This is in advance of the Group’s Half Year Results, which are scheduled for release on Wednesday 30 July 2014. The information contained herein has not been audited and may be subject to further review.
- Continued E&A success in Kenya further de‑risks 600mmbo discovered resources
- Good progress with developments in Ghana, Kenya and Uganda
- Well-funded balance sheet following second bond issue raising $650m
Tullow’s 2014 half-yearly financial results are expected to deliver strong revenue and gross profit in line with expectations of approximately $1.3bn and $650m respectively. Following a second $650m bond issue in April 2014 and successful re‑financings of our corporate revolving credit facility of US$750m and our NOK 3bn Norwegian exploration loan facility, Tullow’s balance sheet is extremely well-funded and the Group has unutilised debt capacity at the end of June 2014 of approximately $2.3 billion.
Tullow’s exploration programme over the past six months has focused mainly on Kenya, Norway, Ethiopia, Mauritania and Gabon. There have been a number of successful exploration, appraisal and testing results from the South Lokichar Basin onshore Kenya. Activity will continue during the second half of the year to refine and extend the basin potential including the Etom and Ekosowan exploration wells. Four new basins in Kenya and Ethiopia are being tested during the second half of the year and five further basins will be tested in Kenya and Ethiopia during 2015.
In Norway, results from the Hanssen well are expected shortly and the Tullow-operated Lupus well commenced drilling this week. In Gabon, results from the onshore Igongo well are expected in the next few weeks and the high impact pre‑salt Sputnik‑1 offshore exploration well is expected to spud in late July / early August 2014.
After mixed frontier exploration results in Mauritania, Ethiopia and Norway, combined with licence relinquishments as part of the Group’s continual high-grading of acreage, Tullow expects a net exploration write off of $415 million for the first half of the year. Post‑tax, this will amount to $305 million of which $150 million relates directly to 2014 wells. In addition, Tullow will also record a loss on disposal in the first half 2014 of $115 million primarily due to contingent consideration adjustments in relation to the Uganda farm‑down.
In West Africa, Jubilee gross production averaged approximately 100,000 bopd for the first half 2014 and the Group expects to maintain this level of production for the full year. The deep water TEN project in Ghana is progressing well and is on track for first oil in mid‑2016.
Tullow continues to make good progress with its future developments in Kenya and Uganda, particularly around cost optimisation for Uganda and the recognition by both Governments of the benefits to their projects of a shared pipeline.
Following the re‑structuring of our UK and Dutch assets sales last year, Tullow signed an agreement to sell 53.1% of its Schooner unit interest and 60% of its Ketch asset in the UK Southern North Sea to Faroe Petroleum (U.K.) Limited. Tullow is also making good progress with selling the remainder of its UK and Dutch North Sea assets. In Asia, having completed the sale of its Bangladesh assets last year, Tullow is awaiting Government consent to complete the sale of its assets in Pakistan to Ocean Pakistan Ltd. The process for reducing Tullow’s stake and capital commitments in the TEN Project in Ghana is ongoing.
Group working interest production for the first half 2014 averaged 78,100 boepd, impacted by underperformance at Schooner‑11 in the UK and non‑operated assets in Gabon. In addition, certain non‑operated production in Gabon has not been booked in the first half of 2014 due to ongoing licence discussions, which are expected to be resolved in the second half of 2014. Production guidance remains unchanged for the full year at 79,000 to 85,000 boepd.
Commenting today, Aidan Heavey, Chief Executive, said:
“Tullow has continued to move the business forward over the last six months. Exploration and appraisal success in Kenya has further de‑risked the 600mmbo discovered resources. We are also making good progress towards developing the oil that our exploration team has found in Ghana, Kenya and Uganda and in assessing the significant upside potential in each of these areas. We are well funded following our second bond issue and we are making steady progress with our asset disposal programme. With potential basin-opening wells across the portfolio coming up in the second half of the year and strong revenue and cash flow, Tullow is in a strong position for the remainder of this year and into 2015.”