Tullow Oil plc has forecast its full-year free cash flow to be around $350 million, subject to year-end working capital movements.
Free cash flow generation, according to the energy company, “has been adversely affected by lower production, and by lower oil prices for much of the second half of the year”.
“Despite lowe-than-forecast free cash flow, the Group continues to focus on debt reduction, and net debt at the end of 2019 is expected to be around $2.8 billion (from $3.1 billion at the beginning of the year). Gearing is expected to increase marginally to approximately 2.0x (from 1.9x at the beginning of the year), reflecting lower EBITDAX. The Group retains liquidity headroom and free cash in excess of $1 billion”, the statement said, adding: “Capital expenditure for the year is expected to be approximately $540 million, including approximately $35 million for Tullow’s 33.3% share of the Lake Albert Development in Uganda”.
Concerning its assets in Ghana, Tullow said it continues to carry out its infill drilling programme across the Jubilee and TEN fields using the Maersk Venturer rig.
“As reported in Tullow’s 2019 Half Year Results, the En14-P production well at TEN was suspended in July. Consequently, the completion of the paired water injector well, En16-WI, was also postponed. The rig then moved to Jubilee and has successfully completed one production well and drilled one water injection well. This will be followed by the completion of the water injector and a well workover”.
Tullow said it expects to continue to use the Maersk Venturer rig across both the TEN and Jubilee fields in 2020. “The well programme is being developed with the Joint Venture Partners and will be finalised by the end of the year”.
Jubilee and TEN Fields
At Jubilee, gross full-year 2019 production is forecast to be around 89,000 bopd (c.31,500 bopd net). The lower-than-forecast full-year outcome is predominantly due to topside issues which have constrained water injection and gas handling. Water injection will be returned to full capacity by the end of November and enhancements to the gas handling system are planned for early 2020 to increase gas throughput capacity which will reduce gas management constraints. Production-equivalent insurance payments ended in May 2019 and, following a final reconciliation, the average for the full year is 2,000 bopd net.
At TEN, gross full year 2019 production is forecast to be around 62,000 bopd (c.29,000 bopd net). During 2019, production has been impacted by the suspension of the EN14-P well and therefore production has drawn on fewer wells than planned. TEN associated gas sales are forecast to average around 125 boepd for the full year.
Gas export from both fields has been limited in 2019 due to low demand from the Ghana National Petroleum Company (GNPC). Discussions on increasing gas offtake are ongoing with GNPC with an increase anticipated towards year-end. Sustaining increased levels of gas offtake will reduce the amount of gas being reinjected into the fields, improving oil production over time.
Tullow and its Joint Venture Partners in Ghana continue to assess the appropriate investment programme in 2020 to improve the performance of the fields and their facilities. This includes re-assessing both the infill drilling programme and future development plans to ensure that the significant remaining reserves and resources at Jubilee and TEN are produced in the most cost-effective and efficient manner in 2020 and beyond. Guidance for 2020 will be provided in Tullow’s Trading Statement and Operational Update in January 2020.
The West Africa non-operated portfolio has continued to perform strongly and production from the fields in Gabon, Côte d’Ivoire and Equatorial Guinea is forecast to average around 25,000 bopd net in 2019. During the year, production from Gabon has been particularly strong, with the Simba and Ruche fields performing ahead of expectations.
Decommissioning in the UK North Sea continues to progress as planned. At Tullow’s operated licences, final equipment removal and seabed clearance activities continue and are expected to be completed around the middle of 2020. In Mauritania, the decommissioning programme for the wells in the Chinguetti field is due to commence by the end of 2019.