Tullow Set To Book US$1.7 Billion Impairment Over Lower Oil Prices

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Africa focused oil and gas company, Tullow, is set to book between US$1.4-1.7 billion in impairments before tax in its half-year results over decline in oil prices.

Tullow, which had a market capitalisation of around US$508 million after markets closed on Tuesday, had US$3 billion in net debt and untapped liquidity and free cash of around US$500 million.

The company plans to spend around US$365 million on investments and decommissioning this year.

Tullow added in a trading statement that its 2020 cash flow was forecast to break even at current prices.

It has hedged 60 percent of its sales this year at a floor price of US$57 a barrel and 44 percent of next year’s at a floor of US$51 a barrel.

“As a result of lower near-term oil price forecasts and a revision in the Group’s long-term oil price assumption from US$65/bbl to US$60/bbl, the Group expects material impairment and exploration write-offs to be recorded at the half-year in the range of US$1.4-1.7 billion (pre-tax),” Tullow said in a statement posted on its website.

The company said the impact of COVID-19 has been managed safely across its business with no impact on its operated production.

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“Group working interest production in the first half of 2020 averaged 77,700 bopd in line with expectations; full year guidance has been narrowed to 71,000-78,000 bopd reflecting continued good performance across the portfolio.

“Ghana operational performance has been strong in the first half with uptime on both FPSOs in excess of 95 percent. Completion operations on the Ntomme-9 production well at TEN are ongoing; the well is due onstream in August.”

The impact of COVID-19 on the Kenya work programme and fiscal framework has led the Joint Venture to call force majeure on its licences which will delay FID and impact the ongoing farm-down process. Constructive discussions are ongoing with the government regarding next steps.

In Suriname, the drilling of the Goliathberg-Voltzberg North prospect (GVN-1) in Block 47 is planned for the first quarter of 2021. A rig is expected to be contracted shortly for this Upper Cretaceous prospect.

Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented: “Since becoming CEO on 1st July, I have been impressed by the quality of Tullow’s people and the potential of our assets and I am confident that we can build Tullow into a competitive and successful business once again. Despite the challenging external environment in the first half of the year, Tullow has performed well; delivering production in line with forecast, agreeing the sale of the Ugandan assets and re-shaping the Group’s structure and cost base. In the second half of 2020, our focus will remain on continuing to deliver safe and reliable production from West Africa, reducing debt and building a cost effective and efficient organisation that can compete in a low oil price environment.”

Source:www.energynewsafrica.com

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