Ahead of its its audited 2020 full year results on 10 March 2021, Tullow reports on its current trading and prospects.

In its Trading Statement, Tullow announced that:

• Group working interest oil production in 2020 averaged 74,900 bopd in line with expectations.
• 2020 full year revenue is expected to be c.US$1.4 billion; gross profit is expected to be c.US$0.4 billion.
• Capital and decommissioning expenditure for 2020 were c.US$290 million and c.US$50 million respectively.
• Year-end net debt reduced to c.US$2.4 billion (2019: US$2.8 billion), as a result of US$430 million free cashflow including Uganda proceeds of US$500 million.
• Pre-tax impairments and exploration write-offs expected to be broadly in line with the Group’s 2020 half-year results of US$1.4 billion.

Looking ahead to 2021, Tullow announced in the same statement that:

• Group working interest oil production is forecast to average 60-66,000 bopd in 2021 following the COVID-driven drilling hiatus in 2020
• Capital expenditure is forecast to be c.US$265 million, with an additional c.US$100 million to be spent on decommissioning
• Organisational restructuring completed which is expected to deliver sustainable annual cash savings of over US$125 million.
• In Ghana, production from Jubilee and TEN for the year to date is in line with expectations. This is supported by gas export in excess of 120 mmscfd. A new oil offloading system is due to be commissioned on Jubilee in the first quarter of 2021
• On Jubilee, a drilling rig is being mobilised to commence drilling in the second quarter of the year and the first new production well is forecast to be onstream in the third quarter
• Tullow also announced in its Trading Statement that the Group has started discussions with its creditors with regards to its debt refinancing options and these discussions are progressing constructively and are expected to conclude in the second quarter of 2021.

As part of these discussions, Tullow and its lenders agreed to extend the redetermination of the Group’s RBL Facility, which was due to complete in January 2021, by up to one month. This is to allow additional time for the lending banks to review the New Business Plan and Operating Strategy. Following its September 2020 RBL Facility redetermination, Tullow had US$1.8 billion of debt capacity approved by the lending syndicate.

As demonstrated at the Group’s Capital Markets Day, Tullow’s portfolio has substantial potential and a large resource base associated with its producing assets in West Africa where there is extensive infrastructure in place. Tullow believes that these assets, managed with a rigorous focus on costs, will generate material cash flow over the next decade, which the Group anticipates will enable reduction of its current debt levels and deliver significant value for its host nations and investors. Tullow intends to deliver production growth in the medium term and the ability to sustain production over the longer term.

Separately, Tullow retains a 50% stake in an onshore development project in Kenya for which the Kenyan government has agreed an extension of the Second Additional Exploration Period for the 10BB and 13T licence blocks until 31 December 2021. This extension will provide time for Tullow and its partners to conduct a comprehensive review of the development concept to ensure it continues to be robust even at low oil prices and to consider the strategic alternatives for the asset.

Finally, Tullow has a focused but extensive exploration portfolio in Africa and South America. Drilling of the Goliathberg-Voltzberg North (GVN-1) exploration well in Block 47 in Suriname, started in late January 2021 and work continues on developing the prospect inventory on the Orinduik and Kanuku licences offshore Guyana.

As of December 31, 2020, Tullow is also benefitting from a hedging programme which has 60 per cent of 2021 sales revenue hedged. 2021 is hedged with a floor of approximately US$48/bbl, whilst retaining good access to upside in oil prices with caps averaging approximately US$67/bbl. 2022 sales revenue is currently hedged 3% with a floor of approximately US$51/bbl.  Tullow’s realised oil price for 2020 was approximately US$51/bbl (versus an average of US$54.1/bbl Brent oil price for the year) including the benefit of approximately US$219 million of net hedge receipts during the period.

Closing of the Ugandan transaction with Total E&P Uganda B.V. took place on 10 November 2020, with US$500 million received from Total as part consideration for the Ugandan Interests. Once a final investment decision is taken (which is expected in 2021), Tullow will receive an additional US$75 million payment by way of deferred consideration with further contingent payments linked to Brent oil price payable after production from the assets in Uganda commences.

KeyFacts Energy: Tullow Ghana country profile