacent
Deepwater Tano licence. Combined hydrocarbon
columns in excess of 600 metres have been identified and the recoverable resources of the
field are now estimated to range from 500 million
barrels up to 1.8 billion barrels.
The lower sands of Mahogany-2 were production tested in June and flowed 36* API crude at a
rate of 5,200 bopd and approximately 5.3
mmscfd of associated natural gas. This test confirmed that each of these highly productive
wells will have the potential to produce at rates
in excess of 20,000 bopd when completed for production. A second test is close to completion
on the upper sands after which the Songa Saturn
rig goes off contract.
No gas cap was encountered in this well indicating the oil bearing reservoirs extend
further north from this location, with positive
implications for ultimate Jubilee field reserves. A further appraisal campaign will begin in
September 2008, with plans for a minimum of
three wells planned to help determine the further upside potential of the Jubilee field, prior
to initiating development drilling.
Jubilee Field Development and Well Planning
Development planning for the Jubilee field is progressing rapidly towards sanction with a
target of producing first oil in 2010. The
Jubilee partnership, with the support of the Ghanaian Government, has agreed on a first phase
of development focusing on the core area of
the field. Phase One will consist of approximately 15 production and injection wells tied back
to a Floating Production Storage and Offtake
vessel (FPSO) with a minimum production capacity of 120,000 bopd.
Tenders have been received and are being evaluated for production facilities (FPSO and
sub-sea equipment), and the preferred contractors
will be selected in the next few months. The project is expected to be sanctioned in the
fourth quarter of 2008, with tender results to date
supporting the objective of achieving first oil production in 2010. The facilities will
include the capability to re-inject produced gas,
thereby avoiding gas flaring. The Jubilee field has a potentially material associated gas
resource and the partnership is currently
developing plans for early export of gas to the Ghanaian market where significant energy
demand exists.
Based on the exceptionally positive drilling and test results to date it is now likely
that multiple phases of development will be
required to fully develop the Jubilee field. The data from the upcoming appraisal drilling
campaign will be incorporated into our overall
view of the field prior to development work commencing in 2009.
Exploration Activity
The Odum-1 exploration well, drilled in February 2008 in the West Cape Three Points block,
encountered a significant oil column with
resource potential of over 100 million barrels in good permeable reservoirs. This field will
be appraised by a 500 sq km extension of the
2007 Jubilee 3D/4D seismic survey and potentially by further drilling during 2009. Development
options for this field will be considered
following appraisal and in context of the overall Ghana development programme.
The Jubilee and Odum discoveries have established the Turonian and Campanian intervals as
working geological plays in the region. These
plays offer considerable upside potential across the West Transform Margin and have been
de-risked by these recent discoveries. In
particular, the Teak prospect in the West Cape Three Points licence and the Tweneboa prospect
in the Deepwater Tano licence have a combined
gross upside potential of over a billion barrels and Tullow expects both of these prospects to
be drilled in early 2009. Further exploration
prospects are under review in both Ghana and C d'Ivoire and are likely to be drilled as part
of the 2009 campaign.
The Ebony prospect in the Shallow Water Tano block (Tullow 31.5%) is expected to be
drilled by the West Ceres jack-up rig in the third
quarter of 2008.
Uganda and Congo (DRC)
Tullow has continued its 100% success rate in the Lake Albert Rift Basin having
encountered hydrocarbons in all 13 wells drilled. The
most recent drilling activity in the Butiaba region has resulted in three discoveries and has
de-risked a number of further prospects by
opening up a new deltaic play in the north of the basin. The near-shore campaign has continued
with the Kingfisher-2 well which has
encountered oil shows in zones interpreted as analogous to those seen in the Kingfisher-1
discovery. In addition, good progress is being
made towards the sanction of an Early Production System in the third quarter this year and
offshore drilling is on track to commence in mid
2009. Overall, excellent progress is being made with the exploration, appraisal and early
development programmes in the basin.
Butiaba Campaign - Blocks 1 & 2 (Tullow 50% and 100%)
Onshore drilling activity is currently focused on the Butiaba drilling campaign where over
20 leads and prospects have been identified
with upside potential of up to billion barrels in aggregate. To date, three wells have been
drilled in a nine-well campaign, Taitai-1,
Ngege-1 and Karuka-1, and all have encountered hydrocarbons at the objective levels. One well
is expected to be drilled per month and an
integrated campaign of appraisal and flow testing for the Butiaba area will be undertaken
later in the programme.
The Taitai-1 well, testing an escarpment fan play equivalent to those drilled in the
Kaiso-Tonya region, reached a total depth of 1,006
metres in May and encountered five metres of net gas pay and at least eight metres of net oil
pay. A thick section of oil-stained basement
was also encountered and provides upside potential both at Taitai-1 and elsewhere in the
basin. Pressure testing and sampling confirmed the
presence of moveable 30*API oil.
The Ngege-1 well, to evaluate the Victoria Nile delta play in the north of Block 2, was
drilled in June to a depth of 640 metres. The
well was located three kilometres from the crest of the Ngege structure and encountered over
five metres of net oil pay and nine metres of
net gas pay. Seismic interpretation indicates significant further potential within the Ngege
structure. This discovery has confirmed the
presence of a working hydrocarbon system in a new play fairway, thereby upgrading several
other prospects in both Block 2 and Block 1.
The third exploration well in the Butiaba Campaign, Karuka-1, commenced drilling on 28
June. The well, which is testing an escarpment
fan prospect 20 km north of Taitai-1 reached a total depth of 853 metres on 6 July. The well
has encountered oil in basal sands and logging
operations are ongoing. The next well in the Butiaba schedule is expected to be Kasamene-1, 20
km west of Ngege-1 in the Victoria Nile delta
play area.
In the Butiaba area all planned onshore 2D seismic data has now been acquired and the
current programme, which is focusing on the
nearshore and shallow water area of Block 2, is approximately 70% complete. This programme has
already validated many of the current
prospects and assisted in the identification of numerous additional leads, some of which
exhibit amplitude effects characteristic of
hydrocarbons.
Near-shore Campaign - Blocks 2 & 3A (Tullow 100% and 50%)
Following the suspension of the Ngassa-1 well in February, the Nabors 221 rig moved to
Block 3A to drill the Kingfisher-2 well. This
well is designed to appraise reservoir zones discovered by the Kingfisher-1 well and to
explore a deeper potential objective. As announced
on 30 June, the well has been drilled to a depth of 2,992 metres and excellent oil shows have
already been encountered and interpreted as
being potentially equivalent to a number of zones intersected by the Kingfisher-1 well. The
rig is now drilling ahead to the basal sands
target which is expected to be encountered during August at a depth of approximately 4,000
metres.
Following the Kingfisher programme, the rig is likely to move back to Block 2 to drill the
Ngassa prospect. A new onshore location has
been identified which reduces the operational complexity following significant difficulties
with earlier drilling. The environmental impact
study for this new location has been initiated and drilling is expected to commence towards
the end of the year.
Offshore Drilling
Preparations for offshore drilling during 2009 are continuing and Tullow is currently in
the process of awarding a Front End Engineering
and Design (FEED) contract. This work and the subsequent construction and mobilisation phases
are expected to deliver a drilling campaign
covering Blocks 2 and 3A in 2009.
Offshore prospect evaluation has to date focused on the interpretation of the 3D seismic
dataset over the greater Kingfisher/Pelican
complex, with encouraging results. The interpretation of the Pelican prospect area is
particularly encouraging as seismic amplitude
anomalies at numerous stratigraphic levels have been identified which are potentially
indicative of hydrocarbons. A number of new offshore
prospects have also been identified and are expected to form part of the offshore drilling
campaign.
Early Production System
The sanction of an Early Production System, utilising the discoveries in the Kaiso-Tonya
region, is at an advanced stage, with
government approvals expected in the third quarter 2008. The target for first oil from this
development remains 2009.
The project has been designed to produce around 4,000 bopd of heavy fuel oil and petroleum
products. A proportion of the heavy fuel oil
will be utilised in a local power generation plant with the balance and the petroleum products
being exported by truck into the local
market. The FEED contract has been awarded to Wood Group with the expectation that the full
contract award will be made following project
sanction and full Government approval. The construction of the local power generation and
transmission lines will be delivered by Jacobsen
Elektro with whom Tullow recently signed a Memorandum of Understanding.
The results of the appraisal drilling and 3D seismic survey, acquired in 2007 are being
incorporated into the reservoir model to
finalise the location of the development wells.
Congo (DRC)
Tullow also has interests in two prospective blocks on the Congo (DRC) side of the Lake
Albert Rift Basin, adjacent to the Group's
Ugandan acreage. While the validity of the award of these licences is currently being
disputed, Tullow has confidence in the integrity of
the original award process and its title to the licence and will continue to pursue all legal
and governmental avenues to finalise the
award.
Congo (Brazzaville)
Gross production from the M'Boundi field (Tullow 11%) in the first half of 2008 averaged
41,000 bopd from 59 production wells. The focus
on drilling water injection wells and upgrading the water injection facilities continues to
have a positive impact on overall reservoir and
production performance.
In January 2008, Tullow announced the sale of its interest in the field to the Korea
National Oil Company (KNOC) for a total cash
consideration of $435 million. The deal is subject to government approval and is expected to
complete later in 2008.
Equatorial Guinea
Performance from the Ceiba field (Tullow 14.25%) has continued to exceed expectations during
the first half of 2008 with gross production
averaging over 40,000 bopd. An infill drilling campaign is now complete and the installation
of flowline gas lift is underway to assist
production as water production from the wells increases.
Gross production from the Okume Complex (Tullow 14.25%) for the first half of 2008
averaged over 66,000 bopd as the field increased to a
facility constrained plateau rate of 75,000 bopd. The first phase of development of the Elon
field in the Okume Complex has now been
completed. Drilling continues on the Okume field, bringing the total well count for the
complex to 25.
Average gross production from these fields in 2008 is expected to average over 100,000
bopd.
C d'Ivoire
The success of the recent Espoir development programme has resulted in field production
being constrained by the capacity of the FPSO.An upgrade of the FPSO processing facilities is under way and is on schedule for completion in
2009.
Gross production from the Espoir fields (Tullow 21.30%) averaged over 30,000 boepd during
the first half of 2008 and is expected to
remain at approximately this level for the remainder of the year although this may be impacted
by the ongoing facility upgrade.
Exploration efforts continue to pursue both the Upper Cretaceous turbidite sandstone play,
analogous to the Jubilee discovery in Ghana,
and tilted Albian fault blocks similar to the Espoir field, along the West Africa Transform
Margin. Tullow holds equity in three exploration
blocks in C d'Ivoire where significant prospectivity remains to be tested as part of the 2009
drilling programme.
Blocks CI-107 and CI-108 were relinquished in May 2008.
Mauritania
Gross production from the Chinguetti field (Tullow 19.01%) is approximately 10,500 bopd, in
line with expectations. In May, a programme of
three well interventions was conducted to improve gas lift and reduce water production. The
full impact of this programme on field
production will be determined as the field is brought back on line after the recent annual
shutdown on the FPSO. The rig then spudded the
first of two infill wells, aimed at accessing additional reserves and production. The first
well, C19 has been successfully drilled and
encountered oil in the reservoir section; completion of the well is underway with first
production expected in early-September.
In April, an appraisal well was drilled on the Banda discovery (Tullow 21.6%), which
successfully encountered gas pay. The analysis of
this well resulted in the well being sidetracked to a more optimum location where 30 metres of
net gas and 11 metres of net oil were
intersected. The pressure testing and sampling indicated that the well is in communication
with the original discovery well some two
kilometres away. Results from both wells are now being evaluated to determine the gas volumes
in place and the extent of the underlying oil
rim. Further development options and appraisal options for the field are currently being
considered.
In Block 6, the Khop-1 exploration well was spudded in February and whilst only minor oil
shows were encountered, the well provided
important stratigraphic data on the prospective Cretaceous intervals, which will prove
invaluable as we progress our exploration of the
area. Evaluation of exploration opportunities across the entire area indicates the potential
for significant resources within the
under-explored Cretaceous section, where a series of prospects with total gross upside
resources of up to one billion barrels have been
recognised along previously unexplored play fairways.
Gabon
Production from Gabon averaged 13,100 bopd net to Tullow in the first half of 2008 and is
currently approximately 13,750 bopd. The two
main assets, Tchatamba (Tullow 25%) and Niungo (Tullow 40%) have continued to perform
strongly.
Production performance continues to improve on the Echira field (Tullow 40%) where
appraisal drilling with potential to add significant
reserve upside is planned for late 2008. Over the remainder of 2008, production will be
maintained at approximately 13,750 bopd through the
addition of first oil from Ebouri (Tullow 7.5%), commencement of production from Onal (Tullow
7.5% back-in) and a further 35 development
wells to be drilled on Tsiengui, Obangue, Oba and Onal fields
Namibia
The development of the Kudu main field area remains a key area of focus for Tullow. The Group
is also committed to proving and
commercialising the potentially significant reserves upside within the greater Kudu Licence
area. The Kudu-8 well, drilled in 2007, although
sub-commercial proved that the Kudu reservoir sequence is contained within a large
stratigraphic trap, indicating that gas is likely to be
present in any porous connected sands in the area. Current exploratory appraisal efforts are
therefore now focused on locating extensions of
the highly productive Kudu main field reservoir.
Whilst development concepts for Kudu continue to be primarily based on supplying gas to an
800 MW load power station in Namibia with
excess electricity being exported to the South African, the delays in commercial closure have
also resulted in alternative options being
actively considered. The changing global and regional energy environment has resulted in a
combination of local power options combined with
direct gas export having the potential to be commercially viable. The fast maturing marine CNG
technology is being actively pursued as it
potentially offers the means for managing both the local and export markets. Technical and
commercial studies are currently being conducted
to confirm the viability of this development option.
Cameroon
Tullow completed the sale of its 40% interest in the Ngosso concession to MOL on 2 July 2008.
EUROPE CORE AREA
Tullow's producing interests in Europe lie in the Southern Gas Basin of the UK North Sea.In addition Tullow also has offshore
exploration interests in the Netherlands and Portugal.
Working interest production(1) 1H 2008 Average Current Production (boepd)
(boepd)
CMS Area 15,220 13,000
Thames-Hewett Area 8,360 8,200
UK Total 23,580 21,200
(1) Includes condensate
UK
During the first half of 2008 Tullow has benefited from a significant rise in UK gas pricing.The gas price outlook for the remainder of
2008 and beyond is also very strong and against this backdrop incremental investment
opportunities in the UK are now being actively
progressed. The Group has also agreed the sale of non-core assets that will raise £245
million, these include non-core
exploration/development assets in the CMS area and an operated interest in the Hewett-Bacton
producing assets and terminal.
Tullow's net UK production averaged 23,580 boepd in the first half of 2008, 13% lower than
the same period in 2007. This reduction was
primarily a result of natural decline in mature fields exacerbated by poor weather in the
first quarter which hampered intervention visits.However, the current reservoir performance of the fields in both the Thames-Hewett Area and
the CMS assets are generally in line with
expectations. Average production from the UK in 2008 is expected to be in the range 22,000 to
24,000 boepd.
In the Thames-Hewett area, the development of the Tullow-operated Wissey discovery (Tullow
62.5%) in Block 53/4d is ongoing. The well
has been drilled and completed and the facilities tie-in is underway with first gas forecast
for August at an initial rate of 75 mmscfd. The
Thames co-venturers have also approved the drilling of a development well in the Bure field to
accelerate production and are currently
sourcing a rig for early 2009.
The Hewett Complex has now been fully de-manned yielding considerable cost savings. The
appraisal-development well targeting a deep
Rotliegendes reservoir in the Hewett main field is scheduled for August 2008. However, as part
of Tullow's ongoing portfolio
rationalisation, the Group announced the proposed sale of its entire 51.68% interest in the
Hewett-Bacton development to Eni for a
consideration of £210 million. The sale is expected to be completed by the end of the year.
In the CMS Area the operated Schooner (Tullow 90.35%) and Ketch (Tullow 100%) fields
continue to produce strongly and following a review
of infill opportunities further drilling is now planned for 2009. The Ketch-10 well is
expected to be spudded in early 2009 and we are
evaluating a second well to be drilled as part of the same programme with the overall
objective of accessing currently undepleted
compartments within the greater Ketch field area. In addition the non-operated fields are also
performing strongly and further drilling is
planned, including the Murdoch MD11 infill well and two infill wells on the highly productive
Boulton B reservoir. The operator expects to
spud the first of these wells in the fourth quarter of 2008. With our partners we have also
made good progress on the development plan for
the Harrison project and sanction is expected by the end of the year.
In April 2008 Tullow sold peripheral exploration and development interests in its CMS
assets to Venture Production for a consideration
of £35 million. This transaction completed on 24 June 2008 and a profit of £15 million will
be recognized in the first half results.
Netherlands
Tullow has rapidly grown its acreage position in the Netherlands and now holds nine operated
blocks and one non-operated block now held. The
majority of this acreage falls in Quadrant E, adjacent to the Group's UK CMS acreage where the
Carboniferous play has been successfully
exploited over the last few years. The same Carboniferous play extends into Quadrant E and has
been identified as being highly prospective
and under-explored. Current work is focused on seismic data reprocessing and geological study
work ahead of potential drilling campaigns in
2009 and 2010.
SOUTH ASIA CORE AREA
In South Asia, Tullow has exploration, development and production interests in Pakistan
and Bangladesh and exploration interests in
India.
Working interest production(1) 1H 2008 Average Current Production (boepd)
(boepd)
Pakistan 1,890 2,000
Bangladesh 3,500 3,500
South Asia Total 5,390 5,500
India
Drilling operations on Block CB-ON/1 (Tullow 50%) have commenced. A firm programme of four
wells has been approved, along with two
contingent wells. The wells will target a range of different play types within the rift basin.
The C1 well in the east of the block commenced on 27 June and is expected to take 30 days
to reach total depth. Reservoirs targeted
include prospective Middle Eocene and Early Eocene sands between approximately 650 metres and
750 metres and Early Palaeocene sands below
1,100 metres. The well is currently at 642 metres preparing for logging prior to running
casing above the first target sequence.
The next well will target prospect G1 in the north of the block.
Bangladesh
Gross production from the Bangora field (Tullow 30%) remains steady at 70 mmscfd. The
second phase of development is well under way and
is scheduled to be completed in the third quarter this year: this involves the upgrade in
capacity of the plant and the tie-back of the
Bangora-3 well. When completed, the plant capacity will increase to 120 mmscfd and field
production is expected to increase to in excess of
100 mmscfd. In addition, Tullow has applied for a shallow water block in the Bangladesh third
licensing round and is awaiting notification
from Petrobangla.
Pakistan
Gas production from the Chachar field (Tullow 75%) continues at a rate of 14 mmscfd, whilst
production from Sara/Suri continues at a low
level.
Tenders have been issued for a rig to drill an exploration well on the Kohat Block (Tullow
40%) in Q4 2008. Geological fieldwork has
been completed on the Kalchas Block (Tullow 30%) and plans are being finalised to commence
seismic operations.
SOUTH AMERICA CORE AREA
In South America, Tullow has exploration interests in Suriname and French Guiana and
continues to negotiate Production Sharing Contracts
for two key blocks offered in Trinidad's 6th exploration licensing round.
Trinidad
The Production Sharing Contract for Block 2ab (Tullow 32.5%) was initialled on 15 May and it
is anticipated that the agreement will be
signed in Q3 2008. The work programme for the licence includes the acquisition of 864 square
kilometres of 3D seismic and the drilling of
four wells over the next three years. Negotiations are continuing on the Guayaguayare Block
(Tullow 65-80%).
Suriname
The second phase of exploration drilling on Uitkijk (Tullow 40%), involving five exploration
wells, is scheduled to commence in Q3 2008.This will be followed by a 5 well exploration well programme on the Coronie Block (Tullow 40%)
later in 2008.
French Guiana
Block 2 in French Guiana (Tullow 97.5%) contains the high impact but high risk Matamata
prospect, a very large dome shaped structure in the
north western part of the block. Gaz de France recently elected not to participate any further
in the licence and Tullow is now focused on
bringing in a partner to dilute its interest whilst securing a rig to allow drilling to
commence on the block.
Summary of Planned Second Half 2008 Exploration and Appraisal Activity
Country Block Prospect Interest Spud Date
Uganda Blocks 1&2 Butiaba campaign 50%/100% In progress
Uganda Block 3A Kingfisher-2 50% In progress
India CB-ON/1 4-well campaign 50% In progress
Ghana Deepwater Tano Hyedua-2 49.95% (op) Q3 2008
Ghana Shallow Tano Ebony 31.5% (op) Q3 2008
Ghana WCTP Mahogany-3 22.9% Q4 2008
Ghana WCTP Mahogany-4 22.9% Q4 2008
Uganda Block 2 Ngassa-2 100% (op) Q4 2008
Suriname Uitkijk & Coronie 10 Shallow wells 40% Q4 2008
Pakistan Kohat Kohat East 40% (op) Q4 2008
Mauritania PSC A Banda E 24.3% Q4 2008
CONFERENCE CALLS
Conference calls hosted by Aidan Heavey (Chief Executive), Paul McDade (Chief Operating
Officer), Angus McCoss (Exploration Director)
and Tom Hickey (Chief Financial Officer) will be held today at 09:30 (BST) and at 15:00
(BST).
To access the calls please dial the appropriate number below shortly before the call and
ask for the Tullow Oil plc conference call. A
replay facility will be available three hours after the conference call until 16 July. The
telephone numbers and access codes are:
European Conference Call Replay Facility
UK Participants 020 7806 1956 UK Participants 020 7806 1970
Irish Participants 01 655 8886 Irish Participants 01 659 8321
Access Code 9312438ž
U.S. Conference Call Replay Facility
Domestic Toll Free +1 800 762 8795 Domestic Toll Free +1 800 406 7325
Toll +1 480 629 9041 Toll +1 303 590 3030
Access Code 3898555ž
FOR FURTHER INFORMATION CONTACT:
Tullow Oil plc
(+44 20 8996 1000)
Aidan Heavey
Tom Hickey
Chris Perry
Citigate Dewe Rogerson
(+44 207 638 9571)
Martin Jackson
George Cazenove
Murray Consultants
(+353 1 498 0300)
Joe Murray
Ed Micheau
Disclaimer
This announcement contains certain operational and financial information in relation to
the first half of 2008 that is subject to final
review and has not been audited. Furthermore it contains certain forward-looking statements
that are subject to the usual risk factors and
uncertainties associated with the oil & gas exploration and production business. Whilst the
Group believes the expectations reflected herein
to be reasonable, the actual outcome may be materially different owing to factors either
within or beyond the Group's control, and
accordingly no reliance may be placed on the figures contained in such forward looking
statements.
For further information please refer to our website at www.tullowoil.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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