Tullow Oil plc (Tullow) issues this update and guidance in advance of the Group’s 2019 Full Year Results.
Dorothy Thompson, Executive Chair, Tullow Oil plc, commented today:
“Tullow has ended 2019 with average production of 86,700 bopd and free cash flow generation of c.$350 million. Since our December announcement, Tullow’s senior team has been working hard on a major review focused on delivering a more efficient and effective organisation. The fundamentals of our business remain intact: recent reserves audits demonstrate that we have a solid underlying reserves and resources base in West and East Africa, our producing assets continue to generate good cash flow and we retain a high-quality exploration portfolio. The Board and senior management are confident of the long-term potential of the portfolio and see meaningful opportunities to improve operational performance, reduce our cost base, deliver sustainable free cash flow and reduce our debt.”
Financial and operational update
Group working interest oil production averaged 86,700 bopd in 2019 in line with expectations.
2019 full year total revenue is expected to be c.$1.7 billion; gross profit is expected to be c.$0.7 billion. Capital expenditure in 2019 was c.$490 million.
Free cash flow for the full year 2019 is expected to be c.$350 million, with net debt reduced to c.$2.8 billion and gearing expected to be around 2.0 times.
Tullow expects to report pre-tax impairments and exploration write-offs of c.$1.5 billion (c.$1.3 billion post tax) primarily due to a $10/bbl reduction in the Group’s long-term accounting oil price assumption to $65/bbl and a reduction in TEN 2P reserves.
In 2020, capital expenditure is expected to be c.$350 million, with an additional c.$100 million expected to be spent on decommissioning. Tullow expects to generate underlying free cash flow of at least $150 million from 75,000 bopd at $60/bbl.
Operations across the Group’s production assets have started the year in line with expectations and 2020 Group average production guidance remains unchanged at 70,000 to 80,000 bopd.
In Ghana, recent activity at Jubilee includes the tie-in of the J-54 water injector well and planning for a maintenance period at the end of January to increase gas processing capacity. At TEN, the drilling of a production well on the Ntomme field has commenced and the well is expected to be tied-in by the end of the first quarter.
In Kenya, the early oil pilot scheme (EOPS) is suspended due to severe damage to roads caused by adverse weather in the fourth quarter of 2019. Trucking remains on hold until all roads are repaired to a safe standard. Work continues with Joint Venture Partners and the Government of Kenya to progress the development project.
In Uganda, Joint Venture conversations with the Government are ongoing. Tullow remains committed to reducing its equity stake in the project ahead of FID.
Tullow recently announced the results of the Carapa-1 exploration well offshore Guyana, which proved the extension of the Cretaceous oil play into the Group’s Guyana acreage. Next steps will include the integration of the Carapa result into geological and geophysical models and high-grading of the Cretaceous portfolio across both the Kanuku and Orinduik blocks.
The Marina-1 well offshore Peru is due to spud at the end of January 2020 and is expected to take around 60 days.
The information contained herein has not been audited and may be subject to further review and amendment.