Tullow Oil has met its production targets despite the challenges posed by COVID-19 on the industry.
The Chief Executive Officer of Tullow Oil Plc, Rahul Dhir, who made this known said that despite the challenges that 2020 presented, his outfit delivered production in line with expectations, executed major reductions to its cost-base and reduced net debt through the Uganda asset sale.
“Tullow has a busy year ahead as we begin implementing the business plan that we laid out at our Capital Markets Day. The plan is focused on ensuring that Tullow’s producing assets in West Africa reach their full potential. We will leverage the new plan and our reduced cost base to generate positive free cash flow at current commodity prices, drive down our net debt and deliver a robust balance sheet,” he said.
In his view, the impact of COVID-19 has been managed effectively across the group with negligible impact on production; adding that group working interest oil production averaged 74,900 barrels of oil per day in 2020, in line with guidance.
“2020 full year revenue is expected to be $1.4billion with a realised oil price of $50.8/bbl, including hedge receipts of $0.2 billion; gross profit is expected to be $0.4 billion. Capital and decommissioning expenditure for 2020 were $290 million and $50 million respectively. Year-end net debt reduced to $2.4 billion (2019: $2.8 billion) as a result of $430 million free cash flow. This includes Uganda proceeds of $500 million, $70 million of Group redundancy payments and negative year-end working capital adjustments of $50 million. Pre-tax impairments and exploration write-offs are expected to be broadly in line with the $1.4 billion reported in first half of the 2020 results,” Mr Dhir noted.
2021 Outlook
The group’s working interest oil production is forecast to average 60-66,000 bopd in 2021. This forecast reflects the drilling hiatus in 2020, a planned shut-down in September on Jubilee and deferred development drilling on Simba in Gabon.
Capital expenditure is forecast to be $265 million, with an additional $100 million to be spent on decommissioning. Organisational restructuring which is completed is expected to deliver sustainable annual cash savings of over $125 million. Underlying operating cash flow is expected to be $0.5 billion at $50/bbl for the first year of Tullow’s new business plan which aims to deliver $7 billion underlying operating cash flow over the next 10 years; 2021 pre-financing cash flow is expected to be $0.2 billion at $50/bbl.
In Ghana, oil production from Jubilee and TEN for the year to date is in line with expectations, supported by gas off-take from the Government of Ghana of 125 mmscfd.
Also, a new oil offloading system is being commissioned on Jubilee and is expected to be ready for a first lifting in February.
A drilling rig is being mobilised to Ghana to commence operations in the second quarter of the year and the first new production well on Jubilee is forecast to be on-stream in the third quarter.
