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Tullow Oil announces 2019 results

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Oilfield Technology,

Tullow Oil plc (Tullow), the independent oil and gas exploration and production group, has announced its Full Year Results for the year ended 31 December 2019.

2019 full year results summary

  • Group working interest production averaged 86 800 boe/d; capital investment of US$490 million.
  • Revenue of US$1683 million; gross profit of US$759 million; loss after tax of US$1694 million.
  • Loss after tax driven by exploration write-offs and impairments totalling c.US$2 billion including revised Uganda write-off.
  • Free cash flow of US$355 million; year-end net debt of US$2.8 billion; gearing of 2.0x net debt/EBITDAX.
  • Commenced exploration campaign in Guyana; Carapa-1 well confirms extension of Cretaceous play into Tullow’s acreage.
  • Continued project progress in Kenya towards FID; first ever lifting of Kenyan crude.
  • Departure of CEO and Exploration Director by mutual agreement following disappointing business performance.

Business review

  • Business Review undertaken covering all aspects of Tullow’s operations and cost base.
  • Group being restructured to create an effective and efficient organisation; 35% headcount reduction.
  • Dividend suspended and 2020 CAPEX lowered to c.US$350 million; c.US$200 million of G&A cash cost savings targeted over 3 years.
  • Greater Group control of operations and production forecasting through appointment of Mark MacFarlane as COO.
  • Ghana production and sub-surface management centralised in London; new Asset Director hired.
  • Areas of potential investment to maintain long-term production and reserve recovery identified at both Jubilee and TEN.
  • New Head of Exploration hired; c.45% reduction in exploration budget; disciplined exploration strategy.
  • Portfolio management planned to raise in excess of US$1 billion of proceeds, further streamline the business and reduce gearing.

2020 outlook

  • Group production year-to-date in line with expectations; full year guidance of 70,000 – 80 000 bpd.
  • Jubilee performing well after gas processing facility upgraded, increased gas offtake agreed, and sea-water injection capacity optimised; Nt-09 production well at TEN on-stream in Q2; non-operated West African production in line with expectations.
  • CAPEX of c.US$350 million, down c.30% from 2019; exploring options to reduce further if required.
  • 2020 free cash flow forecast of US$50-US$75 million at US$50/bbl; free cash flow breakeven of c.US$45/bbl.
  • 60% of 2020 sales revenue hedged with a floor of US$57/bbl; 40% of 2021 sales revenue hedged with a floor of US$53/bbl.
  • RBL redetermination ongoing; expected c.US$1.9 billion debt capacity at the end of March; liquidity of c.US$700 million.

Dorothy Thompson, Executive Chair, Tullow Oil plc, commented:

“This has been an intense period for Tullow as we have worked hard on a thorough review of the business which has led to clear conclusions and decisive actions. We are focused on delivering reliable production, lowering our cost base and managing our portfolio to reduce our debt and strengthen our balance sheet. Even with recent events in oil markets, Tullow’s assets remain robust: we are a low-cost African oil producer, with a strong hedging position, substantial reserves that underpin our business and a high potential exploration portfolio.”

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