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RNS Number : 8486V
Tullow Oil PLC
08 November 2017
Tullow Oil plc - November Trading Update
2017 oil production forecast revised upwards to 85-89,000
bopd
Full year free cash flow forecast of c.$0.4 billion
Jubilee and TEN plans approved; drilling to commence in early
2018
8 November 2017 - Tullow Oil plc (Tullow) issues the following
Trading Update for the period 27 July to 8 November 2017. The Group
will publish a Trading Statement and Operational Update on 10
January 2018. Full Year Results for 2017 will be announced on 7
February 2018.
Highlights
-- Full year 2017 West Africa net oil production guidance,
including production-equivalent insurance payments, revised upwards
to 85-89,000 bopd (from 78-85,000 bopd), following strong
production performance from both TEN and Jubilee.
-- TEN FPSO commissioning completed; 2017 gross production now
expected to exceed guidance of 50,000 bopd following higher rates
in the second half of the year; final ITLOS tribunal decision
results in no adverse impact to the TEN fields and allows
development drilling to resume in early 2018.
-- Greater Jubilee Full Field Development Plan approval received
from the Government of Ghana - drilling to commence in 2018;
Jubilee turret remediation work optimised and now planned for 2018
with seven-to-nine weeks of total shut-down.
-- Uganda farm-down submitted to the Government for approval
following signature of pre-emption documentation; deal completion
expected in the first half of 2018. Working towards FID in the
first half of 2018, with FEED and ESIAs for upstream and pipeline
progressing in line with schedule.
-- South Lokichar Exploration and Appraisal drilling campaign
now concluded, results being evaluated and incorporated in the
development plans. Early Oil Pilot Scheme (EOPS) is now expected to
commence early in 2018.
-- Araku-1 wildcat well drilled in Block 54 in Suriname; no
significant reservoir quality rocks encountered, but presence of
gas condensate de-risks deeper plays for future possible
exploration.
-- 2017 Capex guidance reduced to c.$0.3 billion; free cash flow
of around $0.4 billion forecast for 2017; Net debt at 31 October
2017 reduced to $3.6 billion. The RBL re-financing is on schedule
to complete before year-end.
PAUL MCDADE, CHIEF EXECUTIVE OFFICER, TULLOW OIL PLC, COMMENTED
TODAY:
"I am pleased to report that Tullow continues to make good
operational and financial progress. The business is generating free
cash flow which is enabling us to continue to reduce our debt. We
have upgraded our oil production forecasts for West Africa
following strong production at both Jubilee and TEN. In East
Africa, both our projects are making steady progress towards Final
Investment Decisions with our Kenyan business beginning the
important shift from exploration and appraisal to development. With
financial discipline and efficiency embedded across the Group, and
with market conditions showing some early signs of improving,
Tullow is well placed to benefit both from targeted investment in
our diverse, low-cost portfolio and the opportunities that this
point in the cycle presents."
Operational Update
GROUP PRODUCTION
Tullow's West Africa 2017 net oil production forecast, including
production-equivalent insurance payments, has been revised upwards
to 85-89,000 bopd (from 78-85,000 bopd), due to strong production
performance from both TEN and Jubilee.
Gas production from the European portfolio is performing in line
with guidance which remains unchanged at 5,500 to 6,000 boepd for
the full year. Production will be adjusted to reflect the sale of
the Group's entire Netherlands portfolio to Hague and London Oil
plc (HALO) once the deal completes which is expected later this
month.
WEST AFRICA
Ghana
Jubilee
The Jubilee Turret Remediation Project continues to progress
well and during the period, the focus has been on optimising the
remaining work programme and schedule. As a result, the turret
bearing stabilisation works will now take place in the first
quarter of 2018 and are expected to require shut-downs totalling
approximately four-to-six weeks (down from five-to-eight weeks as
previously guided). The next phase to rotate the FPSO to its
permanent heading and to carry out the final spread-mooring will
take place around the end of 2018 and is expected to require a
shut-down of approximately three weeks. Tullow's corporate Business
Interruption insurance is expected to offset the loss of revenue
associated with these shut-down periods. Work is also continuing on
the plan for the installation of a deep-water offloading system
which would take place in 2019 and result in minimal interruption
to production.
The combination of deferring the turret bearing stabilisation
shutdowns into 2018 and good performance from the Jubilee field in
the second half of 2017 means that full year gross production
guidance from Jubilee has been increased to around 89,000 bopd
(net: 31,600 bopd). Tullow's corporate Business Interruption
insurance is expected to reimburse around 6,800 bopd of net
production-equivalent insurance payments. Therefore, full year net
production guidance from Jubilee, including production-equivalent
insurance payments, has been increased to 38,400 bopd.
In October 2017, the Government of Ghana approved the Greater
Jubilee Full Field Development (GJFFD) Plan which has been designed
to develop additional commercial reserves and extend the field
production profile. Approval of this plan permits infill drilling
to commence on the Jubilee field and subsequent development of the
Mahogany and Teak fields.
TEN
The TEN fields have performed well in the second half of 2017
and full year gross production guidance is now expected to exceed
original guidance of 50,000 bopd (net: 23,600 bopd). Final
commissioning of the FPSO has now been completed and with continued
optimisation of production and water injection, the field performed
well and has been regularly producing over 60,000 bopd during the
period.
On 23 September 2017, the International Tribunal for the Law of
the Sea (ITLOS) made its decision with regard to the maritime
boundary dispute between Ghana and Côte d'Ivoire. The new maritime
boundary, as determined by the tribunal, does not affect the TEN
fields and Tullow has received confirmation from the Government of
Ghana that the moratorium on drilling has now been lifted.
Ghana drilling in 2018
Following the ITLOS Tribunal decision and approval of the GJFFD
Plan, Tullow is in the final stages of securing a rig for drilling
on both the TEN and Jubilee fields in 2018. Work is ongoing on the
sequence of the drilling campaign to optimise output from both the
Jubilee and TEN field with the first well in the schedule expected
to be in the Ntomme area of the TEN fields with drilling expected
to commence in early 2018.
Non-operated Portfolio
The West Africa non-operated portfolio has been performing in
line with expectations and production is expected to average around
23,000 bopd net in 2017.
Full year gas production from Europe is expected to average
around 5,800 boepd, in line with guidance. The sale of Tullow's
entire Netherlands portfolio to HALO is expected to complete later
this month. Tullow will adjust its full year European production
accordingly at the year end to reflect this sale.
EAST AFRICA
Kenya
In Kenya, the current phase of exploration and appraisal
drilling in the South Lokichar Basin has been concluded and the
focus is now on the Early Oil Pilot Scheme (EOPS) and the
development of the discovered resources.
Successful exploration wells drilled in the programme were the
Erut-1 well that tested and proved the northern extent of the basin
and the Emekuya-1 well that further de-risked the Greater Etom
structure and the northern area of the basin. The two remaining
exploration wells drilled included the Etiir-1 well, which although
dry, helped to understand the westerly extent of the Greater Etom
Structure, and the Ekales-3 well which tested an undrilled fault
block adjacent to the Ekales field. While reservoir and oil shows
were encountered, the well was deemed non-commercial.
Appraisal drilling has also been a key focus of the programme in
2017. Appraisal wells were drilled at Ngamia-10 and 11, Amosing-6
and 7 and Etom-3 and all the wells have improved the definition of
the limits of their respective fields. The final well in the
programme was the Amosing-7 appraisal well and the Marriott-46 rig
has now been demobilised.
The Auwerwer and Lokone reservoirs in the Etom-2 well were
tested utilising artificial lift and flowed at 752 bopd and 580
bopd respectively which was lower than anticipated. As a result,
further technical work will be undertaken to assess how
representative the tests may have been and identify potential
options to increase flow rates from the Etom field.
Activity will now move to focus on collecting further dynamic
data from the fields. As part of EOPS extended production, water
injection testing and a waterflood pilot test utilising the
Ngamia-11 well are planned for the first half of 2018. Produced oil
will initially be stored, until all work is completed and necessary
consents and approvals granted for the transfer of crude oil to
Mombasa by road.
Tullow is now reviewing all the data from the South Lokichar
basin and in the first quarter of 2018 intends to give its
assessment of Contingent Resources and plans for developing the
basin.
A Joint Development Agreement (JDA), setting out a structure for
the Government of Kenya and the Kenya Joint Venture Partners to
progress the development of the export pipeline, was signed on 25
October 2017. The JDA allows important studies to commence such as
FEED, Environmental and Social Impact Assessments (ESIA), as well
as studies on pipeline financing and ownership. Upstream FEED and
ESIAs are expected to commence in the first quarter of 2018.
Uganda
Tullow's farm-down in Uganda continues to progress with the
signature of the pre-emption documents by the Joint Venture
Partners. The Joint Venture Partners have officially notified the
Government of Uganda, seeking its approval of the transaction.
Tullow now anticipates that the farm-down with Total and CNOOC will
complete in the first half of next year with cash payment on
completion and payment of deferred consideration for the
pre-completion period (including the whole of 2017) being received
in 2018. The Joint Venture partners are working towards reaching
FID in the first half of 2018; at which point Tullow's second cash
instalment from the farm down will be received. In line with its
post-transaction status, Tullow has been reducing its footprint in
Uganda and is preparing for a non-operated presence only.
Operational activity is continuing as planned, with FEED and
ESIAs for both the upstream and pipeline progressing in line with
the FID schedule. Discussions on the pipeline project continue with
both Governments supporting progress on the key commercial and
transportation agreements. Commitment to the pipeline project was
marked by both the Ugandan and Tanzanian Governments in August when
a foundation stone was laid by the Presidents of each country at
the Tanga Port in Tanzania. Two further ceremonies are planned for
this month where a cross-border stone will be laid at the
Uganda-Tanzania border and a foundation stone will be laid in
Hoima, Uganda.
NEW VENTURES
South America
In October, the Araku-1 exploration well in Suriname was drilled
to a total depth of 2,685 metres and no significant reservoir
quality rocks were encountered. The well has been plugged and
abandoned. Logging and sampling proved the presence of gas
condensate, which in combination with high quality 3D seismic data,
has de-risked deeper plays which offer significant future
exploration potential in the Group's acreage. The well was drilled
safely and under budget with a net cost to Tullow of c.$11
million.
In August, Tullow completed the farmout of a 20% equity in the
Block 47 license offshore Suriname to Ratio Petroleum.
3D seismic acquisition in Guyana concluded in September.
Processing of data acquired is in its early stages to mature and
rank identified prospects for future potential drilling.
In Jamaica, Tullow entered into the next phase of the Walton
Mourant license in October 2017 and will acquire a 2,100 sq km 3D
survey in 2018.
Africa
In October 2017, Tullow announced that it had signed four new
onshore licences (CI 518, CI 519, CI 301 and CI 302) in Côte
d'Ivoire. The licences cover 5,035 sq km and a full tensor
gradiometry gravity survey will begin in 2018.
In Mauritania, a 3D survey in Block C3 to cover new shallow
water plays began in September 2017 and has now concluded. Tullow
will also relinquish its interest in Block C-10 at the end of
November. The Partnership are exiting at the end of the second
exploration period as insufficient commercial justification could
be made to enter into a third phase of the licence.
In Zambia, a 20,000 sq km full tensor gradiometry gravity survey
and passive seismic survey to cover frontier Tertiary age rift
basins finished in October 2017. The data from all the surveys is
now being assessed.
In Namibia, Tullow completed the farmout of a 30% interest in
the PEL37 license to ONGC Videsh in October.
Financial update
Tullow formally commenced the re-financing of its Reserves Based
Lending facility in October and is on schedule to complete the
process before the end of the year. At 31 October 2017, Tullow had
net debt of $3.6 billion, down from $3.8 billion at the Half Year,
and unutilised debt capacity and free cash of approximately $1.2
billion.
Forecast capital expenditure for the year has reduced to
approximately $0.3 billion (net of accrual reversals) following a
reduction of approximately $60 million made across the Group's East
African assets. This Group forecast includes expenditure of
approximately $65 million in Uganda which will be reimbursed once
the farm-down completes next year.
Strong production and higher oil prices for much of the second
half of the year continues to positively impact cash flow
generation, and for the Full Year 2017, the Group expects to
generate around $0.4 billion of free cash flow.
Derivative instruments update
As at 31 October 2017, the Group's oil hedge position to the end
of 2019 was as follows:
Hedge position 2017 2018 2019
======================================= ======= ======= =======
Oil hedges
======================================= ======= ======= =======
Volume (bopd) 42,500 38,500 17,732
======================================= ======= ======= =======
Average floor price protected ($/bbl) 60.32 51.29 47.82
--------------------------------------- ------- ------- -------
Notes to Editors
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 80
exploration and production licences across 17 countries which are
managed as three business delivery teams: West Africa, East Africa
and New Ventures.
FOR FURTHER INFORMATION CONTACT:
Tullow Oil Murray Consultants
plc (Dublin)
(London) (+353 1
(+44 20 498 0300)
3249 9000) Pat Walsh
Chris Perry Joe Heron
George Cazenove
Nicola Rogers
================= ===================
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www.tullowoil.com.
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This information is provided by RNS
The company news service from the London Stock Exchange
END
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