Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented today:
“The turnaround of Tullow has gained momentum in the first half of 2022, with solid production from our West African portfolio driving stronger financial performance. We added material, unhedged production in Ghana through the pre-emption of the Kosmos-Oxy deal and took over the Operations & Maintenance (O&M) of the Jubilee FPSO to ensure that we can sustain the good operating performance and deliver further operating cost improvements. Our drilling programme has been very efficient and at current performance levels we will be able to deliver our planned programme of wells through next year with just one rig.

The Board of Tullow remains fully committed to the merger with Capricorn which continues to be recommended by both the Tullow and Capricorn Boards on the current terms. We firmly believe that the proposed merger has the potential for material value creation by implementing a combined business plan which accelerates investment in key projects and delivers very significant synergies.

We have a high quality, opportunity rich portfolio, a clear and disciplined growth strategy and an improving balance sheet. The Board looks to the future with confidence, and I look forward to sharing further details at a capital markets day.”

2022 First Half Results Summary

• Group working interest production for the first half of 2022 averaged 60.9 kboepd, in line with expectations.
• Ghanaian drilling programme ahead of schedule, having completed two previously drilled wells and drilled and completed another three wells. A further six wells are expected to be drilled and two of these completed by year-end.
• Operational delivery: continued strong FPSO uptime (Jubilee c.95% and TEN c.99%), gas export (averaging c.90 mmscfd) and water injection (Jubilee c.170 kbwpd and TEN c.65 kbwpd).
• Reserves of 242 million barrels as of 30 June, valued at c.$4.7 billion after hedging (c.$5.3 billion before hedging).(1)
• Revenue of $846 million with realised oil price of $87/bbl after hedging; gross profit of $620 million; profit after tax of $264 million; underlying operating cash flow of $165 million.
• First half free cash flow of $(205) million (negative), which includes an arbitration payment of $76 million (outflow), Uganda FID payment of $75 million (inflow) and Ghana pre-emption consideration of $126 million (outflow), but excludes the benefit of over $200 million revenue relating to two Ghana liftings, which took place in early June but for which cash was received shortly after 30 June 2022, on 1 and 5 July respectively.
• Capital investment in the first half of 2022 was c.$156 million plus decommissioning costs of c.$29 million.
• Net debt at 30 June 2022 of c.$2.3 billion; Gearing reduced to 1.9x net debt/EBITDAX; liquidity headroom and free cash of $0.6 billion.
• Pre-emption of Deep Water Tano component of Kosmos Energy/Occidental Petroleum Ghana transaction successfully completed.
• Announcement of recommended all-share combination of Tullow Oil plc and Capricorn Energy.

(1) Note: The NPV10 valuation is calculated in accordance with the terms of the indenture for the issuance of 10.25% Senior Secured Notes due 2026 by Tullow Oil dated 17 May 2021. Tullow has agreed with the Takeover Panel that an independent valuation report prepared in accordance with Rule 29 of the City Code on Takeovers and Mergers will be included in the scheme document when published by Capricorn Energy plc in connection with its recommended merger with Tullow. The publication of this independent reserves report in connection with the Merger, or any other independent reserves report required by the Takeover Code, should not be construed as a commitment to publish any such report in the future.

2022 Guidance

• Group working interest production narrowed to 60-64 kboepd.
• Full year capital investment and decommissioning spend of c.$380 million and c.$100 million, respectively. Increase of $30 million associated with additional equity following pre-emption in Ghana.
• Full year underlying operating cashflow expected to be c.$950 million, assuming an average oil price of $95/bbl. Post all costs, Tullow forecasts full year free cash flow of c.$200 million and gearing of <1.5x (net debt/EBITDAX) by year-end.
• Free cash flow guidance includes the c.$75 million contingent consideration in relation to Tullow’s sale of its assets in Uganda to TotalEnergies, a payment of c.$76 million in relation to the arbitration award in favour of HiTec Vision regarding the purchase of Spring Energy in 2013 and a c.$126 million payment for the completion of the pre-emption related to the sale of Occidental Petroleum’s interests in the Jubilee and TEN fields in Ghana to Kosmos Energy.

Merger with Capricorn Energy

On 1 June 2022 Tullow announced that it had reached agreement with Capricorn Energy on the terms of an all-share merger to create a leading African energy company with a material and diversified asset base and a portfolio of investment opportunities delivering visible production growth. This recommended merger will enable the new company to develop and implement a new business plan that accelerates the development of new, material opportunities, realise meaningful cost synergies and deliver a combined group with robust cash generation and a resilient balance sheet. The combined group will also have a sustainable capital returns programme and a deep commitment to environmental stewardship, social investment, development of local content and its national workforces.

Production

Group working interest production averaged 60.9 kboepd in the first half of 2022, in line with expectations. Full year production guidance for 2022 has been narrowed from 59-65 kboepd to 60-64 kboepd. 

Gross production from the Jubilee field averaged c.82.4 kbopd (net: c.30.8 kbopd) in the first half of the year, representing an increase of more than 15% compared to the first half of 2021. This is due to good well and operational performance, which included the successful completion of the planned, biennial maintenance shutdown of the Jubilee FPSO in May. Full year net production guidance for Jubilee is 32kbopd. Gross production from the TEN field averaged c.24.3 kbopd (net: c.12.5 kbopd) in the first half of the year, in line with expectations. Full year net production guidance for TEN is 13kbopd, with the expectation of an increase in production rates when the En21-P well comes onstream in the fourth quarter.

Net production from the non-operated portfolio averaged c.17.6 kboepd in the first half of 2022, in line with expectations. Full year net production guidance for the non-operated portfolio is c.17 kboepd.

Production from Gabon averaged c.15.5 kbopd in the first half of 2022, with Simba being the highest contributor. A long-term appraisal well test at the Tchatamba field is underway and expected to see first oil in September 2022. Infill drilling campaigns continue at the Ezanga Complex and Oba field.

Production from Côte d’Ivoire averaged c.2.1 kboepd in the first half of 2022. A 45 day shutdown of the Espoir FPSO is now planned from October 2022, in which cargo tank maintenance and remediation work, which is required for vessel class certification, will be carried out. Tullow continues to engage with the operator, CNR International, to define the appropriate longer-term course of action for the FPSO.

Tullow Oil country profiles:   Ghana   l   Kenya

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