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Tullow Oil Assets remain robust

Tullow Oil plc (LON:TLW), the independent oil and gas exploration and production group, announced today its Full Year Results for the year ended 31 December 2019. Details of a management presentation, webcast and conference call are available on the Group’s website.

Dorothy Thompson, Executive Chair, Tullow Oil, commented today:

“This has been an intense period for Tullow as we have worked hard on a thorough review of the business which has led to clear conclusions and decisive actions. We are focused on delivering reliable production, lowering our cost base and managing our portfolio to reduce our debt and strengthen our balance sheet. Even with recent events in oil markets, Tullow’s assets remain robust: we are a low-cost African oil producer, with a strong hedging position, substantial reserves that underpin our business and a high potential exploration portfolio.”


  • Group working interest production averaged 86,800 boepd; capital investment of $490 million
  • Revenue of $1,683 million; gross profit of $759 million; loss after tax of $1,694 million
  • Loss after tax driven by exploration write-offs and impairments totalling c.$2.0 billion including revised Uganda write-off
  • Free cash flow of $355 million; year-end net debt of $2.8 billion; gearing of 2.0x net debt/EBITDAX
  • Commenced exploration campaign in Guyana; Carapa-1 well confirms extension of Cretaceous play into Tullow’s acreage
  • Continued project progress in Kenya towards FID; first ever lifting of Kenyan crude
  • Departure of CEO and Exploration Director by mutual agreement following disappointing business performance
Total revenue ($m)11,6831,859
Gross profit ($m)7591,082
(Loss)/ profit after tax ($m)(1,694)85
Free cash flow ($m)355411
Net debt ($m)2,8063,060
Gearing (times)2.01.9

1.   Total revenue does not include receipts for Tullow’s corporate Business Interruption insurance of $43 million (2018: $188 million).


  • Business Review undertaken covering all aspects of Tullow’s operations and cost base
  • Group being restructured to create an effective and efficient organisation; 35% headcount reduction

Business Review
A full review of Tullow’s business has been carried out by the Board and the management team. The guiding principles of the review were as follows:

  • Ensure the delivery of safe and sustainable operations across the Group
  • Review Tullow’s portfolio and investments to prioritise free cash flow generation and debt reduction
  • Implement greater control of operations and improve production forecasting
  • Restructure Tullow to ensure organisational cost efficiency and effectiveness

A series of decisive actions have been taken with the outcomes described below.


  • Financial strategy focused on free cash flow and a more conservative approach to the capital structure of the business
  • Group capital expenditure reduced by c.30% to c.$350 million for 2020; exploration spend reduced by c.45% to c.$75 million
  • Portfolio management options identified to raise in excess of $1 billion of proceeds to strengthen balance sheet and provide a solid foundation for the business going forward
  • Formal sales process launched in Kenya; continuing to work with Joint Venture Partners on a farm-down in Uganda
  • $100 million annual dividend suspended
  • Efficiency improvements result in G&A cost reduction; initial headcount reduction of 35%
  • Targeting c.$200 million net cash G&A savings over three years; reduced allocation to opex, capex and corporate overheads
  • RBL debt capacity expected to be c.$1.9 billion at the end of March resulting in headroom of c.$700 million


  • Mark MacFarlane appointed as COO with responsibility for the operated and non-operated businesses, including production operations and forecasting, with direct control of development, exploration and technical excellence across the Group


  • Ghana Asset Director, Wissam Al-Monthiry, formerly of BP, hired to manage integrated operations and commercial planning
  • Ghana sub-surface management and analysis centralised in London with day-to-day operations run in country
  • Working successfully with the Government of Ghana to increase gas offtake and improve production at both Jubilee and TEN
  • Sea-water injection reliability improved; gas processing capacity on the Jubilee FPSO successfully upgraded
  • Identifying high-potential, undeveloped areas at Jubilee and Ntomme for future investment to build reserves and production


  • New Head of Exploration, Amalia Olivera-Riley, formerly of Repsol and Exxon Mobil hired
  • Centralisation of Tullow’s technical and non-technical expertise in London
  • Exploration portfolio to be balanced between proven basins, targeted frontier drilling and near-field opportunities
  • Equity positions being leveraged to attract partners and carries; targeting c. 30% equity in all licences pre-drill


  • Executive Management of the Company changed; focused management structure put in place
  • Recruitment of a new CEO is well under way with a final short-list being considered by the Board
  • Internal restructuring has created a less complex organisation and will improve efficiency and effectiveness
  • Proposing the closure of both the Cape Town and Dublin corporate offices

Following the Business Review, the Board remains confident both in the strength of Tullow’s assets and its people. Tullow produces low-cost barrels of oil in West Africa, has substantial and valuable oil reserves in both West and East Africa and has a high potential exploration portfolio in Africa and South America. The fundamentals of Tullow’s business as an Exploration and Production company remain sound.

The Board is fully committed to remaining a leading independent oil company across Africa, working closely with communities and host governments and to the creation of Shared Prosperity in the countries where Tullow operates.

  • Dividend suspended and 2020 capex lowered to c.$350 million; c.$200 million of G&A cash cost savings targeted over 3 years
  • Greater Group control of operations and production forecasting through appointment of Mark MacFarlane as COO
  • Ghana production and sub-surface management centralised in London; new Asset Director hired
  • Areas of potential investment to maintain long-term production and reserve recovery identified at both Jubilee and TEN
  • New Head of Exploration hired; c.45% reduction in exploration budget; disciplined exploration strategy
  • Portfolio management planned to raise in excess of $1 billion of proceeds, further streamline the business and reduce gearing


  • Group production year-to-date in line with expectations; full year guidance of 70,000 – 80,000 bopd
  • Jubilee performing well after gas processing facility upgraded, increased gas offtake agreed, and sea-water injection capacity optimised; Nt-09 production well at TEN on-stream in Q2; non-operated West African production in line with expectations
  • Capex of c.$350 million, down c.30% from 2019; exploring options to reduce further if required
  • 2020 free cash flow forecast of $50-$75 million at $50/bbl; free cash flow breakeven of c.$45/bbl
  • 60% of 2020 sales revenue hedged with a floor of $57/bbl; 40% of 2021 sales revenue hedged with a floor of $53/bbl
  • RBL redetermination ongoing; expected c.$1.9 billion debt capacity at the end of March; liquidity of c.$700 million

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