Tullow Oil trading impacted by falling oil prices

gh pressrelease jubilee fpso night 802x535Tullow Oil has released a statement to summarise recent operational activities and to provide trading guidance in respect of the financial half year to 30 June 2017

Tullow Oil expects to generate US$0.6bn of pre-tax operating cash flow, before working capital, for the first half of 2017. This is higher than the first half of 2016 as a result of insurance proceeds, contributions from TEN, and increased contributions from Jubilee, Ghana. The Group expects to incur US$0.6bn pre-tax, US$0.4bn post-tax, of non-cash impairment of property, plant, and equipment due to reduced oil price forecasts.

The Group hedges a part of its production on a two-year forward-looking basis. The current commodity hedge volumes represent approximately 60 per cent in 2017 and 40 per cent in 2018 of total Group net entitlement volumes on a pre-tax basis.

The Group’s capex guidance for the year has been revised from c.US$0.5bn to c.US$0.4bn. This change reflects a revision to prior year accruals in Ghana and lower forecast expenditure across the portfolio.  The deferred consideration from the Uganda farm-down, once completed, would further reduce the overall Group capex for 2017 to c.US$0.3bn.

In February, the Group agreed a twelve month extension to the maturity of the Corporate Facility to April 2019. Commitments and available debt capacity under this facility, which is undrawn, are currently US$800mn and are scheduled to reduce to US$600mn in January 2018, $500 million in April 2018, and US$400mn in October 2018.

In April, Tullow successfully completed a US$750mn Rights Issue in order to reduce gearing, provide the Group with financial and operational flexibility and enable growth over the next three-to-five years. At the end of June 2017, net debt is estimated at US$3.8bn, a reduction of c.US$0.95bn from year end 2016, following receipt of Rights Issue proceeds and cash flow generated from operations, demonstrating ongoing delivery of organic deleveraging.

In May, Tullow cancelled US$410mn of Reserve Based Lending (RBL) commitments, effectively accelerating a significant part of the commitment amortisation scheduled for October 2017. Commitments and available debt capacity under the RBL are currently US$2.75bn, reducing to US$2.64bn in October 2017 in line with the amortisation schedule. The Group plans to refinance the RBL before the end of 2017.

The Group’s unutilised debt capacity and free cash at the end of June 2017 is estimated to be approximately US$1.2bn.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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