This is in advance of the Group’s Half Year Results, which are scheduled for release on Wednesday 29 July 2015. The information contained herein has not been audited and may be subject to further review.
Actions taken in the first half to re-set the business, improve funding liquidity and cut costs
Strong West Africa oil production in the first half; 2015 full year guidance increased
TEN Project remains within budget and on schedule for first oil in mid-2016
COMMENTING TODAY, AIDAN HEAVEY, CHIEF EXECUTIVE SAID:
“We have taken a number of important steps to ensure that Tullow remains on a firm financial footing. This approach is paying off with good progress across the business in the first half of 2015. Our major oil producing assets in West Africa have performed strongly and we have upgraded our 2015 full year production forecast accordingly. The TEN Project remains within budget and on track for first oil in mid-2016. In East Africa, we are making steady progress towards project sanction with good appraisal and test results from our wells in Northern Kenya and strong support from the Governments of Kenya and Uganda. Finally, we continue to build our inventory of exploration prospects to provide options when market conditions improve.”
In the first half of 2015, West Africa working interest oil production was within guidance averaging 66,500 bopd. As a result of strong performance from Jubilee and the non-operated portfolio, 2015 working interest production guidance for West Africa has been increased to 66,000-70,000 bopd from 63,000-68,000 bopd. In Europe, working interest gas production for the first half of 2015 was within guidance averaging 8,100 boepd. This figure includes the impact of the completion of a Netherlands gas asset sale on 30 April 2015 to AU Energy. Average working interest production guidance in Europe, having been adjusted by 1,000 boepd to account for this sale, is now 6,000-8,000 boepd from 6,000-9,000 boped.
Jubilee production performance has remained strong averaging around 105,000 bopd gross (37,300 bopd net) during the first half of 2015. Final commissioning of the onshore gas processing facility was completed in March 2015 and since then gas exports from the Jubilee field have averaged around 80 mmscfd. Tullow plans to drill two additional Phase 1A wells and the first of these, J-37, has commenced drilling. In light of the performance of the Jubilee field year to date and the decision to have a planned one week shutdown in the second half of 2015, Tullow has increased its full year 2015 average working interest production guidance for the field to 103,000 bopd (36,500 bopd net). Work continues to incorporate the Mahogany, Teak and Akasa resources in the Greater Jubilee Full Field Development Plan which the partnership plans to submit to the Government of Ghana by year-end.
The TEN Project continues to make excellent progress and remains within budget and on schedule for first oil in mid-2016. Important milestones on the project achieved during the second quarter included: the running of the first two of ten well completions; the installation of the turret on the bow of the FPSO; the first in-country fabrication works made ready for the start of the offshore installation campaign in mid-July; and specialist subsea manifolds and umbilicals from the USA made ready for transport to Ghana. Following the 25 April ruling from the Special Chamber of the International Tribunal of the Law of the Sea (ITLOS) on Provisional Measures, discussions are ongoing with the Government of Ghana on their implementation and no impact is expected on project activity to first oil.
In Gabon, due to ongoing licence discussions with the Government regarding the Onal fields, Tullow has not included Onal (approximately 2,000 bopd net), in its first half 2015 Group production figures. However, an agreement with the Government is expected and Tullow has retained the annual production from the fields in its Group 2015 full year guidance.
In East Africa, progress is being made on the decision regarding the route of the export pipeline with the Technical Consultant having submitted its final feasibility report to the Governments of Uganda and Kenya. It is expected that the Governments will shortly agree on the preferred routing which will enable the next phase of work on the pipeline to progress.
Kenya operations have been focused on the South Lokichar Blocks 10BB and 13T where appraisal drilling and Extended Well Tests (EWT) are continuing. In May, the Amosing EWT commenced and five reservoir zones in the field were tested across two wells, being separately produced in one well while pressure responses were measured in the other well. Production from all five zones was at a combined average constrained rate of 4,300 bopd under natural flow conditions and a cumulative volume of 30,000 barrels of oil was produced into storage. The pressure data supports significant connected oil volumes and confirms lateral reservoir continuity between the wells which is positive for the future development of the Amosing field. Having completed the production testing, preparations are now under way for water injection tests into each of the five completed reservoir zones in Amosing-2A. These tests will validate the viability of water flood reservoir management and the oil recovery assumptions for the Field Development Plan.
Elsewhere in the South Lokichar basin, preparations for the Ngamia field EWT are under way. Multi zone completions were installed in the Ngamia-8, Ngamia-3 and Ngamia-6 wells. Initial rig-less flow testing during clean-up was at a combined maximum rate of 3,900 bopd and 1,740 bopd of 30 to 33 degree API oil for Ngamia-8 and Ngamia-3 with Ngamia-6 clean-up flow testing ongoing. These initial results are very encouraging.
The PR Marriott 46 rig spudded the Ngamia-9 appraisal well on 13 June 2015. Following this well, the rig will then move to drill the Twiga-3 and Amosing-5 appraisal wells, completing the 2015 appraisal drilling activities. In the third quarter of 2015, a basin testing exploration well is planned at Cheptuket in Block 12A. The well will test a basin bounding structural closure in a similar structural setting to the successful discoveries along the western bounding rift basin fault in the South Lokichar basin.
In Uganda, progress has been made on several fiscal matters which it is hoped will enable substantive progress to be made towards the sanction of the Lake Albert oil development. On 11 June 2015, the Government announced that it had amended the VAT Act to relieve oil exploration and development from VAT. On 22 June 2015, following constructive discussions with the Government of Uganda and the URA, Tullow announced that it had agreed to pay $250 million in full and final settlement of its CGT liability for the farm-downs to Total and CNOOC that completed in 2012. This sum comprises $142 million that Tullow paid in 2012 and $108 million to be paid in three equal installments. The first of these was paid upon settlement and the remainder will be paid in 2016 and 2017.
EUROPE AND SOUTH AMERICA
In Norway, Tullow completed the Bjaaland exploration well in May with only residual oil shows encountered. The well was plugged and abandoned. The Leiv Eiriksson semi-submersible drilled the Bjaaland well and moved to the Tullow operated Zumba prospect which completed drilling in June and was plugged and abandoned as a dry hole.
Tullow has also been actively managing its equity position and exposure to drilling costs in Norway across a number of licences. Completed farmdown transactions resulted in a reduction to Tullow’s equity in the Zumba and Hagar prospects to 40% and 10% respectively, subject to Government approval.
In the Netherlands, Tullow completed the sale of its operated and non-operated interests in the L12/15 area and Blocks Q4 and Q5 to AU Energy on 30 April 2015. The consideration was €64 million for the sale of approximately 1,500 boepd. On 5 June 2015, a farmdown to GDF Suez E&P Nederland completed resulting in the sale of 30% equity and the operatorship of Exploration Licences E10, E11 (including Tullow’s Vincent discovery), E14, E15c and E18b. Following these and previous deals, Tullow no longer holds any operated licences in the UK or Netherlands.
In the Caribbean-Guyanas, Tullow has been very active maturing its exploration opportunities in the region. In May, the Spari-1 well in Suriname commenced drilling with a result expected in August. In Jamaica, where Tullow has a significant offshore acreage position, a bathymetry survey has been completed on the Walton & Morant Blocks. The survey results provided indications of possible seeps on which to position drop cores and this operation has commenced.