Trading Statement and Operational Update - Tullow Oil
Wednesday 28 June 2017
Tullow Oil plc (Tullow) issues this statement to summarise recent operational activities and to provide trading guidance in respect of the financial half year to 30 June 2017.This is in advance of the Group’s Half Year Results, which are scheduled for release on Wednesday 26 July 2017. The information contained herein has not been audited and may be subject to further review and amendment.
COMMENTING TODAY, PAUL MCDADE, CHIEF EXECUTIVE, SAID:
“Tullow continues to make good progress despite tough market conditions. Our recent Rights Issue and free cash flow from our low cost, producing assets have resulted in a significant reduction in our debt and provided the Group with greater financial and operational flexibility. Since I became CEO in April, I have reviewed our medium-term plans and remain satisfied that we are making the right investment decisions with regard to our producing, development and exploration portfolio. Financial discipline and efficient capital allocation will be a key focus of my tenure as CEO as we seek to deleverage the Company and return to growth even at low oil prices.”
OPERATIONAL UPDATE
PRODUCTION
Tullow’s first half 2017 West Africa oil production has performed in line with guidance, and is expected to average 81,400 bopd including production-equivalent payments received under Tullow’s Business Interruption insurance policy for the Jubilee field. In Europe, half year net production is expected to average 5,600 boepd.
West Africa working interest oil production full year guidance of between 78,000 and 85,000 bopd for 2017, including production-equivalent insurance payments, remains unchanged. Europe full year gas production guidance for 2017 is now expected to average between 5,500 and 6,000 boepd.
WEST AFRICA
GHANA
Jubilee
Gross production from the Jubilee field is expected to average 83,900 bopd (net: 29,800 bopd) in the first half of 2017. Tullow’s corporate Business Interruption insurance is expected to reimburse Tullow for approximately 5,000 bopd of net production-equivalent payments in 1H 2017 increasing Tullow’s effective net production to 34,800 bopd. Full year net production guidance from Jubilee, including production-equivalent insurance payments, remains around 36,000 bopd.
The Interim Spread Mooring of the Jubilee FPSO was successfully completed in February and the vessel is now anchored to the seabed with the turret bearing locked and the vessel held on a constant heading. The Joint Venture Partners and the Government of Ghana have agreed on the need to stabilise the turret bearing and a shutdown of between five and eight weeks is planned for late 2017. Work continues to further reduce the length of this shutdown. Planning for the rotation of the vessel to its optimum heading and the installation of a deep water offloading system is ongoing and it is anticipated that this work will be executed in two stages in 2018 and 2019. The total shutdown duration for stabilisation, rotation and offloading system installation is not expected to exceed 12 weeks.
Work is progressing with the Government of Ghana and JV Partners to update the Greater Jubilee Full Field Development Plan (GJFFD). The JV Partners remain on track to re-submit the GJFFD Plan by the end of July 2017 with approval expected later in the year, allowing drilling to commence in 2018. A 4D seismic survey was completed in the first quarter of the year and data acquired will be used to optimise the location of GJFFD wells and to assist with ongoing reservoir management.
TEN
During the second quarter, trials to optimise the fields and facilities throughput have resulted in production levels regularly in excess of 50,000 bopd. In June 2017, a final commissioning capacity test and facility blowdown was completed demonstrating that that FPSO can operate in excess of its design capacity of 80,000 bopd. The testing however identified an issue with the FPSO’s flaring system which has been addressed but required a 10-day shutdown of the facility. Production in the first half of 2017 from the TEN fields is therefore expected to average 48,000 bopd (net: 22,700 bopd) while full year gross production guidance remains unchanged at 50,000 bopd (net: 23,600 bopd). The TEN gas manifold has also been installed and commissioned and a gas export trial to GNGC facilities has been successfully completed.
The final oral hearings at the International Tribunal for the Law of the Sea (ITLOS), with regard to the maritime border dispute between Ghana and Côte d’Ivoire, took place in February 2017. During the proceedings the Chairman of the Tribunal indicated that a final ruling was expected around the end of September 2017.
The Joint Venture Partners are currently progressing a rig tender process that would, subject to the ITLOS decision, allow drilling of the remaining wells to resume around the end of the year.
NON-OPERATED PORTFOLIO
Production from the West Africa non-operated portfolio is expected to average 23,900 bopd in the first half of 2017. Full year production is expected to average 22,500 bopd which is in line with full year guidance.
Full year gas production from Europe averaged 5,600 boepd in the year to date, which is slightly lower than expectations due to deferment and delays in some activities. Tullow expects full year 2017 European gas production to now average between 5,500 and 6,000 boepd.
EAST AFRICA
KENYA
Exploration and Appraisal
The exploration and appraisal campaign in Kenya has progressed to schedule with important results from the successful Erut -1 exploration well, which extended the proven oil limits to the northernmost end of the South Lokichar basin, and the Emekuya-1 exploration well which demonstrated oil charge across a significant part of the Greater Etom structure.