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RNS Number : 7537R
Tullow Oil PLC
01 July 2015
Tullow Oil plc - Trading Statement & Operational Update
Actions taken in the first half to re-set the business, improve
funding liquidity and cut costs
Strong West Africa oil production in the first half; 2015 full
year guidance increased
TEN Project remains within budget and on schedule for first oil
in mid-2016
1 July 2015 - 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 2015. This is
in advance of the Group's Half Year Results, which are scheduled
for release on Wednesday 29 July 2015. The information contained
herein has not been audited and may be subject to further
review.
COMMENTING TODAY, AIDAN HEAVEY, CHIEF EXECUTIVE SAID:
"We have taken a number of important steps to ensure that Tullow
remains on a firm financial footing. This approach is paying off
with good progress across the business in the first half of 2015.
Our major oil producing assets in West Africa have performed
strongly and we have upgraded our 2015 full year production
forecast accordingly. The TEN Project remains within budget and on
track for first oil in mid-2016. In East Africa, we are making
steady progress towards project sanction with good appraisal and
test results from our wells in Northern Kenya and strong support
from the Governments of Kenya and Uganda. Finally, we continue to
build our inventory of exploration prospects to provide options
when market conditions improve."
Operational Update
PRODUCTION
In the first half of 2015, West Africa working interest oil
production was within guidance averaging 66,500 bopd. As a result
of strong performance from Jubilee and the non-operated portfolio,
2015 working interest production guidance for West Africa has been
increased to 66,000-70,000 bopd from 63,000-68,000 bopd. In Europe,
working interest gas production for the first half of 2015 was
within guidance averaging 8,100 boepd. This figure includes the
impact of the completion of a Netherlands gas asset sale on 30
April 2015 to AU Energy. Average working interest production
guidance in Europe, having been adjusted by 1,000 boepd to account
for this sale, is now 6,000-8,000 boepd from 6,000-9,000 boped.
WEST AFRICA
Jubilee production performance has remained strong averaging
around 105,000 bopd gross (37,300 bopd net) during the first half
of 2015. Final commissioning of the onshore gas processing facility
was completed in March 2015 and since then gas exports from the
Jubilee field have averaged around 80 mmscfd. Tullow plans to drill
two additional Phase 1A wells and the first of these, J-37, has
commenced drilling. In light of the performance of the Jubilee
field year to date and the decision to have a planned one week
shutdown in the second half of 2015, Tullow has increased its full
year 2015 average working interest production guidance for the
field to 103,000 bopd (36,500 bopd net). Work continues to
incorporate the Mahogany, Teak and Akasa resources in the Greater
Jubilee Full Field Development Plan which the partnership plans to
submit to the Government of Ghana by year-end.
The TEN Project continues to make excellent progress and remains
within budget and on schedule for first oil in mid-2016. Important
milestones on the project achieved during the second quarter
included: the running of the first two of ten well completions; the
installation of the turret on the bow of the FPSO; the first
in-country fabrication works made ready for the start of the
offshore installation campaign in mid-July; and specialist subsea
manifolds and umbilicals from the USA made ready for transport to
Ghana. Following the 25 April ruling from the Special Chamber of
the International Tribunal of the Law of the Sea (ITLOS) on
Provisional Measures, discussions are ongoing with the Government
of Ghana on their implementation and no impact is expected on
project activity to first oil.
In Gabon, due to ongoing licence discussions with the Government
regarding the Onal fields, Tullow has not included Onal
(approximately 2,000 bopd net), in its first half 2015 Group
production figures. However, an agreement with the Government is
expected and Tullow has retained the annual production from the
fields in its Group 2015 full year guidance.
EAST AFRICA
In East Africa, progress is being made on the decision regarding
the route of the export pipeline with the Technical Consultant
having submitted its final feasibility report to the Governments of
Uganda and Kenya. It is expected that the Governments will shortly
agree on the preferred routing which will enable the next phase of
work on the pipeline to progress.
Kenya operations have been focused on the South Lokichar Blocks
10BB and 13T where appraisal drilling and Extended Well Tests (EWT)
are continuing. In May, the Amosing EWT commenced and five
reservoir zones in the field were tested across two wells, being
separately produced in one well while pressure responses were
measured in the other well. Production from all five zones was at a
combined average constrained rate of 4,300 bopd under natural flow
conditions and a cumulative volume of 30,000 barrels of oil was
produced into storage. The pressure data supports significant
connected oil volumes and confirms lateral reservoir continuity
between the wells which is positive for the future development of
the Amosing field. Having completed the production testing,
preparations are now under way for water injection tests into each
of the five completed reservoir zones in Amosing-2A. These tests
will validate the viability of water flood reservoir management and
the oil recovery assumptions for the Field Development Plan.
Elsewhere in the South Lokichar basin, preparations for the
Ngamia field EWT are under way. Multi zone completions were
installed in the Ngamia-8, Ngamia-3 and Ngamia-6 wells. Initial
rig-less flow testing during clean-up was at a combined maximum
rate of 3,900 bopd and 1,740 bopd of 30 to 33 degree API oil for
Ngamia-8 and Ngamia-3 with Ngamia-6 clean-up flow testing ongoing.
These initial results are very encouraging.
The PR Marriott 46 rig spudded the Ngamia-9 appraisal well on 13
June 2015. Following this well, the rig will then move to drill the
Twiga-3 and Amosing-5 appraisal wells, completing the 2015
appraisal drilling activities. In the third quarter of 2015, a
basin testing exploration well is planned at Cheptuket in Block
12A. The well will test a basin bounding structural closure in a
similar structural setting to the successful discoveries along the
western bounding rift basin fault in the South Lokichar basin.
In Uganda, progress has been made on several fiscal matters
which it is hoped will enable substantive progress to be made
towards the sanction of the Lake Albert oil development. On 11 June
2015, the Government announced that it had amended the VAT Act to
relieve oil exploration and development from VAT. On 22 June 2015,
following constructive discussions with the Government of Uganda
and the URA, Tullow announced that it had agreed to pay $250
million in full and final settlement of its CGT liability for the
farm-downs to Total and CNOOC that completed in 2012. This sum
comprises $142 million that Tullow paid in 2012 and $108 million to
be paid in three equal installments. The first of these was paid
upon settlement and the remainder will be paid in 2016 and
2017.
EUROPE AND SOUTH AMERICA
In Norway, Tullow completed the Bjaaland exploration well in May
with only residual oil shows encountered. The well was plugged and
abandoned. The Leiv Eiriksson semi-submersible drilled the Bjaaland
well and moved to the Tullow operated Zumba prospect which
completed drilling in June and was plugged and abandoned as a dry
hole.
Tullow has also been actively managing its equity position and
exposure to drilling costs in Norway across a number of licences.
Completed farmdown transactions resulted in a reduction to Tullow's
equity in the Zumba and Hagar prospects to 40% and 10%
respectively, subject to Government approval.
In the Netherlands, Tullow completed the sale of its operated
and non-operated interests in the L12/15 area and Blocks Q4 and Q5
to AU Energy on 30 April 2015. The consideration was EUR64 million
for the sale of approximately 1,500 boepd. On 5 June 2015, a
farmdown to GDF Suez E&P Nederland completed resulting in the
sale of 30% equity and the operatorship of Exploration Licences
E10, E11 (including Tullow's Vincent discovery), E14, E15c and
E18b. Following these and previous deals, Tullow no longer holds
any operated licences in the UK or Netherlands.
In the Caribbean-Guyanas, Tullow has been very active maturing
its exploration opportunities in the region. In May, the Spari-1
well in Suriname commenced drilling with a result expected in
August. In Jamaica, where Tullow has a significant offshore acreage
position, a bathymetry survey has been completed on the Walton
& Mourant Blocks. The survey results provided indications of
possible seeps on which to position drop cores and this operation
has commenced.
Trading Statement Guidance
Guidance is provided in relation to Tullow's half year reporting
to 30 June 2015 in advance of the Group's Half Year Results release
on 29 July 2015. Guidance figures are subject to change.
SALES, REVENUE AND GROSS PROFIT
1H 2015 1H 2014
=================================================== ========= ============
West Africa working interest
production (bopd) 66,500 63,900
--------------------------------------------------- --------- ------------
Europe working interest
production (boepd) 8,100 14,500
--------------------------------------------------- --------- ------------
Sales volumes (boepd) 66,500 73,200
--------------------------------------------------- --------- ------------
Total revenue ($ bn) 0.8 1.3
--------------------------------------------------- --------- ------------
Gross profit ($ bn) 0.3 0.7
--------------------------------------------------- --------- ------------
Administrative expenses
($ bn) 0.1 0.1
--------------------------------------------------- --------- ------------
Pre-tax operating cash flow
(before working capital)
($ bn) 0.5 0.9
=================================================== ========= ============
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: The decline of Europe working interest production
and sales volumes can be attributed to the farm-downs
of the Q&L Blocks (Netherlands) in 1H 2015 and of
Schooner and Ketch (UK) in 2014.
Note 3: Administrative expenses (G&A) are essentially
flat in 1H 2015 as the impact of organisation simplification
changes will not start to be realised until 2H 2015.
Tullow is on track to achieve its $500 million savings
target over 3 years.
REALISED PRICES
1H 2015 1H 2014
=================================================== ========= ============
1H 2015 Realised post
hedge oil price ($/bl) 71.4 106.7
--------------------------------------------------- --------- ------------
1H 2015 Realised post
hedge gas price (p/therm) 46.2 55.2
=================================================== ========= ============
HEDGING INSTRUMENTS
1H 2015 1H 2014
============================== ========
(Loss)/gain on hedging
instruments ($m) (50) (18)
======================== ===== ========
Note 4: The $50m loss is an estimate at 31 May 2015; the actual
period end figure to be reported in the Half year results may
differ. The $50m loss is in relation to the changes in time value
of the Group's commodity derivative instruments over the last 6
months, driven by changes in implied volatility and the movement in
the forward curve during the period. As at 29 May 2015, the Group's
derivative instrument had a positive fair value of $270 million,
inclusive of deferred premium.
HEDGING POSITION (as at 29 June 2015) 2H 2015 2016 2017 2018
========================================= ======== ======= ======= ======
Oil Volume (bopd) 34,500 31,257 19,500 5,000
========================================= ======== ======= ======= ======
Average Floor price protected ($/bbl) 85.98 79.29 76.68 68.04
========================================= ======== ======= ======= ======
Gas Volume (mmscfd) 3.73 0.62
========================================= ======== ======= ======= ======
Average Floor price protected (p/therm) 55.00 63.00
========================================= ======== ======= ======= ======
EXPLORATION WRITE OFF
Pre-tax write off Tax effect Net write off
=========================== ================== =========== ==============
1H 2015 activity ($m) 75 (37) 38
--------------------------- ------------------ ----------- --------------
Prior years activity ($m) 10 (8) 2
--------------------------- ------------------ ----------- --------------
1H 2015 Total ($m) 85 (45) 40
=========================== ================== =========== ==============
Note 5: During 1H 2015 the Group spent $0.15 billion, including
Norway exploration costs on a post tax cash basis, on exploration
and appraisal activities, and expects to write off approximately
$38 million in relation to this expenditure. The Group expects to
write-off approximately $2 million of prior year expenditure in
Norway. Therefore, the total net exploration write-offs for 1H 2015
are expected to be approximately $40 million. This will be shown in
the income statement as a $85 million exploration write-off and an
income tax credit of $45 million in relation to tax relief received
in respect of Norwegian expenditure.
LOSS ON DISPOSAL & RESTRUCTURING
COSTS
1H 2015 1H 2014
==================================== ======== ========
Loss on disposal ($m) 50 115
------------------------------------ -------- --------
Restructuring costs (gross) 47 -
($m)
------------------------------------ -------- --------
Restructuring costs (net) 17 -
($m)
==================================== ======== ========
Note 6: The loss on disposal relates to the farm-down of the
Q&L blocks in the Netherlands, where $55m net of adjustments
was received in cash.
Note 7: Gross restructuring costs are the total costs Tullow is
expecting to occur in respect of the simplification project
announced in November 2014. Net restructuring costs represent the
portion of these costs that relate to corporate G&A activities
that have not been recharged to capital projects, operating costs
or partners.
TAXATION
1H 2015 1H 2014
===================================== =================== ======================
Tax Charge ($m) 60 66
===================================== =================== ======================
Note 8: After adjusting for exploration write-offs,
impairments, related deferred tax benefits, and
profits/losses on disposal, the Group's underlying
effective tax rate is between 30-35%. With the inclusion
of these items the Group's net tax charge in the
income statement is a charge of $60m, which includes
a $108m prior year charge for Ugandan CGT.
CAPITAL EXPENDITURE
2015 full
1H 2015 year
===================================== =================== ======================
Capital expenditure
($ bn) 0.9 1.9
------------------------------------- ------------------- ----------------------
E&A/D&O split
(%) 15/85 10/90
===================================== =================== ======================
Note 9: Capital expenditure excludes acquisition
costs and includes Norway exploration costs on a
post tax cash basis.
DEBT SUMMARY
As at 30 Jun
As at 30 Jun 2015 2014
===================================== =================== ======================
Net Debt ($bn) 3.6 2.8
------------------------------------- ------------------- ----------------------
Facility Headroom
($bn) 2.1 2.3
------------------------------------- ------------------- ----------------------
Free Cash ($bn) 0.2 0.2
------------------------------------- ------------------- ----------------------
Committed Bank
Facilities ($bn) 5.0 4.75
------------------------------------- ------------------- ----------------------
Corporate Bonds
($bn) 1.3 1.3
===================================== =================== ======================
Note 10: On 19 March 2015 Tullow arranged a $0.2bn increase in
commitments on its Reserves Based Lending Facility and a $0.25bn
increase in commitments on its Revolving Corporate Facility.
Note 11: Committed bank facilities include an Exploration
Finance Facility of c.$300m, a working capital facility relating to
exploration expenditure on our Norwegian exploration licences.
GROUP AVERAGE WORKING INTEREST PRODUCTION (1)
1H 2015 2015 Full Year
Actual (kboepd) Forecast (kboepd)
======================= ===================================================== ===========================================
Ghana 37.3 36.5
======================= ===================================================== ===========================================
Equatorial Guinea
----------------------- ----------------------------------------------------- -------------------------------------------
Ceiba 3.0 2.8
----------------------- ----------------------------------------------------- -------------------------------------------
Okume 6.1 5.5
======================= ===================================================== ===========================================
Total
Equatorial
Guinea 9.1 8.3
======================= ===================================================== ===========================================
Gabon
----------------------- ----------------------------------------------------- -------------------------------------------
Tchatamba 5.2 4.8
----------------------- ----------------------------------------------------- -------------------------------------------
Limande 2.1 2.6
----------------------- ----------------------------------------------------- -------------------------------------------
Etame
Complex 1.4 1.6
----------------------- ----------------------------------------------------- -------------------------------------------
Other Gabon 4.1 6.1
======================= ===================================================== ===========================================
Total Gabon 12.8 15.1
======================= ===================================================== ===========================================
Côte d'Ivoire 3.9 4.3
======================= ===================================================== ===========================================
Congo (Brazzaville) 2.2 2.2
======================= ===================================================== ===========================================
Mauritania 1.2 1.1
======================= ===================================================== ===========================================
West Africa sub-total 66.5 68.0
======================= ===================================================== ===========================================
UK 3.9 3.4
======================= ===================================================== ===========================================
Netherlands 4.2 3.6
======================= ===================================================== ===========================================
Europe sub-total 8.1 7.0
======================= ===================================================== ===========================================
GROUP TOTAL 74.6 75.0
======================= ===================================================== ===========================================
(1) Includes condensate
CURRENTLY PLANNED 2015 EXPLORATION AND APPRAISAL ACTIVITY
Country Block/Licence Prospect/Well Interest Spud Date
======================== =============== ==================== ========== ===========
WEST AFRICA
========================================= ==================== ========== ===========
Gabon Nziembou Igongo-1 test 40% In progress
------------------------ --------------- -------------------- ---------- -----------
EAST AFRICA
========================================= ==================== ========== ===========
Kenya 12A Cheptuket 65% (op) Q3 2015
(ex-Lekep)
------------------------ --------------- -------------------- ---------- -----------
10BB Amosing-5 50% (op) Q3 2015
appraisal
---------------------- --------------- -------------------- ---------- -----------
10BB Ngamia-9 appraisal 50% (op) In progress
--------------- -------------------- ---------- -----------
13T Twiga-3 appraisal 50% (op) Q3 2015
---------------------- --------------- -------------------- ---------- -----------
EUROPE, SOUTH AMERICA
& ASIA
========================================= ==================== ========== ===========
Norway PL642 Hagar 10% Q3 2015
------------------------ --------------- -------------------- ---------- -----------
Netherlands J09 Alpha-North 9.95% Q3 2015
------------------------ --------------- -------------------- ---------- -----------
K15 FG-SE-B appraisal 9.95% In progress
---------------------- --------------- -------------------- ---------- -----------
K15 FI-N 9.95% In progress
---------------------- --------------- -------------------- ---------- -----------
Suriname Block 31 Spari 30% In progress
------------------------ --------------- -------------------- ---------- -----------
Pakistan Kalchas Kup 30% In progress
======================== =============== ==================== ========== ===========
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). The Group has interests in over 130
exploration and production licences across 22 countries which are
managed as three Business Delivery Teams.
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
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