Tullow Writes Down $1.4bn, Eyes Further Sales

Tullow Oil is looking at further asset sales that could total $1bn following its $500mn Ugandan asset sale to French major Total, it said September 9 as it announced first-half write-downs totalling $1.4bn. It expects to collect the cash later this year subject to Ugandan government approval, with further payments to come depending on the progress Total makes upstream.

CEO Rahul Dhir said that "despite the very tough conditions in the first half of this year, we have successfully delivered reliable production and major, sustainable reductions to our cost base." He said he would explain his plans to realise the company's potential late this year at a capital markets day.

Tullow's net production was 77,700 barrels of oil eqivalent/day in the first six months, compared with guidance of 75,000 boe/d. but the company recorded a net loss of $1.32bn, due to exploration write-offs and impairments totalling $1.4bn pre-tax. Oil production in Gabon has been hit by Opec+ output limits.

Tullow's capital investment was $192mn and it spent $38mn on decommissioning. Its net debt at June 30 was $3.0bn, up from $2.8bn six months earlier, with free cash of $0.5bn but it is also eyeing portfolio sales that are "still targeted to deliver proceeds of over $1bn in aggregate albeit in a challenging external environment for asset sales and farm downs."

Group production is "strong going into the second half and full year guidance has been narrowed from 71-78,000 boe/d to 73-77,000 boe/d following good well performance in Ghana offset by the negative impact from Opec+ quotas in Gabon, where the non-operated Simba field is shut in this year.

Production across both fields in Ghana was strong in H1 with the Jubilee field averaging 84,700 boe/d gross (net: 30,000 boe/d) and the TEN field averaging 50,900 boe/d gross (net: 24,000 boe/d). They averaged 90,000 boe/d and 50,000 boe/d gross in July and August."

This performance is a result of increased gas offtake nominations from the Ghana National Gas Company, it said, as well as government approval to flare more gas. The company's focus on continuous improvement to maintain the utilisation of the floating offshore production and storage vessel above 95%.

A comprehensive review of the investment and production optimisation plans for Jubilee and TEN, which are designed to realise the full potential of both assets and to maximise value for all stakeholders, is under way. 

Capital and decommissioning expenditure full year guidance of around $300mn and $65mn remains unchanged.
60% of 2H 2020 sales revenue has been hedged with a floor of $57/b; 48% of 2021 has been hedged with a floor of $51/b.
Organisational restructuring is well advanced and forecast to deliver cash savings of over $350mn over three years, significantly in excess of the previous target of $200mn. This will deliver annual sustainable cash savings of over $125mn from 2021.