Tullow Oil, Chief Executive Officer Aiden Heavy has acknowledged that: ‘‘2015 has been tough year for the industry.’’ His comments come as the crude oil prices hit an all time low of nearly $40 per barrel.
However, he was quick to note that despite the difficult environment, Year to date revenue and cost of sales are in line with company’s expectations.
Tullow’s forecast capital expenditure for 2015 currently remains unchanged at around $1.9 billion and the Group expects 2016 capital expenditure to be approximately $1.2 billion. On 30 September 2015, Tullow completed its RBL re-determination process, resulting in no change to debt draw capacity at $3.7 billion. The available amount under the corporate facility remains $1 billion.
Aiden notes that the business remains well funded with unutilised debt capacity and free cash expected to be approximately $1.7 billion at the year end. The Group expects to generate pre-tax operating cash flow before working capital in 2015 of around $1.0 billion and exit the year with net debt at around $4.2 billion.
The Group’s Major Simplification Project is on track and will deliver cost savings over three years of around $500 million. A one- off restructuring charge for this project of approximately $40 million is expected in 2015, with $25 million having already been recorded in first half 2015.
Tullow has taken appropriate steps to meet the challenges presented by lower oil prices.
Mr. Aiden says the company is focusing resources on West African oil assets which, by 2017 with TEN onstream, will be producing around 100,000 bopd net to Tullow.
‘‘We are also focused on managing our costs and ensuring that we have sufficient funding to meet all our commitments. We expect to begin deleveraging our balance sheet with production from TEN and this project remains on time and on budget for mid-2016.’’ He said
On the East African developments, Tullow is progressing steadily with FID for both Kenya and Uganda now expected in 2017.
As we approach the end of the year,Tullow is focused on priorities of generating steady cashflow from operations, completing TEN on schedule and on budget, ensuring we retain appropriate liquidity and building on our exciting exploration prospect inventory for the future.
Tullow continues to build on its exciting exploration prospect inventory for the future; replenishing and high-grading its exploration portfolio while actively managing its equity exposure to future seismic and drilling costs.
In Suriname a 4,000 sq km 3D seismic programme of the Tullow-operated offshore Block 54 was completed in September 2015. This was followed by a 20% farm out of Block 54 in October 2015 to Noble for a carry, leaving Tullow with a 30% interest and retained operatorship.
Tullow and its partners are reviewing the results of the recent seismic programme ahead of selecting future drilling prospects. Initial indications suggest that the Araku prospect has significant potential. In Jamaica, Tullow has awarded a 2D acquisition contract to cover the Walton Mourant basin after the successful bathymetry and drop core survey completed earlier in the year.
In Norway, the Group farmed out its remaining 20% interest in the unsuccessful Hagar well in PL650, ahead of drilling. Tullow farmed out a 10% interest to both VNG and Pure Energy in July and August respectively. The Kup-1 well in Pakistan, in which Tullow has a 30% non-operated stake, is currently drilling with a result expected towards the end of 2015.