Tullow Oil updates market on solid development progress

Tullow Oil issued a trading update for the period from 27 July to 9 November on Wednesday, a period in which TEN first oil was achieved on time and on budget on 18 August with first lifting on 6 October.

The FTSE 250 firm said current production was around 50,000 bopd.

TEN production ramp-up to the end of October was impacted by issues with the water injection systems, the board said, with 2016 annualised gross production for TEN now expected to be around 15,000 bopd.

Jubilee field production averaged around 100,000 bopd since August, the board said, with the Turret Remediation Project on schedule and affirmation of cover for both the hull and machinery and business interruption insurance received in September.

Full year 2016 West Africa net oil production guidance was revised to 64-67,000 bopd, which now included reduced production from TEN offset by production-equivalent revenues at Jubilee covered by business interruption insurance.

The company’s early oil pilot scheme in Kenya was now targeted to be on-stream mid-2017, with full field development planning continuing and joint development agreements to progress pipeline development and commence studies now negotiated and awaiting signature.

A four-well exploration campaign was to commence in the South Lokichar basin in Kenya in December, targeting prospects in the north of the basin and extending existing discoveries.

Uganda production licences were also awarded during the period, with the board saying good progress was being made on upstream development and the Hoima to Tanga export pipeline with the award of both FEED contracts expected in early 2017.

Preparations were ongoing for drilling the potentially high impact Araku prospect offshore Suriname in 2017, and Tullow’s Norway divestment was progressing well, with 12 licences sold - including the Wisting discovery.

Disposal of the remaining assets in the country was expected to conclude in first half of 2017.

RBL re-determination was also completed successfully, securing available credit of $3.3bn and new commitments of $345m, effective 1 April next year.

“First oil at the TEN field, offshore Ghana, on 18 August 2016 was a key milestone for Tullow,” said CEO Aidan Heavey.

“Our major capital commitments came to an end and our low cost West Africa oil production is increasing substantially.”

Heavey said as a result, Tullow will start to generate free cash flow in the current quarter and will begin the process of deleveraging its balance sheet.

“We have also made good progress with the Turret Remediation Project at Jubilee and coverage has been affirmed with our insurers for the repair and business interruption.

“As we exit 2016, we are well placed to begin the process of both refinancing and paying down our debt in 2017 while also focusing on growth through our exploration programmes in Africa and South America and the commercialisation of our assets in East Africa,” Heavey explained.