Tullow Oil ups production, cash targets after refinancing talks begin

Tullow Oil increased its production and cash targets and cut spending guidance for the full year after an eventful third quarter that has allowed it to proceed on development plans in Ghana and begin re-financing its sizable debt pile.

Full year oil production is expected to come in at 85,000-89,000 barrels of oil per day, up from 78-85,000 bopd previously, after strong production performances from its TEN and Jubilee oilfields offshore Ghana.

After Tullow was given permission by the International Tribunal for the Law of the Sea to re-start the development of the TEN fields no adverse impact was reported by the company and as well as now being expected to contribute more than the 50,000 bopd of production than initially guided, further development drilling will be able to begin early in 2018.

Next year will also see drilling start to develop the Jubilee field after Ghana approved the company's plan, with remediation work on the troublesome turret of its floating production, storage and offloading vessel planned for 2018 with seven-to-nine weeks of total shutdown.

Tullow, which in the first-half of the year reported an operating loss of $395m due to impairment charges of $642m due to the weak oil price and a $572m hit on TEN, formally began the refinancing of its reserves based lending facility last month and said it was "on schedule" to complete the process before the end of the year.

As of the end of October, net debt stood at $3.6bn, down from $3.8bn three months before, with unutilised debt capacity and free cash of approximately $1.2bn, with $0.4bn of cash generation expected for the year thanks to strong production and higher oil prices for much of the second half so far.

Chief executive Paul McDade forecast capital expenditure of roughly $0.3bn for the year thanks to a reduction of $60m on Ugandan and Kenyan assets.

"I am pleased to report that Tullow continues to make good operational and financial progress," he said. "The business is generating free cash flow which is enabling us to continue to reduce our debt."

He said the East African development projects are making steady progress towards final investment decisions, with a joint development agreement signed with the government of Kenya and joint venture partners to develop an export pipeline as the Kenyan business begins to move towards development.