• First half revenue of $777 million, gross profit of $351 million and profit after tax of $70 million
• Start-up of Jubilee South East marks major step up in production and free cash flow
• Business plan on track to deliver c.$800 million free cash flow between 2023-2025

Tullow todat announced its half year results for the six months ended 30 June 2023.

Rahul Dhir, Tullow Chief Executive Officer, commented today:
“We are at an important inflection point in the evolution of our business plan. For the last two and a half years we have relentlessly focused on capital discipline, operational performance and appropriate investment in our assets. This has resulted in a much-improved business, material debt reduction and most recently, the delivery of Jubilee South East which has substantially increased production. We now switch to harvesting mode as our business is set to generate c.$800 million of free cash flow between 2023 and 2025, whilst we will continue to run our business with the same discipline. This will enable us to further reduce our debt, put in place a sustainable capital structure and grow our business to create value for our investors, host nations and employees.”

Delivering strategic priorities

• First half working interest production of 53.5 kboepd; additional 7.3 kboepd net gas production from Ghana.
• Start-up of Jubilee South East project, with gross production from the Jubilee field surpassing 100 kbopd.
• Commercialisation of Ghana gas through interim gas sales agreement; represents a new revenue stream for Tullow.
• Strong operational and safety performance; 97% average uptime at Jubilee and TEN FPSOs; four new Jubilee wells online year to date.
• Gabon portfolio optimisation through cashless asset swap agreement with Perenco and licence extensions.
• Unlocked value from sale of Tullow Guyana B.V., including the Orinduik licence, to Eco Atlantic for cash and contingent consideration.
• Accelerated deleveraging through purchase of c.$166 million of 2025 Notes for c.$100 million cash consideration.

First Half Financial Results

• Revenue of $777 million; realised oil price of $73.3/bbl after hedging; gross profit of $351 million; profit after tax of $70 million.
• Underlying operating cash flow of $188 million1; free cash flow of $(142) million.
• Capital investment of $187 million and decommissioning costs of $44 million.
• Net debt at 30 June 2023 of $1.9 billion1; Gearing of 1.7x net debt/EBITDAX1; liquidity headroom of $0.7 billion.

Full Year Outlook

• Full year oil production guidance narrowed to 58 to 60 kbopd (from 58 to 64 kbopd); additional c.7 kboepd gas production expected from Ghana.
• Unchanged full year capex guidance of c.$400 million and decommissioning spend of c.$70 million.
• Significant free cash flow reversal in the second half with c.$200 million1 generated at $80/bbl. Unchanged full year free cash flow guidance of c.$100 million1 at $80/bbl.
• Year-end net debt expected to be c.$1.7 billion1 and gearing expected to be c.1.5x (net debt/EBITDAX)1.
• Continued delivery of business plan to generate c.$800 million of free cash flow1 from 2023 to 2025, supported by strong production outlook and capex flexibility.
• Progressing a range of options to address debt maturities and position the business for a successful refinancing.

Production

Group working interest production averaged 53.5 kboepd in the first half of 2023. In addition, 7.3 kboepd of gas was sold under the Ghana Interim Gas Sales Agreement. Full year oil production guidance has been narrowed to 58-60 kbopd (previously 58 to 64 kbopd), driven by Jubilee first half performance slightly below expectations and the timing of the Jubilee South East start up in the second half of the year. Full year gas production in Ghana is expected to average c.7 kboepd. 

Exploration

In August, Tullow announced the sale of Tullow Guyana B.V, including the 60% operated Orinduik licence, to Eco Atlantic. The sale consists of $0.7 million cash payment upon completion and contingent considerations of $4 million on commercial discovery and $10 million on issuance of a production licence. Furthermore, royalty payments on potential future production of 1.75% of the working interest entitlement revenue net of capital expenditure and lifting costs will be due to Tullow. This transaction is in line with Tullow’s strategy to optimise its portfolio and unlock value from its positions in emerging basins. Tullow and Eco Atlantic are working to secure the required approvals before the end of the year.