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This statement is issued in advance of the Group’s Annual General Meeting, which is being held at the Haberdashers’ Hall in London, at 12pm today. The Group will issue its half-yearly Trading Statement and Operational Update on 3 July 2013 and report Half Year results on 31 July 2013.
Continued strong production from the Jubilee field continues to underpin Tullow’s financial performance which funds our high-impact exploration programme and supports our unchanged production guidance of 86-92,000 boepd for the full year. The Tweneboa-Enyenra-Ntomme (TEN) Project Plan of Development (PoD), submitted to the Government of Ghana in November 2012, is awaiting approval and negotiations are ongoing. In Uganda, the Government and the Partners are now making good progress towards agreeing a Memorandum of Understanding that will define an upstream development based on an export pipeline and a refinery sized to meet local market demand. In Kenya, the Twiga South-1 well test has confirmed good productivity in the South Lokichar Basin and in Ethiopia there are encouraging signs from the Sabisa-1 well. While the Priodontes exploration well in French Guiana was not successful, the extensive Guyane Maritime licence still remains highly prospective. A material programme of over 30 wells is planned for the rest of the year with a number of high impact frontier exploration wells currently being drilled in Mozambique, Côte d’Ivoire, Norway, Ethiopia and Kenya.
Operational update
WEST & NORTH AFRICA
Ghana
Jubilee field production has averaged 104,000 bopd in the year to date in line with expectations. Since first oil, the field has produced over 65 million barrels with continued strong uptime performance from the FPSO facilities. A test of the FPSO facilities has been completed and indicates an oil system capacity in excess of 125,000 bopd. The gas compression upgrade project is on schedule to be completed in the third quarter of this year, thereby removing the current capacity restriction of 110,000 bopd. Given the potential for the gas export route to be delayed until the end of 2013 or beyond, work is ongoing to make sure sufficient gas injection capacity remains available to ensure no impact on Jubilee oil production.
The Jubilee Phase 1A project is progressing with two wells completed and producing above expectations with total field well capacity now in excess of the processing capacity. The remaining three Phase 1A producers and three water injectors will be completed in the fourth quarter of 2013, albeit later than scheduled due to the poor performance and extended downtime of the Sedco Energy rig.
The TEN Project Plan of Development, submitted to the Government of Ghana in November 2012, is awaiting approval. The FPSO and Subsea tender processes are both in the final optimisation phase, with final awards expected upon approval.
The Enyenra-6A appraisal well was completed in April 2013 after encountering 18 metres of oil pay indicating a deeper than expected oil water contact. The well has been suspended for future use in the TEN development program.
The Sapele-1 exploration well was drilled in February 2013 and has now been plugged and abandoned. Exploration drilling on the Deep Water Tano block has been completed and the acreage outside the discoveries will now be relinquished.
Rest of the region
Production from the West & North Africa region was in line with expectations for the year to date.
Strong production has been seen from the Ceiba field in Equatorial Guinea following a workover and infill drilling program. In Gabon, performance across the portfolio has been strong, with significant ongoing work programmes. However, due to a short strike in March 2013, average production in Gabon for the period is marginally below expectations. The Mboundi Field redevelopment, in Congo (Brazzaville), is progressing with three production wells and one water injection conversion completed during the period to further optimise production.
Exploration activity in the region continued in the period. In Côte d’Ivoire, the Calao-1X well spudded in early April and a result is expected in May 2013. An appraisal plan for the Paon discovery has now been approved by the Government of Côte d’Ivoire and the Paon-2A appraisal well is scheduled for the fourth quarter of 2013.
In Mauritania, the four-well exploration campaign is scheduled to commence in July 2013. Tullow’s acreage position in Mauritania has also been enhanced with the signing of the Production Sharing Contract (PSC) for the shallow water C3 license area in April 2013.
In April 2013, Tullow also took over operatorship of the offshore Guinea oil and gas exploration concession and plans to drill a deepwater prospect in the first quarter of 2014.
SOUTH & EAST AFRICA
Uganda
In Uganda, activities this year have focused on the remaining exploration and appraisal operations, field development planning and engagement with the Government of Uganda to agree a basin-wide development concept.
Exploration and appraisal activities across the basin this year have included two exploration wells, one appraisal well, seven flow tests and seismic acquisition. While resources continue to be enhanced through this exploratory appraisal, the Ondyek-1 well to the West of Nile was unsuccessful and exploration in this area is now complete.
Significant engagement between the partners and the Government of Uganda has taken place recently and a common understanding has now been reached on the significant factors that impact the basin development. Critically, agreement has been reached on a basin commercialisation plan, which will include an export pipeline and a refinery sized to meet the local market demand. A Memorandum of Understanding, to document this agreement, is now being prepared and will form the basis of the integrated development workplan for the basin. This is expected to include a number of Field Development Plans and Production Licence Applications that will be submitted during the course of the year.
Kenya & Ethiopia
Our high impact exploration campaign continues across Kenya and Ethiopia, with significant ongoing seismic operations, three active rigs and a further rig contracted to start activities in September 2013. In the remainder of 2013 we plan to acquire 2D and 3D seismic, drill a further seven wells and perform significant testing operations.
In Kenya, the Paipai-1 well was drilled in March 2013 and encountered light hydrocarbon shows whilst drilling and has been suspended pending agreement on future evaluation options. The testing of the Twiga South-1 discovery was completed in February 2013; a constrained combined rate of 2,812 bopd was achieved and has the potential to be increased to an unconstrained rate of over 5,000 bopd. Testing at the Ngamia-1 discovery is still in progress and the first test, from a zone previously considered to be non-productive and not included in previous estimates of net pay, flowed at a cumulative rate of 281 bopd. A further five tests are planned over the next month and are expected to lead to an increase in the previous total net pay of 100 metres. The test results to date on Twiga South and Ngamia are extremely encouraging for the Lockichar Basin and are important steps towards understanding the commerciality of these discoveries and the overall potential of the basin.
The next exploration well is Etuko-1, which is expected to spud within the next two weeks. This well is testing the first prospect in the Basin Flank play, and is more centrally located in the basin compared to Ngamia and Twiga South which were drilled along the basin bounding fault. A lighter, more mobile rig has been contracted to start work in September 2013 which will primarily be used to increase drilling efficiency by conducting testing operations and drilling shallow prospects and evaluation wells.
The first exploration well in Ethiopia, Sabisa-1 has been drilled to a total depth of 1,810 metres, recording hydrocarbon indications in sands beneath a thick claystone top seal. Due to hole instability issues, a sidetrack will be drilled to enable us to log and sample the zones of interest, with a result expected in late May 2013.
Seismic activity has included an extensive survey in Block 10BB/North West Block 12A in Kenya and 1,174 km 2D seismic has been acquired over the Chew Bahir basin in the South Omo block in Ethiopia. Both surveys have identified numerous attractive leads and prospects, some with amplitude anomalies characteristic of hydrocarbons, raising the total prospect and lead count in the acreage to over 120.
Rest of the region
In Mozambique, the Cachalote exploration well spudded on 10 April 2013 and a result is expected in June 2013. In Namibia, the Kudu Gas to Power Project continues to progress following the execution of the Project Development Agreement (PDA) and Gas Sales Agreement (GSA) term sheet with Nampower in March 2013.
EUROPE, SOUTH AMERICA & ASIA
Europe
Production from the Southern North Sea assets has been marginally below expectations for the period due to minor operational issues. The sales process of Tullow’s businesses in the UK and Dutch Southern North Sea gas basin has commenced with a number of data room visits under way indicating significant interest. The process is expected to be completed by the end of the year.
In Norway, drilling has commenced on the Carlsberg and Mjosa wells. Further wells are anticipated in 2013, including Tullow’s first operated well on the Norwegian Continental Shelf, Mantra, due to spud in the fourth quarter of 2013. Production from the Brage field in Norway during 2013 is in line with expectations and with additional drilling under way, a modest increase in production is expected by year end.
The 2013 work program for the Tooq block in Baffin Bay, Greenland, consists of seismic processing, geotechnical analysis and the integration of the various datasets.
South America
In French Guiana, the Priodontes-1 well (GM-ES-3), the second well in the current four-well Guyane Maritime drilling programme was unsuccessful due to a trap-specific issue and has no follow-on consequences for prospectivity elsewhere in the block. The third well, GM-ES-4, on the Cebus prospect, spudded in early May 2013. Interpretation of 3D seismic acquired during the second half of 2012 to rank prospects for follow up drilling is ongoing.
Seismic processing in Suriname has continued and initial seismic interpretations confirm the presence of major deepwater turbidite systems within Block 47. A prospect inventory will be completed and ranked in advance of entering the next phase of the production sharing contract in April 2014.
Subject to approval from the Uruguayan regulator, Administracion Nacional de Combustibles Alcohol y Portland, Tullow has finalised a Farmout agreement in relation to Area 15, offshore Uruguay. Since the start of 2013, 3D seismic acquisition has been ongoing in Area 15 and a full evaluation of the data will begin in the fourth quarter of 2013.
Asia
Tullow signed an agreement with KrisEnergy Asia Holdings BV on 7 April 2013, for the sale of 100% of the share capital of Tullow Bangladesh Limited. The consideration is $42.35 million with an effective date of 1 January 2013. The sale is conditional upon receipt of Government of Bangladesh and Petrobangla approvals and consents. Gross production from the Bangora field is currently around 85mmscfd.
The sale of Tullow’s Pakistan business is in progress.
Financial update
Year to date financials are in line with expectations. Capital expenditure for 2013 is expected to be in the region of US$2.0 billion excluding the Spring acquisition cost of $372 million paid in January 2013. As of 30 April 2013, net debt is approximately US$1.6 billion and un-utilised debt capacity is approximately US$2.0 billion.
Outlook
The remainder of 2013 will be a busy and exciting time for Tullow. Our exploration programme has significant high-impact wells across Africa, Norway and French Guiana and we are making progress towards securing Tullow’s medium-term organic production in Ghana and Uganda. With a strong balance sheet, robust production, planned portfolio activity to manage development capital and a set of industry-leading exploration basins and prospects, Tullow is well placed for the rest of the year and into 2014.