Tullow's backers increase their financial committments

Exploration outfit Tullow Oil has been granted access to increased financing to support its activities on more secure terms from lenders.

Lenders’ commitments under its six-monthly Reserve Based Lend (RBL) have been increased by $200m, while lenders have committed an additional $250m under the company’s corporate credit facility, to reach $1bn.

The covenants on both sources of financing were amended to address the risk of potential breaches in case of oil price volatility.

"Tullow has plenty of liquidity to make it to first oil"

Commenting on the above chief financial officer Ian Springett highlighted the quality of the company’s assets, which is what allowed the firm to obtain the above terms.

He highlighted how in parallel to the above Tullow has “restructured the business to generate projected savings of $500m” alongside other measures, such as the company’s hedging programme.

Tullow now has $6.3bn of committed debt facilities with no near term maturities, giving it a little over $3bn of funding headroom.

“The strong support we have received from our relationship banks ensures that Tullow is well funded and is an important endorsement of our financial strategy and assets," the CFO of the West-Africa- based firm said.

Commenting on the news analysts Mark Henderson and Jamal Orazbayeva at Westhouse Securities said: "With roughly $1.2bn of net capex on TEN to be spent pre-first oil, Tullow has plenty of liquidity to make it to first oil and we forecast that Tullow will be free cash flow positive in 2017, once TEN production has reached plateau.

"This is a positive update and we believe that the increase in funding facilities is a testament to Tullow's low-cost, high-margin production which is set to increase by over 60% between 2015 and 2017."