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RNS Number : 4011H
Tullow Oil PLC
15 November 2018
Tullow Oil plc
November Trading Update
15 November 2018 - Tullow Oil plc (Tullow) issues the following
Trading Update for the period 26 July to 15 November 2018.
Tullow will be hosting a Capital Markets Day on 29 November
2018. Please see full details below. The Group will also publish a
Trading Statement and Operational Update on 16 January 2019 and
Full Year Results for 2018 will be announced on 13 February
2019.
PAUL MCDADE, CHIEF EXECUTIVE OFFICER, TULLOW OIL PLC, COMMENTED
TODAY:
"This has been another period of very solid delivery from Tullow
against the backdrop of continued volatility in the oil price. We
are generating high levels of free cash flow from our West African
assets, making good progress towards project sanctions in East
Africa and are finalising our 2019 exploration programme which we
expect to include high-impact wells in Guyana. Having taken the
time to lay strong foundations for our business, embed a
financially disciplined culture across the Group and repair our
balance sheet, we are now focused on delivering growth and returns
to our shareholders."
Trading Update summary
-- All fields producing in line with expectations, full year oil
production guidance narrowed to 87-91,000 bopd
-- Full year free cash flow forecast to be c.$700 million,
including Uganda farm-down proceeds of $200m, with net debt and
gearing reducing from $3.5 billion and 2.6x to c.$2.8 billion and
c.1.8x respectively by year-end
-- Four new infill wells in Ghana expected to be on line by
early 2019, increasing gross production to around 180,000 bopd
-- Uganda farm-down expected to close around year-end 2018;
development work on track with FID targeted for first half 2019
-- Kenya Foundation Stage development to include the Ngamia,
Amosing and Twiga fields; targeting FID in late 2019
-- Cormorant-1 wildcat well drilled in Namibia for net cost
below $5 million; no significant reservoir quality rocks
encountered
-- Multiple attractive prospects identified in Guyana acreage
with drilling programme expected to commence in mid-2019
Operational Update
GROUP PRODUCTION
Tullow's West Africa oil assets have performed strongly
throughout the year and have delivered production in line with
expectations. The Group's full year oil production, including
production-equivalent insurance payments, is now expected to
average between 87,000 bopd and 91,000 bopd. Gas production is
expected to average around 2,300 boepd for the full year.
Tullow's overall Group production for oil and gas in 2018 is
therefore expected to average between 89,300 boepd and
93,300 boepd.
WEST AFRICA
Ghana
Drilling programme
Tullow has two rigs operating in Ghana, the Maersk Venturer
since March 2018 and the Stena Forth which commenced operation in
October 2018. These rigs are allowing simultaneous drilling and
completion activity across the TEN and Jubilee fields. The drilling
programme is running to plan with four production wells and two
water injector wells expected to be completed by the end of the
year and gross production expected to increase to around 180,000
bopd in early 2019.
Jubilee and TEN Fields
The Jubilee field has performed well throughout the year. One
production well and one injection well have been brought on line
and a further new production well is expected to be completed
before year-end. Tullow forecasts full year gross production to
average around 81,200 bopd (net: 28,800 bopd) and expects net
production-equivalent insurance payments for the full year to be
around 8,000 bopd. Accordingly, full year net production guidance
from Jubilee, including production-equivalent insurance payments,
is now around 36,800 bopd, in line with expectations.
The Turret Remediation Project has been progressing to plan.
Before the end of the year, Tullow expects to rotate the vessel to
its optimum heading where it will be permanently spread moored. No
shutdown is now expected to be required for this work.
The TEN fields have performed in line with expectations with
full year 2018 gross production expected to average around 65,000
bopd (net: 30,600 bopd). A new production well was completed and
tied-in as planned during August 2018 and together with a second
production well in January 2019, gross production is expected to
increase to around 80,000 bopd in early 2019.
Non-operated Portfolio
The West Africa non-operated portfolio has continued to perform
in line with expectations and production is expected to average
around 21,500 bopd net in 2018.
Gas production
Full year gas production from the TEN fields and the UK is
expected to average 2,300 boepd.
Decommissioning
Tullow ceased production from its remaining operated UK North
Sea wells during the third quarter of 2018 and the planned well
plug and abandonment (P&A) operations are now complete. The
decommissioning programme for these wells and Tullow's non-operated
assets continues on schedule and on budget. In Mauritania, planning
continues for P&A of the Chinguetti field following the FPSO
demobilisation and temporary suspension of wells earlier this
year.
EAST AFRICA
Kenya
Good progress continues to be made on the Kenya development
project. The upstream and pipeline Front End Engineering and Design
work is progressing to plan and is expected to be completed in the
first quarter of 2019. Environmental and Social Impact Assessments
are also on schedule for submission to the regulators in the second
quarter of 2019. Following the completion of all field work,
including the production and water injection trials, and further
subsurface analysis, the decision has also been taken to include
the Twiga field alongside the Ngamia and Amosing fields in the
Foundation Stage development. Tullow, its Joint Venture Partners
and the Government of Kenya remain focused on targeting FID in late
2019 and First Oil in 2022.
The transfer of stored crude oil from Turkana to Mombasa by road
continues as part of the Early Oil Pilot Scheme with four trucks
continuing to be dispatched every two days, transporting
approximately 600 bopd. To date, approximately 30,000 barrels of
oil have been transported to Mombasa. The first lifting of sweet
Kenyan crude oil stored in Mombasa is expected in the second
quarter of 2019.
Uganda
Tullow and its Joint Venture Partners, Total and CNOOC Ltd,
await approval of the farm-down transaction from the Government of
Uganda. At completion of the farm-down, which is expected around
the end of 2018, Tullow anticipates receiving a cash completion
payment of $100 million and a payment of approximately $100 million
to reimburse Tullow for pre-completion capital expenditure. A
further $50 million of cash consideration is due to be received
when FID is taken.
Technical work on the development and the upstream pipeline is
well advanced and the Operators are now targeting FID in the first
half of 2019 once agreements with the Governments of Uganda and
Tanzania have been completed.
NEW VENTURES
South America
Guyana will be the main focus for Tullow's 2019 exploration
drilling programme. Following the interpretation of extensive 3D
seismic, multiple high-quality prospects have been identified
across both the Orinduik and Kanuku licences. Furthermore, the
success of the neighbouring Hammerhead-1 well in August 2018, only
seven kilometres from the Orinduik block boundary, has further
de-risked this acreage. Planning continues to determine which
prospects will be selected for a drilling programme across both
licences that we expect to commence in mid-2019.
Tullow has expanded its acreage position in Suriname by signing
a 100% operated interest in Block 62. This is the Group's third
licence and it sits adjacent to Blocks 47 and 54 which are also
operated by Tullow. Tullow plans to carry out initial geological
work on the area ahead of capturing 2D seismic data. This month,
Tullow also completed a farm-down of a 30% interest in the Block 47
licence to Pluspetrol.
Africa
In September, Tullow announced the results of the Cormorant-1
well offshore Namibia. The well encountered non-commercial
hydrocarbons and has since been plugged and abandoned. Gas
signatures, indicative of oil, were encountered in the overlying
shale section, supporting the concept of a working oil system in
the area. The combination of an efficient well design, efficient
operations and a farm-out in 2017 resulted in net expenditure on
this well of less than $5 million. Data gained from the well, in
combination with high quality 3D seismic data, will be used to
evaluate next steps for the Group's Namibian acreage in PEL-37.
Tullow has also decided to exit block PEL-30 in Namibia.
Financial update
Strong production and higher oil prices for much of the second
half of the year continued to positively impact cash flow
generation. For the full year 2018, Tullow expects to generate free
cash flow of around $700 million subject to year-end working
capital movements. This includes exceptional payments of
approximately $200 million associated with the Seadrill litigation
paid in July and assumes the receipt of approximately $200 million
of Uganda deal completion proceeds before year-end.
This strong performance has enabled the Group to further
deleverage the balance sheet during 2018. Net debt at the end of
2018 is expected to reduce to c.$2.8 billion (from $3.5 billion at
the beginning of the year), gearing is expected to be approximately
1.8x and the Group expects to maintain liquidity headroom and free
cash in excess of $1 billion.
Forecast capital expenditure for the year has reduced to
approximately $430 million following savings, farm-downs and some
work programme deferrals. This forecast excludes revised
expenditure of approximately $40 million in Uganda which will be
reimbursed on completion of the Uganda farm-down.
In October 2018, Tullow began a competitive tender process for
its external auditor and expects to complete the process in the
coming months.
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 16 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 1 498
(+44 20 3249 0300)
9000) Pat Walsh
Chris Perry Joe Heron
George Cazenove
Nicola Rogers
For further information please refer to our website at
www.tullowoil.com
UPCOMING EVENT: CAPITAL MARKETS DAY - 29 November 2018, 13:30 -
17:00 (GMT)
Tullow Oil will hold a Capital Markets Event during the
afternoon of Thursday 29 November 2018 in central London.
Presentations will be given by members of the management team to
provide insights into the Group's strategy and key areas of
operations. The event will also be broadcast live and saved on our
website www.tullowoil.com/reports.
Follow Tullow on:
Twitter: www.twitter.com/TullowOilplc
You Tube: www.youtube.com/TullowOilplc
Facebook: www.facebook.com/TullowOilplc
LinkedIn: www.linkedin.com/company/Tullow-Oil.
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END
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