Tullow Oil PLC Business Update (6582I)
April 03 2020 - 2:00AM
UK Regulatory
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RNS Number : 6582I
Tullow Oil PLC
03 April 2020
News Release
Tullow Oil Business Update
RBL redetermination confirms debt capacity of $1.9 billion and
headroom of c.$700 million
Further cost savings identified
3 April 2020 - Tullow Oil plc (Tullow) provides this update
following the successful completion of its RBL redetermination and
identification of further cost savings as the company continues to
adapt to the challenging external environment.
Les Wood, Chief Financial Officer, commented today:
"Securing the ongoing support of our RBL lending banks and
confirming our debt capacity has been important given the current
challenging environment. Today's positive news verifies the
strength of our producing assets and robust hedging strategy which
underpin the RBL and, combined with the further cost savings we
have identified, confirms the strength of our liquidity in the
medium-term. Nevertheless, strengthening the balance sheet
continues to be a key priority with the Group seeking to raise
proceeds in excess of $1 billion through portfolio management.
"Elsewhere in the business, Tullow is responding well to the
challenges presented by the Coronavirus pandemic with strong
controls and processes in place to allow the business to operate as
close to normal as possible in spite of these difficult times."
Reserves Based Lending (RBL) facility
Tullow is pleased to confirm that it has completed the bi-annual
redetermination of its RBL credit facility with
$1.9 billion of debt capacity approved by the lending syndicate.
As a result, the Group has c.$700 million liquidity headroom of
undrawn facilities and free cash at the start of the second quarter
of the year. This level of headroom is deemed appropriate by the
Board considering Tullow's much reduced future capital
commitments.
Tullow has voluntarily reduced facility commitments from $2.4
billion to c.$2.2 billion, effectively accelerating the first
scheduled commitment amortisation from October 2020. The reduction
in debt capacity and commitments will result in a reduction of
finance costs. The next scheduled amortisation of $211 million
(commitment reduction, not repayment) will therefore be in April
2021. This amortisation schedule continues every six months until
final maturity in 2024. The next contractual maturity in Tullow's
capital structure is the $300 million Convertible Bond in July
2021.
Cost savings
As previously announced, Tullow took actions to reduce its
planned capital expenditure (capex) for 2020 by c.30% year-on-year.
Following another review of planned activity, the business has
identified further savings and is now targeting capex of c.$300
million in 2020 (down from c.$350 million) and decommissioning
expenditure of c.$65 million (down from c.$100 million).
Savings have been identified primarily through the deferral of
activities across the portfolio and through savings that can be
realised by ongoing farm-down activities. In Ghana, for example,
savings will be made through the early termination of the Maersk
Venturer rig and the deferral of some well activity, combined with
the removal of any non-critical work that does not focus on safety
and asset reliability.
While focus has been on further capex reductions, Tullow
continues to invest in projects yielding good returns and the Board
has agreed to progress the next phase of the Simba development in
Gabon which will pay back before the end of 2021 at $30/bbl.
The Group's underlying operating costs remain less than $12/bbl,
with Ghana operating costs at c.$9/bbl. With the benefit of the
Group's hedging policy and production remaining on track within the
Group's 70-80 kbopd guidance range, this results in a free cash
flow breakeven oil price of c.$35/bbl for the rest of the year.
Hedging
As outlined at Tullow's Full Year Results, the impact of reduced
oil prices is mitigated by the Group's robust hedging strategy.
Tullow has 60% of its 2020 sales revenue hedged with a floor of
c.$57/bbl and 40% of 2021 sales revenue hedged with a floor of
c.$53/bbl. Tullow's realised oil price in January and February 2020
was c.$62/bbl and following the recent price drop, hedging receipts
of c.$30 million are forecast for March 2020.
COVID-19 (Coronavirus) update
The health and safety of Tullow's staff continues to be the
Group's top priority and Tullow continues to carefully monitor the
ongoing COVID-19 pandemic. Tullow has experience of managing
infectious diseases of this nature following the significant
contingency planning put in place during the West African Ebola
outbreak in 2014. In our principal offices, Tullow staff are
currently working from home in line with Host Government guidelines
with negligible disruption to the business.
Production operations in West Africa have not been affected by
COVID-19 as yet. In addition to the existing Infectious Disease
mitigation plans already in place, Tullow is requiring all
personnel to self-isolate in Ghana for two weeks before
transferring to our FPSOs to ensure that the risk of a COVID-19
outbreak offshore is minimised. In the event that a case of
COVID-19 is discovered offshore, robust mitigation and personnel
evacuation plans are in place to ensure that the impact of any
outbreak is minimised and operations are maintained.
FOR FURTHER INFORMATION CONTACT:
Tullow Oil plc Murray Consultants
(London) (Dublin)
(+44 20 3249 9000) (+353 1 498 0300)
IR: Chris Perry, Nicola Pat Walsh
Rogers, Matt Evans Joe Heron
Media: George Cazenove
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 70
exploration and production licences across 15 countries in Africa
and South America.
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
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