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RNS Number : 1692W
Tullow Oil PLC
09 December 2019
Board changes and 2020 guidance
9 December 2019 - Tullow Oil plc (Tullow) today provides a
forward-looking production and financial update and announces a
number of changes to the Board that take effect immediately.
A conference call will be hosted by Dorothy Thompson, Les Wood
and Mark MacFarlane at 8:00am this morning. Details of the call can
be found at the end of this release.
Board CHANGES
Paul McDade, Chief Executive Officer, and Angus McCoss,
Exploration Director, have resigned from the Board of Tullow by
mutual agreement and with immediate effect. Dorothy Thompson has
been appointed Executive Chair on a temporary basis and Mark
MacFarlane, Executive Vice-President, East Africa and Non-Operated,
has been appointed as Chief Operating Officer in a non-Board role.
Les Wood continues as an Executive Director and Chief Financial
Officer. The Board has initiated a process to find a new Group
Chief Executive.
GROUP guidance
Production and reserves
As disclosed in Tullow's Trading Update on 13 November 2019, the
Group expects 2019 full year net production to average c.87,000
bopd. The Group also expects to deliver free cash flow of c.$350
million, has liquidity headroom in excess of $1 billion and no
near-term debt maturities. Whilst financial performance has been
solid, production performance has been significantly below
expectations from the Group's main producing assets, the TEN and
Jubilee fields in Ghana.
A review of the production performance issues in 2019 and its
implications for the longer-term outlook of the fields has been
undertaken and has shown that the Group needs to reset its
forward-looking guidance. 2020 Group production is forecast to
average between 70,000 and 80,000 bopd. Group production for the
following three years is expected to average around 70,000 bopd. A
breakdown of 2019 and 2020 Group production guidance is provided at
the end of this release.
A number of factors have been identified that have caused this
reduction in production guidance. On the Jubilee field, these
factors include significantly reduced offtake of gas by the Ghana
National Gas Company which Tullow makes available at no cost,
increased water cut on some wells, and lower facility uptime. At
Enyenra (one of the TEN fields) mechanical issues on two new wells
have limited the well stock available and there is faster than
anticipated decline on this field. The non-operated portfolio is
performing well, and production is expected to be sustained for the
medium term.
Independent reserves audits carried out during the year indicate
that oil reserves are likely to remain broadly flat at year-end
2019 compared to the previous year-end (excluding the impact of
2019 production). The audits show increased oil reserves for
Jubilee, Ntomme (one of the TEN fields) and the non-operated fields
which are largely offset by a c.30% decrease in Enyenra
reserves.
Taking action to underpin cash flow generation
In light of these new production forecasts, there will be a
thorough reassessment of the Group's cost base and future
investment plans in order to allocate appropriate capital to the
Group's core production assets, development projects and continued
exploration.
The Board believes that a series of actions will help deliver
sustainable free cash flow. These actions include reducing capital
expenditure, operating costs and corporate overheads. In 2020, the
Board expects the Group to generate underlying free cash flow of at
least $150 million at $60/bbl after a Group capital investment
of
c.$350 million. Considering this level of expected free cash
flow, the Board has decided to suspend the dividend.
Dorothy Thompson, Executive Chair, commented today:
"I would like to thank Paul and Angus for all their hard work
and dedication to Tullow over many years. They leave behind a
business that has delivered two major offshore developments in
Ghana, made significant oil discoveries in Kenya and Uganda and has
a high-impact exploration portfolio. These remain the key building
blocks of our business today.
"The Board has, however, been disappointed by the performance of
Tullow's business and now needs time to complete its thorough
review of operations. A full financial and operational update will
be provided at Tullow's Full Year Results on 12 February 2020, with
an update on progress to be given in the Group's Trading Statement
on 15 January 2020.
"Despite today's announcement, the Board strongly believes that
Tullow has good assets and excellent people capable of delivering
value for shareholders. We are taking decisive action to restore
performance, reduce our cost base and deliver sustainable free cash
flow."
2019 & 2020 PRODUCTION
Oil Production (bopd) FY 2019 forecast FY 2020 mid-point forecast
========================== ================= ===========================
Ghana
========================== ================= ===========================
Jubilee 31,400 29,000
========================== ================= ===========================
Business interruption 2,000 n/a
insurance
========================== ================= ===========================
TEN 28,700 23,000
========================== ================= ===========================
Non-operated portfolio 24,900 23,000
========================== ================= ===========================
TOTAL 87,000 75,000
========================== ================= ===========================
ADDITIONAL INFORMATION
The drilling of the Carapa-1 well on the Kanuku Block in Guyana
continues, with a result expected before the year-end. Carapa-1,
operated by Repsol, is the first well to test the deeper Cretaceous
play in Tullow's Guyana acreage.
Set out below is a summary of the terms relating to Mr McDade's
and Mr McCoss' departure from Tullow. These terms are in line with
Tullow's shareholder-approved 2017 Remuneration Policy. Save as set
out below, Mr McDade and Mr McCoss will not receive any
compensation or payment for the termination of their employment
agreements or for their ceasing to be directors.
-- In connection with the termination of their employment, Mr
McDade and Mr McCoss will receive a payment for salary and pension
contributions in lieu of their contractual notice period; continued
private healthcare insurance coverage for up to 12 months; and
capped contributions towards both their legal fees and the
provision of outplacement services.
-- Neither Mr McDade nor Mr McCoss will receive any cash or
share-based awards under the Tullow Incentive Plan (the TIP) in
respect of the financial years ending 31 December 2019 or 31
December 2020.
-- In respect of the TIP, the Remuneration Committee has
determined (in accordance with the good leaver provisions of the
TIP) that Mr McDade's and Mr McCoss' unvested awards may continue
to vest on their scheduled vesting dates, subject to the terms of
the TIP. In respect of the Tullow Share Incentive Plan (the SIP),
the shares which Mr McDade and Mr McCoss hold already pursuant to
the SIP will be released on termination of employment.
Further details of the remuneration payments to be made to Mr
McDade and Mr McCoss, in accordance with s430(2B) Companies Act
2006, can be found on Tullow's website (www.tullowoil.com).
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is being
released on behalf of Tullow by Adam Holland, Company
Secretary.
CONFERENCE CALL DETAILS:
8:00am UK time; Monday Replay (available until
9 December 16/12/2019)
Conference ID: 4454797 Conference ID: 4454797
From the UK: 08444819752 From the UK: 08082380667
Outside of the UK: +44 Outside of the UK: +44
(0) 2071 928338 (0) 3333009785
FOR FURTHER INFORMATION CONTACT:
Tullow Oil plc Murray Consultants
(London) (Dublin)
(+44 20 3249 9000) (+353 1 498 0300)
Julia Ross - Corporate Head Pat Walsh
of Strategy and Performance Joe Heron
Nicola Rogers - Head of Investor
Relations
George Cazenove - Head of
Corporate Affairs
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 80 exploration
and production licences across 15 countries which are managed as
three business delivery teams: West Africa, East Africa and New
Ventures.
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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