Tullow cuts full-year capex; sees further savings

Africa-focused oil miner Tullow said first quarter production was slightly below expectations due to technical issues at the Jubilee field off Ghana, but said 2016 capital expenditure would be cut by $100m to $1bn “with further savings expected”.

The FTSE 250 company also secured $3.5bn of debt capacity from its lenders, extended its $1bn revolving corporate debt facility by 12 months to April 2018 and said net debt at the end of April was estimated to be circa $4.5bn, with unutilised debt capacity and free cash of circa $1.3bn.

Group working interest production for the first quarter averaged 59,200 barrels per day for West Africa and 6,500 for Europe.

Tullow said it had to implement new Jubilee off-take procedures at the end of March following damage to a turret bearing.
“In light of this issue, full year 2016 average working interest production is likely to be below current guidance of 73,000-80,000 bopd and updated guidance will be provided when the new operating procedures have been fully implemented and stabilised,” the company said.

“However, Tullow does not currently expect this issue to have a material impact on future cash flow, due to the imminent resumption of production and appropriate insurance policies in place.”

Analysts at Barclays said the extension of the loan facility would "comprehensively address remaining concerns about the balance sheet” and combined with its corporate facility this was "sufficient to provide Tullow with at least $500m of financial headroom through 2017”.