Tullow Oil, the independent oil and gas exploration and production group, announces its Full Year Results for the year ended 31 December 2020. 

Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented today:
"After a year of significant change for Tullow we are now executing a robust, cash generative business plan which is focused on our most productive assets. We have transformed our cost base, implemented rigorous capital discipline and are well placed to benefit from higher oil prices. We will start a multi-year, multi-well drilling programme in Ghana next month to deliver sustainable and profitable production growth. Our self-help initiatives will deliver c.$1 billion, including over $700 million from asset sales in the past year. Strong business delivery, increased liquidity and improving commodity prices support constructive refinancing discussions. Importantly, we are also announcing today that we intend to be Net Zero by 2030 as part of our commitment to sustainability. This commitment reflects our desire to work closely with Host Communities and Governments and our investors to deliver a long-term and sustainable business.”

2020 full year results Summary

• Group working interest production averaged 74,900 bopd, in line with expectations
• Revenue of $1,396 million; gross profit of $403 million; loss after tax of $1,222 million
• Loss after tax driven by non-cash exploration write-offs and impairments totalling $1,237 million pre-tax
• Underlying operating cash flow of $598 million and pre-financing cash flow of $625 million
• Capital and decommissioning expenditure were $288 million and $58 million respectively
• Net debt at year-end of c.$2.4 billion; gearing of 3.0x2 net debt/EBITDAX; headroom and free cash of c.$1.1 billion
• Strong operational performance in Ghana; both FPSOs delivered in excess of 95% uptime during the year
• $575 million Uganda asset sale to Total completed in November 2020; $75 million contingent payment expected in 2021

Long term business plan

• 10-year business plan presented at a Capital Markets Day on 25 November 2020 (CMD) to deliver material value and cash flow
• Business plan to generate c.$7 billion underlying operating cash flow and c.$4 billion pre-financing cash flow @ $55/bbl
• Material upside to oil price with business plan generating an additional $1.5 billion of pre-financing cash flow @ $65/bbl
• Over 90% of capital to focus on West African producing assets; options being worked to unlock value in Kenya and South America
• Cost focus is delivering annual savings of >$125 million through 53% headcount reduction, outsourcing and other efficiencies
• A strong foundation has been created to address near-term debt maturities and reduce gearing to 1-2x net debt/EBITDAX
• 2P reserves increased to 260 mmboe representing a 2020 reserves replacement ratio of c.160%, underpinning the business plan

2021 outlook

• Group working interest oil production year-to-date in line with expectations; full year guidance of 60,000 – 66,000 bopd
• Underlying operating cash flow and pre-financing cash flow expected to be c.$0.5 billion and c.$0.2 billion respectively at $50/bbl
• Every $10/bbl increase in the oil price delivers c.$100 million incremental pre-financing cash flow up to $75/bbl
• Capex of c.$265 million; decommissioning of c.$100 million; Ghana drilling programme with four wells in 2021 to start in April
• Sale of interests in Equatorial Guinea and Dussafu in Gabon for up to $180 million agreed; completion expected in H1
• Suriname exploration well result expected early in Q2; focused on prospect maturation across the exploration portfolio
• In Kenya, a comprehensive review of the development concept is being completed to assess future strategic options
• The Tullow Board has committed to the Group becoming Net Zero on its Scope 1 and 2 emissions by 2030

Refinancing update

Tullow has been reviewing its business plan and operating strategy with its creditors and their advisers. The plan is expected to generate material cash flow and create a solid foundation to address near-term debt maturities. Tullow’s low-cost asset base is leveraged to oil price upside.  As part of the ongoing refinancing discussions, Tullow has now received approval for a new debt capacity amount under the Reserve Based Lending facility (“RBL”) of $1.7 billion. With this new debt capacity agreed, Tullow has liquidity headroom and free cash of c.$0.9 billion. The combination of strong business delivery, increased liquidity, recent asset sales and higher commodity prices is providing a positive impetus to constructive discussions with creditors. The Group is confident that a mutually satisfactory agreement on debt refinancing can be reached in the first half of this year.

Production, Reserves and Resources

In 2020, Tullow’s West Africa oil assets performed in line with expectations delivering average working interest oil production of 74,900 bopd. In 2021, working interest oil production is expected to average between 60,000 and 66,000 bopd. This forecast will be adjusted for the sales of the Equatorial Guinea and Dussafu assets once these transactions complete. As laid out at the Group’s CMD, investment focused on the Group’s cash generative producing assets in West Africa is expected to increase production in 2022 and sustain it for the longer term.

Tullow’s audited 2P reserves have increased from 243 mmboe at the end of 2019 to 260 mmboe at the end of 2020. Based on 27 mmboe of 2020 production, this represents an organic reserves replacement ratio of c.160%, underpinning the business plan presented at the CMD. This was largely driven by a 31.5 mmboe increase at Jubilee following improved field performance and the acceleration of development projects in the new plan. Tullow’s audited 2C resources decreased from 1,102 mmboe to 640 mmboe, largely resulting from the Uganda asset sale.

KeyFacts Energy Tullow country/company profiles:   Suriname   l   Equatorial Guinea   l   Ghana   l   Kenya