Tullow Oil has announced its Half Year results for the six months ended 30 June 2020. 

Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented today:
“Despite the very tough conditions in the first half of this year, we have successfully delivered reliable production and major, sustainable reductions to our cost base. We are also close to completing the important sale of our interests in Uganda. The quality of Tullow’s assets remains robust. Since my arrival as CEO, we have been developing new plans for our business, with the support of our Joint Venture Partners and expert advisors. These plans will deliver enhanced value from our assets to benefit all our stakeholders including our host countries and investors. We will host a Capital Markets Day towards the end of 2020 at which we will update the market on these plans to deliver on Tullow’s true potential.”

2020 FIRST HALF RESULTS SUMMARY

• Group working interest production for the first half of 2020 averaged 77,700 bopd, in line with expectations
• Revenue of $731 million; gross profit of $164 million; loss after tax of $1.3 billion
• Loss after tax driven by exploration write-offs and impairments totalling $1.4 billion pre-tax
• Capital investment of $192 million; decommissioning costs of $38 million
• Negative free cash flow in 1H due to weighting of cash taxes, cash capex, differentials, redundancy costs and working capital
• Net debt at 30 June 2020 of $3.0 billion; Gearing of 3.0x net debt/EBITDAX; liquidity headroom and free cash of $0.5 billion
• Strong operational performance in Ghana; both FPSOs delivering in excess of 95 per cent uptime
• Approval from shareholders for sale of Ugandan assets for $500 million in cash on completion and $75 million in cash at FID
• Rahul Dhir appointed Chief Executive Officer as of 1 July 2020; as of 9 September 2020, Dorothy Thompson returns to non-Executive Chair and Mitchell Ingram appointed as new Non-executive Director of Tullow

OPERATIONAL REVIEW

Production
Group working interest production averaged 77,700 bopd in the first half of 2020, in line with expectations. Full year guidance has been updated to reflect recent strong performance in Ghana, offset by production curtailments in Gabon due to OPEC+ quotas being applied. Overall, guidance for the full year is narrowed from 71‐78,000 bopd to 73‐77,000 bopd, with the mid‐point forecast of 75,000 bopd maintained.

Ghana
The impact of COVID‐19 has been managed safely across the business with no adverse impact on Ghana production. This has been achieved in close cooperation with the Government of Ghana.

Production across both fields in Ghana has been strong in the first half of 2020 with the Jubilee field averaging 84,700 bopd gross (net: 30,000 bopd) and the TEN field averaging 50,900 bopd gross (net: 24,000 bopd). This performance is a result of increased gas offtake nominations from the Ghana National Gas Company as well as approval from the Ministry of Energy to temporarily increase flaring, higher than forecast facility uptime of over 95% at both FPSOs and greater reliability and redundancy in the water injection facilities on the Jubilee FPSO.

At TEN, the Ntomme‐09 production well came onstream at the start of August 2020 and is contributing an incremental c.5,000 bopd gross oil production. The Maersk Venturer drillship has now been released. Tenders are ongoing to contract a rig to recommence activity in Ghana in 2021.

The strong production performance has continued in the second half of the year with Jubilee and TEN averaging 90,000 bopd and 50,000 bopd gross respectively through July and August. This has been driven by continued high facility uptimes and strong well performance across both fields including the Ntomme‐09 well that came onstream in early August.

The final phase of the Jubilee Turret Remediation Project is the installation of a Catenary Anchor Leg Mooring (CALM) buoy to assist with offloading. The CALM buoy arrived in Ghana in January 2020 however full installation works were delayed until September 2020. Once the installation works are complete, commissioning is expected to be completed in the fourth quarter of 2020.

A comprehensive review of the investment and production optimisation plans for Jubilee and TEN, which are designed to realise the full potential of both assets and to maximise value for all stakeholders, is currently under way. This review is being conducted in consultation with the Joint Venture Partners and is supported by expert advisors.

Non‐operated portfolio
Production from Tullow's non‐operated portfolio in the first half has been stable with working interest production averaging 23,700 bopd, in line with expectations.

Production performance across the non‐operated portfolio is expected to remain stable in the second half of 2020. However, in August, Tullow received notification from the operator of the Simba field that as part of Gabon's requirement to comply with the OPEC+ quota, the field would be shut in until the end of the year. This is expected to have a net negative impact on average annual Group production of approximately 1,500 bopd which is incorporated in the revised production guidance. The final outcome is subject to change depending on how the Government of Gabon implement the quotas. Tullow are working closely with Joint Venture Partners to ensure any production curtailments are equitably shared.

Decommissioning
Decommissioning in Tullow‐operated licences in the UK North Sea continues to progress as planned with final removal and seabed clearance activities scheduled from September 2020. In Mauritania, decommissioning of the wells in the Chinguetti field was suspended following the Government's decision to close the borders due to COVID‐19 in March 2020.

Kenya
Tullow has been working with its Joint Venture Partners to progress the full field development plan. In May 2020 Tullow and its Joint Venture Partners declared FM on the Kenya licences. Following productive discussions with the Government, an improvement in the COVID‐19 situation and assurances from Government that the tax incentives granted to the phased project will continue to apply, the FM notices were withdrawn in August 2020. Whilst these issues have resulted in a delay to the Final Investment Decision (FID) on the project, it has allowed time for both Tullow and its Joint Venture Partners to collaboratively work on realising the full potential of the assets. This has resulted in the Government of Kenya agreeing to an initial extension to the Second Additional Exploration Period for the 10BB and 13T licence blocks until 31 December 2020 with a final extension until 31 December 2021, contingent on an agreed work programme and budgets. Separately, the farm down process has been suspended while the Joint Venture Partners complete a comprehensive review of the development concept to ensure it continues to be robust at low oil prices, and also consider the strategic alternatives for the asset.

Uganda
Following the announcement on 23 April 2020 that Tullow had agreed the sale of its assets in Uganda to Total for $500 million in cash on completion, $75 million in cash following FID, plus post first oil contingent payments, the transaction is progressing as planned with completion expected before the year‐end.

On 28 May 2020 CNOOC Uganda Limited informed both Tullow and Total that it had elected not to exercise its pre‐emption rights.

On 18 June 2020 Tullow published the shareholder circular relating to the transaction and on 15 July 2020 a General Meeting was held, at which the transaction received approval with over 99 per cent of the 56 per cent votes cast in favour.

On 6 August 2020 the Government of Uganda provided their consent to the transfer of operatorship from Tullow to Total.

Completion of the transaction remains subject to the Government of Uganda and the Uganda Revenue Authority entering into a binding Tax Agreement with Tullow Uganda and Total Uganda that reflects the pre‐agreed principles on the tax treatment of the transaction, and the Government of Uganda approving the transfer of Tullow's interests to Total. Good progress is being made in satisfying these conditions to completion.

Exploration
Tullow retains a high‐quality exploration portfolio in both Africa and South America with high‐potential opportunities. However, in light of the challenging external environment Tullow will be minimising exploration spend in the short term and looking at ways to rebalance the portfolio whilst maintaining opportunities to realise value and preserve longer term options for growth.

South America
In Suriname, the Goliathberg‐Voltzberg North well in Block 47 is now planned to be drilled in the first quarter of 2021, testing dual targets in the Cretaceous turbidite play in approximately 1,900 metres of water. The well will be drilled by the Stena Forth drillship.

Data reprocessing and evaluation continues in Guyana to support future drilling activity. In Peru, Tullow has been awarded blocks Z67 and Z68 in the Trujillo basin, targeting a completely new petroleum system and new plays.

Seismic acquisition in Argentina commenced in the fourth quarter of 2019 and was able to continue until May 2020 before being put on hold due to the impact of the COVID‐19 pandemic. Recommencement is targeted for the fourth quarter of 2020.

Tullow has now exited the Walton‐Morant licence in Jamaica which expired on 31 July 2020.

Africa
Seismic acquisition in Côte d'Ivoire commenced in February 2020 but was suspended in April 2020 due to the impact of the COVID‐19 pandemic. The data collected during the early stages of the project is now being evaluated to decide on the next steps for the basin.

In Namibia, Tullow is awaiting the outcome of the Venus‐1 well which is expected to be drilled by Total in the fourth quarter of 2020 on a block to the south of Tullow's PEL‐90 acreage before deciding next steps.

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