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RNS Number : 5816W
Tullow Oil PLC
28 April 2016
AGM Trading Update
28 April 2016 - Tullow Oil plc (Tullow) issues the following
Trading Update, for the period 1 January to 28 April 2016. This
statement is issued in advance of the Group's Annual General
Meeting which is being held at Tullow Oil plc, Building 9 Chiswick
Park at 12pm today. The Group will announce its Trading Statement
and Operational Update on 30 June 2016. Half year results will be
announced on 27 July 2016.
Highlights
-- Group working interest production for the first quarter
averaged 59,200 bopd for West Africa and 6,500 boepd for Europe.
This was marginally below expectations due to the need to implement
new Jubilee off-take procedures at the end of March following
damage to the Jubilee FPSO turret bearing.
-- New Jubilee off-take procedures being implemented with
off-take and production to resume in the next few days. Group
production guidance will be re-issued once new operating
arrangements have stabilised. No material impact on future Group
cash flow is currently expected due to continued production and
appropriate insurance policies in place.
-- The TEN Project is now over 90 per cent complete and first
oil remains on target for July/August 2016.
-- East Africa Governments agreed to develop resources in Uganda
and Kenya with separate export pipelines.
-- Ongoing assessment of recently completed South Lokichar
appraisal programme in Kenya indicates potential to increase
recoverable resources up to 750 million barrels with further
exploration potential supporting an upside of 1 billion
barrels.
-- Working hydrocarbon system discovered with the Cheptuket-1
exploration well in Kenya's Kerio Valley Basin.
-- Routine six-monthly Reserve Based Lending redetermination
process completed. Debt capacity of $3.5 billion secured.
-- Revolving Corporate Facility extended by 12 months to April
2018, with an initial committed amount of $800 million as of April
2017. An accordion feature has been agreed with Lenders for an
additional amount of $200 million.
-- End of April net debt estimated to be c.$4.5 billion and
unutilised debt capacity and free cash of c.$1.3 billion. Capex
guidance for full year 2016 revised down by c.$0.1 billion to
c.$1.0 billion with further savings expected.
Aidan Heavey, Chief Executive Officer, Tullow Oil plc, commented
today:
"It has been a very busy start to the year for Tullow. In West
Africa, we have made excellent progress with the TEN Project which
remains on time and on budget while a highly experienced project
team are dealing with the turret issues on the Jubilee field FPSO.
Following the decision of the Kenyan and Ugandan Presidents to
develop standalone export pipelines, we now have much greater
clarity and certainty around oil production in both countries. In
Kenya, our appraisal campaign has also been very successful with
ongoing assessment indicating increased resource estimates.
Finally, I am very pleased to announce the completion of our RBL
re-determination and the extension of our RCF. This demonstrates
the continued strong support of our lending banks and is an
important sign of confidence in Tullow's excellent asset
portfolio."
Operations Update
wEST Africa (including Europe production)
Working interest oil production in West Africa averaged 59,200
bopd for the first quarter 2016. The Group's portfolio of
non-operated assets continued to perform well over the period with
production in line with expectations. Jubilee production was below
expectations due to increased downtime associated with the
implementation of revised operating procedures following a problem
being identified with the FPSO turret bearing. In light of this
issue, full year 2016 average working interest production is likely
to be below current guidance of 73-80,000 bopd and updated guidance
will be provided when the new operating procedures have been fully
implemented and stabilised. However, Tullow does not currently
expect this issue to have a material impact on future cash flow,
due to the imminent resumption of production and appropriate
insurance policies in place.
A technical investigation of the Jubilee FPSO turret bearing has
confirmed that it is no longer able to rotate as originally
designed leading to new operating procedures being implemented.
These include the vessel being put on "heading control" which
requires the use of tugs to minimise vessel rotation and revised
offtake procedures, including the use of a dynamically-positioned
shuttle tanker and a storage tanker. Revised operating procedures
are being implemented at the Jubilee field with new equipment and
approvals in place. Sea water injection resumed on 23 April 2016
and offtake is expected to re-commence in the next few days with
production to follow shortly thereafter. These activities and the
two week planned maintenance shutdown have impacted gross
production from the Jubilee field which averaged 80,300 bopd
(28,500 bopd net), for the first quarter 2016.
A project team has been established to review the root cause of
the problem and determine the optimum design of the permanent
solution of the Jubilee turret issue. A decision on the solution is
expected in the next few months. Tullow has a comprehensive package
of insurances in place, including Hull and Machinery insurance,
procured on behalf of the Joint Venture which covers relevant
operating and capital costs associated with damage to the FPSO, and
Business Interruption insurance which covers consequent loss of
production and revenue. Claims under both policies have been
notified to our insurers.
The TEN Project is making excellent progress and remains within
budget and on schedule with first oil expected between July and
August 2016. The project is now over 90 per cent complete and
during the first quarter of 2016 a number of significant milestones
have been achieved. The FPSO Prof. John Atta Mills sailed from
Singapore on 23 January and arrived in Ghanaian waters on 2 March.
The FPSO mooring operations are complete, the vessel is now being
connected to the subsea infrastructure via the risers and
umbilicals and the commissioning of these systems is under way. Six
of the eleven pre-drilled wells are now completed, with the seventh
completion under way. The overall subsea installation campaign,
comprising approximately 35,000 tonnes of equipment, has also
reached over 90 per cent completion. Given the mid-year start-up
and ramp-up in the second half, Tullow estimates that TEN average
annualised production in 2016 will be around 23,000 bopd gross
(net: 11,000 bopd) as previously guided.
In Europe, average working interest gas production for the first
quarter 2016 is in line with expectations at 6,500 boepd with the
Group's portfolio of non-operated assets performing well.
east africa
In Kenya, the result from the basin opening Cheptuket-1 well in
the Kerio Valley Basin was announced in March. The well encountered
good oil shows, seen in cuttings and rotary sidewall cores, across
an interval of over 700 metres and post-well analysis is still in
progress. Following this encouraging basin opening well and the
successful Etom-2 result in the South Lokichar Basin in December
2015, further exploration activities are being evaluated.
At a meeting between various East African Governments in Kampala
on 23 April 2016, it was agreed that Uganda and Kenya would develop
separate, standalone export pipelines for their oil resources.
Tullow welcomes the clarity and certainty that this decision
brings. In Uganda, Tullow will now work with the Government of
Uganda and our partners on the development of these significant
resources through a Uganda-Tanzania pipeline. In Kenya, the Group
continues to examine the data from its recently concluded appraisal
campaign and our initial assessment indicates recoverable resources
of up to 750 million barrels of oil in the South Lokichar Basin.
The Group continues to review options for re-starting the
exploration campaign in this basin to de-risk the overall upside
potential of 1 billion barrels. Tullow will now work with the
Government of Kenya and our partners on a range of options for the
independent development of these resources including early
production using existing infrastructure which would provide
valuable reservoir data ahead of a full field development with an
export pipeline.
New Ventures
In Norway, drilling of the Wisting Central 2 long reach
horizontal well in the Barents Sea was completed in early April and
successfully explored and appraised the Wisting South & Wisting
West segments of the field and included a production test in the
Stø formation. The well was drilled approximately 5 kilometres
south-west of the Wisting discovery well. The well encountered an
oil column of 22 metres in a 1,402 metres horizontal section with
1,250 metres of net light oil pay. A constrained production test
was carried out with a flow rate of approximately 5,000 boepd
demonstrating excellent reservoir properties and valuable
development potential. The well results are expected to provide an
increase of in-place volumes. The next operated well planned in
Norway is on the Rome prospect in PL776, which is expected to
commence in July 2016.
In Jamaica, a 2D seismic survey has been completed over the
32,056 sq km Walton Morant licence. The results of the survey are
currently being analysed to delineate potential plays in shallow
water. In February 2016, Tullow farmed down a 35% working interest
in Block 15 in Uruguay to Statoil with government approval expected
shortly.
Financial Update
(MORE TO FOLLOW) Dow Jones Newswires
April 28, 2016 02:01 ET (06:01 GMT)
Tullow and its lending banks have completed the routine
six-monthly Reserve Based Lending (RBL) redetermination process and
agreed a twelve month extension to the maturity of the corporate
facility. Tullow secured available debt capacity of US$3.5 billion
under the RBL and Tullow's lending banks also agreed a further
amendment to the financial covenant on the RBL and the Corporate
Facility. The first amortisation of the RBL is scheduled in October
2016, when commitments will reduce to $3.25bn. The Corporate
Facility has been extended to April 2018. The current commitments
in April 2017 are $800 million and an accordion feature has been
agreed with Lenders for an additional amount of $200 million.
These successful banking outcomes demonstrate the continued
support of the Group's lending banks during this period of low oil
prices and the high quality of Tullow's asset portfolio.
The business remains well funded and at the end of April 2016,
net debt is estimated at approximately $4.5 billion and unutilised
debt capacity and free cash at approximately $1.3 billion.
The Group's 2016 forecast capital expenditure has been reduced
from $1.1 billion to $1.0 billion following the identification of
savings across the portfolio with further reductions expected.
As at 25 April 2016, the Group's oil hedge position to the end
of 2018 was as follows:
Hedge position 2016 2017 2018
======================================= ======= ======= ======
Oil hedges
======================================= ======= ======= ======
Volume (bopd) 38,749 27,000 9,500
======================================= ======= ======= ======
Average floor price protected ($/bbl) 73.10 68.36 62.09
======================================= ======= ======= ======
MTM value at 31 March 2016 303.5 204.0 42.6
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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 Relations) Martin Jackson Pat Walsh
James Arnold (Investor Relations) Shabnam Bashir Joe Heron
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). The Group has interests in over 120
exploration and production licences across 22 countries which are
managed as three regional business units: West & North Africa,
South & East Africa and Europe, South America and Asia.
Follow Tullow on:
Twitter: www.twitter.com/TullowOilplc YouTube:
www.youtube.com/TullowOilplc
Facebook: www.facebook.com/TullowOilplc LinkedIn: www.linkedin.com/company/Tullow-Oil
Website: www.tullowoil.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
April 28, 2016 02:01 ET (06:01 GMT)
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